“Beware of little expenses; a small leak can sink a great ship.” — Benjamin Franklin
The “Big Squeeze” continues in New York state, affecting each and every health and human-services provider. The NYS Department of Health’s focus for the past year has been the implementation of the Delivery System Reform Incentive Program (DSRIP). DSRIP is a five-year demonstration project to transition and transform the Medicaid delivery system for 6 million New Yorkers from a system that rewards and reimburses volume to one that rewards and reimburses valued-service outcomes. New York state community-based providers, and the 25 Performing Provider Systems (PPS) established throughout the Empire State, have just completed year one of the five-year project timeline. We are the fifth state in the country to have entered into a federal-state partnership under the DSRIP initiative.
My previous columns have described the DSRIP PPS initiative in more specific detail. The focus of this column is the financial impact on and threats to all health and human-service providers resulting from the Big Squeeze. That is, implementation of extensive federal and state reform initiatives affecting Medicaid, Medicare, and Obamacare health and human service providers. Whether politicians or the public like it or not, we already have a fragmented government health-care system that covers close to 70 percent of Americans. So, the country is already more than halfway towards socialized medicine, just like every other industrialized nation in the G-7.
There is an excellent, must-read report prepared and issued by the New York City Human Services Council entitled, “New York Nonprofits in the Aftermath of FEGS: A Call to Action.” I strongly recommend that every board and management team member of a health and human services nonprofit read the report.
The report was prompted by the bankruptcy filing of “a $250 million behemoth nonprofit human service provider” known as the Federation Employment and Guidance Service (FEGS), originally formed in the 1930s. With 1,900 employees, unpaid creditors holding more than $47 million in debt, and 350 program sites, the closing / bankruptcy of FEGS sent shockwaves throughout New York City and the rest of New York state. The transition of FEGS’ programs and services to other not-for-profit service providers, which was accomplished quickly and efficiently, proved that there are no not-for-profit organizations that are “too big to fail.”
The report is extensive, detailed, and well done. Reading it completely is your best course of action. However, knowing that we exist in an information-overload society, I have summarized below the key recommendations produced by the report.
The commission participants consisted of a “blue ribbon panel” of individuals across the spectrum of those involved in the health and human-services sector. The report identified a number of “major findings” that it summarized, with accompanying recommendations, into the following three problem areas:
1) New or redesigned human-services programs intended to build human potential and social welfare are too often developed without consulting the human-services providers that will be responsible for implementing them.
2) Government contracts and philanthropic grants rarely fully cover operating and administrative costs, and payments are often late and unpredictable, resulting in cash-flow constraints and chronic under-funding.
3) There is a lack of adequate risk assessment in the nonprofit service sector. Providers must accept responsibility for aggressively identifying, assessing, and addressing risks to their fiscal health, viability, and sustainability. Ongoing monitoring of current and projected fiscal viability is an absolute requirement, particularly given the FEGS bankruptcy example.
All of the foregoing should lead to a candid assessment of strategic positioning in evaluating and assessing one specific question. That is, what is the best course of action for your organization to position itself for future success in a transformational health-care delivery and payment structure?
The options to consider are as follows:
The first five steps above most frequently include contractual relationships. The final five involve some form of shared governance structure.
Gerald J. Archibald, CPA, is a partner in charge of the management advisory services at The Bonadio Group. He can be reached at (585) 381-1000, or via email at garchibald@bonadio.com
OSWEGO, N.Y. — Oswego Health says it had the system’s first robotically assisted surgery using…
JOHNSON CITY, N.Y. — Tioga State Bank (TSB) will open a new branch in Johnson…
UTICA, N.Y. — A report by the Oneida County Childcare Taskforce made a number of…
ITHACA, N.Y. — Cayuga Health System (CHS), based in Ithaca, and Cancer Resource Center of…
DeWITT, N.Y. — MACNY, the Manufacturers Association will use a $6 million federal grant to…
SYRACUSE, N.Y. — The Syracuse Housing Authority (SHA) and the City of Syracuse will use…