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Coronavirus Could Bring New Financial Pressures

to Distressed Healthcare Industry

3 Pressure Points the Outbreak Might Bring to U.S. Health System

On Feb. 24, the World Health had begun removing list- action plans incorporate the around the HIPAA Privacy Rule: On
Organization warned that the coron- ings from its online mar- CDC’s new guidance for how Feb. 5, the Department of Health and
avirus (COVID-2019) outbreak could ketplace by sellers claim- healthcare workers should Human Services (HHS) reminded
turn into a pandemic, days after reports ing to have products that test for coronavirus. HIPAA-covered entities of the ways they
surfaced that the virus had spread rapid- could prevent or kill the Vulnerabilities via partners can share patient information during
ly in a northern Italy town. coronavirus on the on the care continuum or infectious disease outbreaks. Organ -
For healthcare providers in the United grounds that they were third-party vendors should izations should ensure they—and their
States—already facing financial dis- making “medical market- also be incorporated into partners on the care continuum—have
tress—the anticipated domestic escala- ing claims.” action plans. the proper information governance,
tion of the coronavirus outbreak could 3. Supply chain disrup- • Identify a response team cybersecurity and data privacy controls
have direct and lasting impacts on the tions: Outside of drug to lead ongoing crisis man- in place to mitigate increased risk
health system in the form of supply and medical device prod- agement efforts, coordinat- around greater sharing of patient infor-
chain disruptions, leading to drug and uct shortages, the indus- BY STEVEN SHILL, CPA ing with appropriate feder- mation. (This is especially critical to an
medical supply shortages, as well as try faces other supply al, state and local authori- industry where at least one in five organ-
long-term operational and financial chal- chain risks because of its ties, respectively: These izations say a data privacy breach is their
lenges. For example, more than three- growing practice of offshoring certain efforts should include regular communi- biggest threat, according to BDO data.)
fourths (76%) of U.S. providers already operations overseas—notably to compa- cation to internal and external stake- • Ensure integration of the latest
have 60 days or less cash on hand, and nies located in India, China and holders—with patients prioritized. In medical billing codes around coron-
nearly a quarter (23%) are concerned Vietnam, near or at the epicenter of the the event of an emergency, communica- avirus detection: On Feb. 13, the
about government reimbursement risks, outbreak. Billing functions are the ones tion with patients, employees (particu- Centers for Medicare & Medicaid
according to BDO’s Treating Healthcare most frequently offshored in the name of larly clinicians responsible for contain- Services announced new billing codes
Distress, a survey of 100 CFOs at mid- cost and efficiency. (Increasing labor ing the outbreak) and partners on the for providers and labs to test patients for
market healthcare providers. Variables costs is cited as the primary workforce care continuum is key. When it comes to coronavirus. The code helps ensure
like instability around the Affordable challenge by more than a quarter of patient communication, organizations organizations can specifically track the
Care Act and uncertainty around incom- healthcare CFOs, according to the 2020 should educate not only their direct public health response to the outbreak—
ing payments because of fluctuating BDO Middle Market CFO Outlook patients but also their surrounding com- and helps mitigate incorrect patient
deductibles and patient copays, mean- Survey.) munities on what coronavirus is and key healthcare costs. Organizations should
while, will persist. But healthcare organizations in recent protective measures people can employ. ensure their billing processes have been
These are the top three pressure points years have also begun offshoring other Leveraging information from the WHO’s updated to account for these new codes
that the coronavirus could create domes- functions like HR and certain electroni- dedicated public advice page is a good and that billing staff—domestic and
tically: cally enabled diagnostic consultations place to start. overseas—understand how to correctly
1. Medical device and drug shortages: that don’t require clinicians with U.S. • Regularly monitor announcements bill against them.
As of Feb. 25, the FDA identified 20 drug credentials. In the case when an organi- from the FDA around supply chain • Provide refreshed training to clini-
products that solely rely on China for zation’s international vendor has halted risks and recommended courses of cians on telehealth services and best
their active ingredients or to manufac- operations due to travel restrictions and action: The FDA has been releasing reg- practices: Ahead of anticipated quaran-
ture their finished drug products. China required employee at-home quarantines, ular statements on how the agency is tines or inability of certain patients to
ranks second among countries that that organization may not be able to exe- working to diagnose, treat and prevent travel to facilities for in-person medical
export drugs and biologics to the United cute on certain billing, HR or clinical the disease, as well as monitoring the visits organizations should review their
States and first for medical devices, procedures which could have negative medical supply chain for shortages, dis- telehealth capabilities and ensure all cli-
according to agency data. China’s posi- repercussions both financially and oper- ruptions or fraud risk. Organizations nicians are familiar with the services at
tion as the world’s largest producer of ationally. should keep up to date with agency their disposal. Leveraging such services
rare earth minerals—which include ele- announcements and be ready to adjust could be critical to addressing access to
ments key to making batteries—adds How U.S. Healthcare their enterprise risk plan in tandem. care issues that the outbreak could exac-
additional risk, as further economic Organizations Can Secure Their • Collaborate with and proactively erbate.
shutdowns could hinder production of Operations to Better Support diversify the locations of your suppliers • Maintain contemporaneous docu-
battery-powered medical devices. Patient Care and vendors: Work closely with your mentation: While patient safety should
Additionally, the United States faces a Uncertainty still abounds on whether drug and medical supply providers to be the priority, organizations must
shortage of medical masks because and how the virus could mutate as well build scenario models to determine ways ensure they have a designated team—
China is the world’s largest producer of as how many waves of the outbreak to mitigate any additional risks to your and top down trainings—in place to
medical masks, though some health offi- might take place. And with the Centers supply chain. Identify ways to diversify keep careful records during operational
cials question their effectiveness. for Disease Control and Prevention your supply chain if possible and assess disruptions. Email records around mar-
• China is home to 13% of all facilities (CDC) warning that it’s no longer a mat- the cost-benefit of maintaining duplica- ket conditions, cancelations of supply
that make ingredients for drugs sold in ter of if but when the coronavirus tive providers versus the costs of a lost shipments, or suppliers being impacted
the United States spreads further within the United States, supply chain. In the case of a third-party are crucial to preserve as they can be crit-
• 85% of medicines in the U.S. strate- patient care is priority #1. Still, for U.S. billing or other vendors that are impact- ical to a business interruption claim.
gic national stockpile use at least one healthcare organizations, business conti- ed, organizations would need to have a To learn how your organization can
component that’s sourced from China nuity management is critical, and they backup plan in place should that vendor prepare, get in touch.
- Source: Axios must have a proper enterprise risk plan be unable to deliver on its services.
2. Patient safety risks: In light of safe- in place sooner rather than later to • Review your organization’s insur- Steven Shill, CPA, is National Leader and
ty concerns and travel limitations, it’s ensure they can provide effective services ance policy: It’s crucial that healthcare Assurance Partner at The BDO Center for
become more difficult for the United to patients. organizations understand how to deter- Healthcare Excellence & Innovation
States to conduct its regular inspections Organizations should consider the fol- mine and capture lost revenue and
of drug and medical supply manufactur- lowing steps: income as a result of this unpredictable Contact:
ing sites in China. This could further • Conduct a proactive business conti- and unforeseen outbreak. Reviewing Alfredo Cepero, Managing Partner
exacerbate product shortages and patient nuity risk assessment: Organizations coverage around infectious disease, trade 305-420-8006/ acepero@bdo.com
safety risks associated with less effective should identify potential internal opera- disruption and workforce loss is critical
products as it limits the U.S.’ ability to tional, financial and market risks; deter- to proactively managing the short- and Angelo Pirozzi, Partner
oversee quality of production. mine direct and indirect impacts; and long-term risks. 646-520-2870 / apirozzi@bdo.com
Additionally, Amazon said on Feb. 20 it generate an action plan. It’s critical that • Review policies and procedures

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