New Form 990 is Must Reading for Boards

The new IRS Form 990, the primary way not-for-profits report their performance to the IRS, dramatically expands what hospitals must report. Examples of what’s new include:

  • How many directors are “independent” (using new IRS definition)?
  • How much community benefit does the hospital provide (using new standardized definitions)?
  • How does the board determine executive compensation?
  • How is the board conflict of interest policy enforced?
  • Do board members have business or family ties with each other?
  • Does the board review the 990 before it’s submitted IRS (hint: don’t answer “no”)?

The summer issue of Great Boards will dissect the new Form 990 and offer expert opinions on what boards should do NOW to prepare. In the meantime, see a recent speech from IRS’ Director of Exempt Organizations Lois Lerner and full copies of the form, schedules, and instructions on the IRS website.

Should Healthcare Come With a Warranty?

Is your hospital sufficiently aligned with its doctors to offer a “fixed price warranty” for treating common conditions?  Doing so would require tight ties between hospitals and physicians to follow best clinical practices, minimize complications, and operate efficiently.  We talked about how hospitals and physicians can align in the winter and spring issues of Great Boards and in case studies of five integrated systems.

New evidence of the case for alignment comes from a Commonwealth Fund-supported study published by Health Affairs. It argues warranties could incentivize providers to cut complications and improve profit margins.

Under one approach — the “Prometheus Payment” model being tested by the Robert Wood Johnson Foundation — hospitals and physicians would receive a global fee based on best practices needed to treat a specific condition.  Risk-adjusted, “evidence-informed case rates” (EICRs) are being developed for 12 EICRs for certain types of cancer, cardiology and orthopedic care—as well as for some routine and preventive care.   EICRs fully compensate providers for expected costs of evidenced-based care, but only half of the predicted cost of dealing with potentially avoidable complications—in effect, creating a price warranty.

Some health systems, such as Geisinger’s Proven Care program, already offer fixed prices.  Geisinger CEO Glenn D. Steele Jr. explained the program to an impressed Congressional committee. Cutting Medicare and Medicaid costs though bundled pricing is almost certain to be included in health reform legislation.

Boards need to be certain their hospitals are engaging with doctors now to develop an alignment strategy that, for most, includes both employment and non-employment options.