Expanding Opportunities

Healthcare consulting in an era of reform Part 2

In Part 1 of this article, the impact of healthcare reform on the opportunities for healthcare consulting was discussed.  In Part 2, methods utilized by healthcare consultants, as well as the phases of a typical healthcare consulting engagement, are discussed.

Healthcare consulting

Two classes of skill sets are useful for effective healthcare enterprise consulting: strategic and organizational. Strategic thinking requires a sound understanding of general business principles as well as specialized knowledge of the healthcare market.  This knowledge can be derived from both research and experience.  An accurate understanding of the depth of this experience is crucial to a consultant’s decision to accept engagements relating to specialized topics. 

The process of organizing and planning for each aspect of the engagement is important to the consulting engagement.  The “Engagement Checklist, presented below, along with an understanding of a few sound principles, can serve as a basis for such a process.

The Engagement Checklist:

1. Evaluate whether to accept the engagement by identifying all parties to the prospective engagement (e.g., client, subject enterprise, the enterprise’s owners, and any related parties or affiliation) and performing a conflict search to ensure that there are no conflicts of interest.
2. Develop an estimate of required chargeable hours and fees based on the purpose and scope of the engagement, as well as the availability and sufficiency of data required for due diligence.
3. Prepare and submit to client a proposal letter and engagement agreement, including a “Schedule of Professional Fees.”
4. Submit a Documents and Materials Request and a Healthcare Enterprise Information Worksheet in the proposal package, where appropriate.
5. Obtain a signed engagement agreement and retainer from client.
6. Develop a detailed work program by identifying project milestones and assigning discrete tasks to appropriate staff based on skill sets, experience, and availability.
7. Collect and analyze the data appropriate for the engagement methods to be utilized for the project, including both general data (e.g. demographic, medical specialty, managed care environment, utilization demand, physician/population ratios) and specific data (e.g., financial statements, tax returns, inventory list, staff listing, and other data obtained from the subject enterprise).
8. Prepare/Furnish appropriate filing of all hard documents in project binder(s) separated by numbered indices.
9. Follow up with the client or subject company regarding documents still needed, if necessary through the utilization of a “Data Status Tracking Summary.”
10. Ensure staff members use the consulting and analysis methods selected under the supervision of an experienced consultant or supervisor.
11. Include/Perform a trend analysis and comparison to industry norms.
12. In the case of a transactional- or valuation-related assignment, perform ratio analysis of subject enterprise and compare those ratios with industry or specialty ratios.  Describe and analyze these comparisons in the narrative report.
13. Prepare the narrative to document and communicate to reader of the report all work performed and conclusions reached in a manner that will allow the reader to replicate consultant’s work.
14. Prepare a final discussion draft of the report to assist the consultant in avoiding any inadvertent errors of omission or commission.
15. Perform a detailed review of the work papers and final discussion draft of the report.
16. Obtain an independent internal review of the work papers and report draft.
17. Resolve any internal professional disagreements relative to methodologies employed.
18. Include a “Tick and Tie” report: correct any errors.
19. Discuss engagement findings and final report draft with client.
20. Determine that all review points and open items have been cleared.
21. Prepare and bind the final report in multiple originals according to client agreement.
22. Sign and apply embossed certification seal, if applicable, to the multiple original reports on both the transmittal letter and certification pages.
23. File all work papers, data sources, and other engagement-related documents for secured filing.
24. Prepare and submit final billing for engagement to client.
25. Conduct a post-engagement review to evaluate the staff’s performance and quality of final work product. 

Phases of the Consulting Engagement

The purpose of consulting work is the provision of an opinion.  The consulting process consists of four basic phases:  proposal, research, analysis, and reporting.

Proposal

The first phase, proposal, involves business development activities culminating in the delivery of a proposal for specific consulting work.  Business development is beyond the scope of this article, but there are numerous considerations pertaining to the development of a proposal and acceptance of an engagement that weigh heavily on the successful outcome of the project.  A consulting pre-engagement acceptance form can lead the consultant through many of the questions that must be addressed before accepting an engagement, including the self-assessment of expertise, available resources (personnel and financial), any conflicts of interest, and many other issues. 

Research

Once the consultant accepts an engagement, the next phase, research, involves compiling the necessary data to complete the assignment.  The specific research consists of gathering information from the subject healthcare professional enterprise, including financial, business, operational, staffing, and other information.  The other portion of this phase is the performance of using materials that are available through published governmental and private sources and may include information on such topics as the healthcare market, local economic conditions, competitors, healthcare facilities, managed care organizations, benchmarking statistics, reimbursement trends, specialty or industry trends, supply of practitioners and facilities, and many other relevant topics.

Analysis

The third phase of an engagement, analysis, involves summarizing and interpreting the information gathered in the research phase and comparing the specific research with the general research.  This analysis can range anywhere from providing simple summaries of the compiled research to an in-depth financial analysis.  There are a number of standard tools for analysis that consultants should be familiar with, i.e:

• Summarization:  This includes tables, matrices, abstracts, etc., that are designed to allow for the distillation of a body of information into one or more of its essential characteristics. 

• Benchmarking: Benchmarking refers to the comparison of specific research data on the subject with industry norms.  This may be as simple as a variance analysis on a single characteristic such as physician compensation or as complex as an analysis involving numerous variables and incorporated within another, larger analysis.

• Forecasting: Forecasting generally involves trend analysis and produces a prediction of future values or performance, e.g., financial pro formas, budgets, demand analysis, and space or staffing forecasts.

Reporting

The final phase of a consulting engagement, reporting, involves the reporting of results to clients or other parties.  Though presentation is the final phase, presentation aspects, such as progress reports, updates, interim reports, and other intermediate communications will occur throughout the engagement.  These reports may occur in a variety of formats, including business correspondence, oral presentations, and written reports.  Generally, final reports should be formal, written in a technical style, and include the results of all analysis as well as the opinion and recommendations of the consultant.

Record Management and Archiving

The organization of any project requires diligence and planning in the maintenance of project and business records.  The records management and archiving process should be maintained in a manner that allows each document in the consultant’s workfile to be identified (“I”), classified (“C”), and appropriately stored (“S”), so that it can be timely and efficiently retrieved (“R”) in the event that it needs to be referenced in the future.  Beyond the obvious reasons for careful design and upkeep of records management systems—such as internal project management capability—-there are numerous legal and ethical concerns requiring the diligent preservation of client business records.  For example, the consultant should ensure that his or her workfile is maintained and stored in a manner that is consistent with a predetermined document retention policy, and in the case of a valuation engagement, that the workfile is maintained in accordance with the requirements mandated under professional valuation standards, as well as those requirements of law and regulation, e.g. rules of the court, healthcare regulatory specifications, taxing authority regulation. 

Conclusion

In the ever-changing regulatory, research, competitive, and technology environments of the healthcare industry, the knowledge required of a healthcare consultant may stem from a broad range of educational and experiential backgrounds.  Additionally, the wealth of certification and further educational opportunities for consultants in the healthcare field will contribute to the growing field of healthcare consulting.  Note that given the highly regulated nature of the healthcare industry, consultants, although unable to offer a legal opinion, should be versed in the most current regulatory guidelines, and may, in this respect, be likely to work closely with non-healthcare attorneys. As new consulting opportunities arise in lieu of the ever-increasing regulatory scrutiny regarding healthcare enterprise transactions and employment arrangements, this type of collaboration is likely to become more and more commonplace.

The scope of healthcare consulting services related to assisting healthcare enterprises and providers include navigating complex industry challenges across each of the four pillars of the healthcare industry, i.e., (1) rapidly changing regulatory edicts and increased enforcement activities; (2) continual stress on reimbursement yields for providers; (3) increasing competitive challenges and peril; and, (4) costs associated with technological advancements.  Overall, the continued growth of the healthcare consulting profession, in terms of educational opportunities and an increasing market of healthcare-related engagement opportunities due to the continuously evolving healthcare delivery system, indicates a reasonable likelihood for growth in the quantity and types of healthcare consulting engagements in coming years. 

[author] [author_image timthumb=’on’]http://www.healthcapital.com/hcc/images/expert_cimasi.jpg[/author_image] [author_info]Robert James Cimasi, MHA, ASA, FRICS, MCBA, CVA, CM&AA, serves as chief executive officer of Health Capital Consultants (HCC),  a nationally recognized healthcare financial and economic consulting firm headquartered in St. Louis, MO, serving clients in 49 states since 1993.  Mr. Cimasi has over 30 years of experience in serving clients with a professional focus on the financial and economic aspects of healthcare service sector entities including valuation consulting and capital formation services; healthcare industry transactions, including joint ventures, mergers, acquisitions, and divestitures; litigation support and expert testimony; and, certificate-of-need and other regulatory and policy planning consulting. Robert can be reached at (314) 994-7641 or www.healthcapital.com.[/author_info] [/author]