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Healthcare Finance in Focus Insights and best practices of 2019

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John HesselmannNational Head of HealthcareBank of America

Lynn WiatrowskiHealthcare Treasury Sales ExecutiveBank of America

Kerri SchroederHealthcare Credit ExecutiveBank of America

Healthcare finance executives are at the center of bold, new initiatives

as hospitals and health systems respond to technological change.

Stand-alone innovation centers, process redesign, patient-care

advancements, and new ways to integrate IT into healthcare delivery

are part of an industry-wide effort to leverage digital technology.

What does that mean for finance executives? They’re faced with an

unprecedented set of tasks, from funding cutting-edge investments

and revenue cycle automation to steering working capital strategies

that are essential to maintaining a resilient organization.

You’ll find new insights into these critical activities in our seventh

annual Healthcare Finance in Focus. Produced with Becker’s Hospital

Review and HealthLeaders Media, this annual report features executive

roundtable discussions, industry surveys and specialized articles.

Providing you with relevant thought leadership is part of our enduring

commitment to your critical mission. That’s why we’re always asking:

What would you like the power to do?®

John Hesselmann Lynn WiatrowskiKerri Schroeder

For online access to these articles, as well as videos, webinars and other resources, visit bofaml.com/healthcare.

innovate and grow

balancing innovation and risk

building resilience

December 2019 | Volume 7

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Reprinted from Becker’s Healthcare Review, 2019


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“ We truly believe our best innovators are the ones who are actually doing the work, the ones who can actually see where there’s potential to do things better.”

Emerging technologies such as artificial intelligence and robotic automation

are transforming businesses and economies worldwide — consumer interactions are becoming more personalized, manufacturing and distribution more streamlined, and operational planning more predictive. While these technologies have broad implications for all industries, perhaps no other is more likely to experience revolutionary change as the result of technological advancement than healthcare.

The challenges facing the healthcare industry — rising costs, increasing rates of chronic illness and an intensifying clinician shortage — mandate that America’s health systems leverage innovative technologies

to improve care quality, access and affordability. Despite health system leaders’ clear imperative and desire to innovate, the integration of new technologies and processes is hardly occurring at breakneck speed. A report published by the Pittsburgh-based Center for Connected Medicine in June suggests most health systems are innovating at a slow pace. For the report, CCM researchers surveyed executives from 28 health systems. More than half of respondents said their organizations were either implementing and scaling innovation “somewhat slowly” or “very slowly.” Zero respondents characterized their organizations as innovating “very quickly.”

Before hospitals and health systems can innovate effectively

and expeditiously, leaders must guide their organizations around numerous barriers. Financial constraints and inherent institutional rigidity can make it difficult for even the most ambitious health systems to innovate. Results from a Becker’s Healthcare and Bank of America Merrill Lynch survey of more than six dozen hospital executives conducted in May suggest the most prominent barriers to innovation are budgetary constraints and difficulties generating buy-in from C-level leaders and individual providers.

This e-book examines barriers to innovation, offers insights into balancing cost savings efforts with investment in new technology, and details how leading health systems are preparing for the

The Path to ProsperityExecutive Insights on Fostering Innovation and Making it Stick

By Brian Zimmerman, Custom Content Editor, Becker’s Healthcare

Tim HeinrichCFO of Thorek Memorial Hospital in Chicago

Rob McMurrayCFO of Newark, Del.-based Christiana Care Health System

Michelle StansburyVice President of Innovation with Houston Methodist

John HesselmannGlobal Commercial Banking, National Head-Healthcare with Bank of America Merrill Lynch

Participants Include:

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Reprinted from Becker’s Healthcare Review, 2019balancing innovation and risk

future amid various industry uncertainties. The content is based on results from the Becker’s-Bank of America Merrill Lynch survey and a roundtable discussion among industry experts.

Discussion participants included:

•Tim Heinrich, CFO ofThorek Memorial Hospital inChicago

•Rob McMurray, CFO ofNewark, Del.-based ChristianaCare Health System

•Michelle Stansbury, VicePresident of Innovation with Houston Methodist

•John Hesselmann, GlobalCommercial Banking, National Head-Healthcare with Bank of America Merrill Lynch

‘We can’t cost cut our way to prosperity’ — Balancing budgetary efficiency and cost reduction with innovation

In concept, hospital executives are on board with innovation. In a 2017 survey involving more than 300 hospital executives conducted by the American Hospital Association, three in

four respondents said digital innovation was an important component of their organization’s long-term strategy. Still, according to Harvard Business Review, hospitals are “notoriously slow to adopt digital innovations.” Such hesitancy to innovate in practice is at least partially driven by the traditional approaches most hospitals apply to resource allocation and budgeting. More than 70 percent of Becker’s-Bank of America Merrill Lynch survey respondents cited budgetary constraints as one of the primary barriers to innovation at their organization, making it the most-cited barrier in the survey.

While judicious resource management is essential to successful innovation and financial well-being, fiscal pragmatism alone is not enough to ensure hospitals and health systems thrive (or survive) in the long-term. The varied pressures facing hospitals, such as the rise of outcomes-based medicine, means these organizations need to revamp their operational models and approaches to care to remain relevant.

The most-cited budgetary barrier named by participants in the Bank

of America Merrill Lynch-Becker’s survey? Rigid budget structures. Traditional annual budgets offer little room for adjustment as the fiscal year unfolds. To innovate effectively, organizations often need to be able to recalibrate in a hurry.

One way to avoid budgetary barriers is to create a separate, central budget for innovation investment. Many health systems today are creating separate innovation programs that operate on independent budgets.

At Houston Methodist’s Center for Innovation — which is the research-and-development engine of the eight-hospital, 2,300-plus-bed health system — Ms. Stansbury said her team isn’t hampered by budgetary rigidity. “We’ve been fortunate that our overall budget has been set aside just for innovation initiatives instead of it being collectively combined with traditional capital and operating budgets,” she said.

A rigorous approach to budgeting that eliminates excess costs will always be an important part of managing any enterprise. However, it’s crucial for health system leaders to realize that cost reduction efforts have to be

The Path to Prosperity: Executive Insights on Fostering Innovation and Making it StickParticipants Include:

The Path to Prosperity: Executive Insights on Fostering Innovation and Making it Stick

a part of a broader strategy of advancement designed to meet the challenges of healthcare today and tomorrow. At Christiana Care — a two hospital health system comprising more than 1,200 beds — innovation is a vital component of the system’s long-term strategy, according to Mr. McMurray.

“It’s important [for leaders] to understand that we can’t cost-cut our way to prosperity,” he said. “There’s always going to be a need to look for ways to drive down unit costs through efficiencies, but we have to strike a balance with investments in innovation developed as part of an

overarching strategy with clear goals set for what constitutes a return.”

Innovating with unstoppable force

Managing resources more efficiently and adopting nimble, unilateral budgeting models can mitigate the effect of external financial pressures. However, some fiscal constraints are simply intractable and symptomatic of broad market pressures. Health system leaders looking to make innovation a priority can’t rely on improved resource management alone — they must

make innovation itself a core tenet within their organization’s culture.

Houston Methodist applies a dual top-down, bottom-up approach to internal communication to ensure innovation is engrained in day-to-day behaviors and thinking. Ms. Stansbury said her CEO communicates that innovation should be prioritized for all employees, and mechanisms have been put in place to allow frontline staff to offer feedback where they see opportunity for process improvement.

“We’ve got 24,000 employees and our belief is innovation is everyone’s responsibility,” Ms. Stansbury said. “We truly believe our best innovators are the ones who are actually doing the work, the ones who can actually see where there’s potential to do things better.”

Mr. McMurray said Christiana Care also takes steps to ensure innovation is well-integrated into the system’s culture by creating conduits for communication between staff and leadership.

“A culture of trust is critical to foster innovation,” Mr. McMurray said. “We listen actively to our caregivers and seek to understand,

Rob McMurrayCFO of Newark, Del.-based Christiana Care Health System

“ It’s important [for leaders] to understand that we can’t cost-cut our way to prosperity. There’s always going to be a need to look for ways to drive down unit costs through efficiencies, but we have to strike a balance with investments in innovation developed as part of an overarching strategy with clear goals set for what constitutes a return.”

Rob McMurray CFO of Newark, Del.-based Christiana Care Health System

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and we assume good intentions when folks come to us … we’re curious and continuously looking for ways to innovate.”

During the roundtable discussion, executives also mentioned the importance of balance in resource allocation and innovation project selection. Health systems should only launch innovation initiatives if there’s a reasonable expectation that the effort will yield measurable benefits. Mr. Heinrich said one of most prominent barriers to innovation at Thorek Memorial — a 218-bed hospital that’s been serving the North Side of Chicago for more than 100 years — is cutting through the healthcare industry’s hype and group think to prioritize the integration of solutions that matter most to the hospital’s clinicians and patients.

“Everybody thinks they have to have the shiniest, newest thing,” Mr. Heinrich said. “You only have so many hours in the day and so many dollars to spend. We really try to ask ‘What do we need? Do we just need this because it’s shiny and it’s new, or do we need it because it actually will provide a benefit?”

Ms. Stansbury also noted the importance of strategically deploying resources in a non-wasteful manner, arguing that the most precious resource of all is employees’ time. “Almost everyone is 100 percent busy as it is,” she said. “We try to quickly determine whether a [pilot initiative] is a successful project or not. And then, move on.”

One way to get around the employee time crunch problem and simultaneously foster a culture of collaboration and communication is to ask for volunteers to head innovation efforts. Mr. Hesselmann said he’s seen this tactic applied effectively firsthand.

“We’re pretty aggressive about asking for volunteers,” Mr. Hesselmann said. “You go out and ask for volunteers to get involved, and you’ll be surprised at how many people you get from all levels of the organization.”

Rewriting the healthcare playbook

In addition to leveraging technology and new protocols to improve care quality and achieve successful reimbursement under value-based care models, hospital executives must also prepare for other emerging trends that are poised to reshape the industry. One such trend is the rise of outpatient care as more and more procedures are being performed

Tim HeinrichCFOThorek Memorial Hospital in Chicago


outside the four walls of a hospital. This is partly evidenced by the growing ambulatory surgery center market. The ASC market is projected to increase $40 billion by 2020, up from $36 billion in 2018, according to a data compiled by the Health Industry Distributors Association. Additionally, the gap between hospitals’ inpatient revenue and outpatient revenue has narrowed in recent years. In 2017, hospitals’ outpatient revenue reached $472 billion, nearing the net inpatient revenue total of nearly $498 billion, according to the AHA.

Ms. Stansbury said Houston Methodist is working to stay out in front of this trend. “We are really looking at how we can still provide the best quality and safety to our patients without necessarily providing it in our four walls,” she said. “And we’re focusing on how we can partner with the right vendors to help us do that.”

Another trend poised to reshape the industry is the rise of healthcare consumerism. As competition between hospitals increases, it will become even more important for executives to help their organizations meet consumer demands. Both providers and payers are now partly evaluated by customer experience. People want their healthcare experience to be comparable to the convenient and transparent consumer experiences they’ve become accustomed to in their interactions with other industries. The results of McKinsey’s 2018 Consumer Health Insights Survey suggest that patients not only want healthcare to be more affordable, but they also want increased access to care and more personalized care experiences. Digital solutions like mobile appointment reminders and online communication tools that allow patients to interact

with clinicians remotely can help providers meet emerging consumer expectations.

Leading healthcare executives are looking to outside industries for models of how to effectively use digital tools to enhance the consumer experience. Ms. Stansbury said that in addition to keeping apprised of regulatory changes, her team is preparing the health system for the future of healthcare by looking at industries such as online retail and retail pharmacy as models for how to deliver a better patient experience.

“I think everyone is trying to make the patient experience better than what it’s been,” Ms. Stansbury said. “We’re moving toward mobile and thinking about how we can make the patient experience more seamless.”

“ Everybody thinks they have to have the shiniest, newest thing. You only have so many hours in the day and so many dollars to spend. We really try to ask ‘What do we need? Do we just need this because it’s shiny and it’s new, or do we need it because it actually will provide a benefit?’”

Tim Heinrich CFO, Thorek Memorial Hospital in Chicago

“ I think everyone is trying to make the patient experience better than what it’s been. We’re moving toward mobile and thinking about how we can make the patient experience more seamless.”

Michelle Stansbury Vice President of Innovation, Houston Methodist

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Mr. Heinrich had been hesitant about looking at outside industries as potential models for innovation initiatives, but changed his thinking in recent years as he saw competition for patients increase as nationwide hospital utilization declined. Mr. Heinrich said there will be fewer hospitals in the future, which means hospital leaders of today need to be open to change in order to achieve sustainability.

“I think being flexible and being open and honest with yourself as an organization is crucial now,” Mr. Heinrich said. “Looking at other industries is going to be important … good customer service is good customer service. There are things we can learn from other industries that I think we need to open our mind to in order to sustain ourselves.”

Beyond investing in outpatient care and ushering in new digital solutions to help meet patients’

consumer-driven expectations, Mr. Hesselmann said the most successful hospitals he works with are those that double down on what they already do best and leverage their core competencies to drive success. “They’re not straying from their values, they’re playing to their strengths,” Mr. Hesselmann said, adding that this approach will be a winning strategy in the future.

Innovation in the revenue cycle

Revenue cycle management is perhaps the area of health system operations where the application of new technologies and processes can yield the most immediate benefit to the bottom line.

Today’s hospital finance teams are tasked with achieving adequate payment from payers in an increasingly complex reimbursement environment. At the same time, patients are paying for a larger share

of their medical bills due to the rise in high deductible health plans, meaning patient payments now make up a larger share of hospital revenue than ever before. Healthcare finance leaders are increasingly leveraging new technology solutions to help navigate these changes.

More than 60 percent of respondents in the Bank of America Merrill Lynch-Becker’s survey said their organizations were investing in new health IT for revenue cycle management, making it the most-cited area of health IT investment. This trend bore out during the roundtable discussion as participants detailed their organizations’ integration of new technology into the revenue cycle.

Ms. Stansbury said Houston Methodist has integrated robotic process automation into the revenue cycle to automate


mundane tasks such as insurance verification and claim status inquiry, which has allowed members of the finance team to redirect their time and attention toward more difficult endeavors. Mr. McMurray said Christiana Care is also leveraging the latest financial software to streamline revenue cycle management, and Mr. Heinrich said his team is working on integrating solutions that make it easier for patients to pay for their care.

Mr. Hesselmann said his teams work directly with hospitals to eliminate paper-intensive processes and streamline the revenue cycle.

“We put a heavy emphasis in investing in products and

solutions where we can reduce the reliance on paper and manual intervention, both on our side and on the healthcare providers side,” Mr. Hesselmann said. “We’re trying to automate as much as possible and use AI where it makes sense.”

AI, automation and data analytics are already revolutionizing hospitals’ approaches to revenue cycle management, and this technology will only become more sophisticated in the future. When it comes time to allocate funds for innovation, hospital and health system leaders should give special consideration to equipping revenue cycle management teams with new tools.

The path forward

Hospitals and health systems face numerous uncertainties in the form of regulatory changes, shifting patient demographics, clinician shortages and the rise of consumer-driven healthcare. But uncertainty is not necessarily the defining theme of this moment in healthcare — healthcare could just as easily be described as occupying an age of opportunity. Emerging technologies and value-based incentives have shed light on a new path forward, one that leads to a more equitable future where care is personalized, patients are healthier and clinicians happier. Innovation is the path, it’s up to today’s health system leaders to guide their teams down it.

General disclaimer for Bank of America Merrill Lynch, visit baml.com/disclaimer.©2017 Bank of America Corporation. ARQ36NN5

“ We put a heavy emphasis in investing in products and solutions where we can reduce the reliance on paper and manual intervention, both on our side and on the healthcare providers side. We’re trying to automate as much as possible and use AI where it makes sense.”

John Hesselmann Global Commercial Banking, National Head-Healthcare, Bank of America

“ They’re not straying from their values, they’re playing to their strengths.”

John Hesselmann Global Commercial Banking, National Head-Healthcare, Bank of America

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Reprinted from Becker’s Healthcare Review, 2019


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“ With reimbursement tied to patient satisfaction and competition among providers on the rise, hospitals are investing in technology to improve patient retention and engagement.”

Digital innovation has ushered in an era of extraordinary convenience across consumer-driven industries. Today, consumers in areas such as retail and banking experience highly personalized, streamlined interactions that fit neatly into the chaos of modern life. Conversely, the healthcare industry has either been reluctant to, or incapable of, keeping pace with these industries when it comes to consumer-facing innovations. While advancements in clinical care — such as the rise of genetic medicine — have abounded in recent years, many industry decision-makers have been reluctant to overhaul longstanding processes and workflows in favor of holding tight to the status-quo and fee-for-service thinking.

This, however, is changing.

More and more hospitals and health systems are bringing on tech-savvy executives — in either established roles or newly inaugurated positions, such as chief digital officer — to drive innovation in care delivery and patient engagement, among others. That the healthcare industry is a “laggard” when it comes to innovation may be a trope that soon drops from the industry’s thought-leadership lexicon. More than half of the healthcare administrators that participated in a 2019 Advisory Board survey said “hardwiring innovation into planning, improvement and staff culture” had become a key response to industry disruption at their organization, making it the most-selected potential response

to disruption on the survey. In the same survey the year prior, that response ranked eighth.

This increased emphasis on innovation is evidenced by how hospitals and health systems allocate funds. In a 2019 survey of healthcare executives conducted by Becker’s Hospital Review and Bank of America, more than 67 percent of respondents said their organization’s budget for new technology had increased in the last two years.

Although hospitals and health systems have intensified efforts to make their operational processes more innovative in recent years, the desire to do so isn’t exactly new for many executives. They have craved innovation for much longer. According to a handful of

On the Frontlines of InnovationExecutives weigh in on big tech, barriers to innovation and the future of healthcare

By Brian Zimmerman, Custom Content Editor, Becker’s Healthcare

Participants Include:

Neil Gomes,Chief Digital Officer and Executive Vice President of Technol-ogy Innovation and Consumer Experience at Philadelphia-based Thomas Jefferson Uni-versity and Jefferson Health

Karen Murphy PhD, RN, Executive Vice President and CIO with Danville, Pa.-based Geisinger

Peter M. FleischutMD, Senior Vice President and Chief Transformation Officer for NewYork-Presbyterian (New York City)

Stephen MorganMD, Senior Vice President and Chief Medical Information Officer at Roanoke, Va.-based Carilion Clinic

Kerri SchroederBank of America Healthcare Credit Executive

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executives who spoke with Becker’s during a roundtable discussion sponsored by Bank of America, the healthcare industry’s sluggish progress on operational innovation can be attributed more to a set of challenging circumstances and limited resources rather than a lack of will.

Discussion participants included:

• Karen Murphy, PhD, RN,Executive Vice President andCIO with Danville, Pa.-basedGeisinger

• Stephen Morgan, MD, SeniorVice President and ChiefMedical Information Officer atRoanoke, Va.-based CarilionClinic

• Kerri Schroeder, Bank ofAmerica Healthcare CreditExecutive

• Peter M. Fleischut, MD, SeniorVice President and ChiefTransformation Officer for

NewYork-Presbyterian (New York City)

• Neil Gomes, Chief DigitalOfficer and Executive VicePresident of TechnologyInnovation and ConsumerExperience at Philadelphia-based Thomas JeffersonUniversity and Jefferson Health

During the conversation, Dr. Murphy said part of the reason healthcare has been labeled a laggard on innovation is because hospital and health system leaders have been working in a “very, very complex ecosystem, and traditional finance models support the continuation of that very complex ecosystem.” In short, healthcare delivery and reimbursement are built in a way that nurtures the status quo.

Ms. Schroeder said financial barriers can slow down the adoption of new technologies. “Oftentimes investments in clinical assets take priority in

the competition for capital spending within the system,” she said. “Investments in back office and operations sometimes fall lower on the priority list. However, we’re starting to see a real shift toward prioritizing some of those initiatives … because they’re becoming so important to maintaining relationships with patients.”

With reimbursement tied to patient satisfaction and competition among providers on the rise, hospitals are investing in technology to improve patient retention and engagement. This push to innovate may also be fueled by the entry of tech giants like Amazon and Apple into healthcare — these companies have vast expertise in consumer engagement and well-established consumer-centric infrastructures. However, the relationship between providers and tech giants is not completely adversarial — in addition to taking the reins on healthcare services for their own

On the Frontlines of Innovation: Executives weigh in on big tech, barriers to innovation and the future of healthcare On the Frontlines of Innovation: Executives weigh in on big tech, barriers to innovation and the future of healthcare

employees, tech companies are developing tools that will help hospitals and health systems deliver a better experience to patients.

This e-book examines the barriers to innovation in healthcare, the relationship between big tech and providers, and the importance of ensuring all efforts to innovate processes or incorporate new technologies take the needs of individual providers and patients into consideration. The content is based on results from the Becker’s-Bank of America survey and the executive roundtable discussion.

‘Technology isn’t strategy’ — The importance of people, processes and culture

While the roundtable participants agreed that technology adoption is on the rise, several made a point to emphasize that technology alone won’t solve healthcare’s more intractable problems. If applied without end-users’ needs in mind, new solutions may worsen more problems than it solves, like physician burnout. About 70 percent of more than 4,000 Rhode Island physicians surveyed in 2017 said they’d experienced stress related to health information technology, according to a study published in the Journal of the

American Medical Informatics Association. The prevalence of burnout among clinicians should serve as a reminder to hospital and health system leaders that technology should empower, not burden, staff.

Dr. Fleischut — who heads innovation initiatives at NewYork-Presbyterian Hospital, which comprises 4,069 beds and experience more than 3 million patient visits annually — said the application of certain technologies in healthcare operations has stalled at times. Dr. Fleischut said in order to increase the likelihood of adoption, new solutions should be tailored to support the people and processes necessary to execute on the organization’s larger strategies. “You can’t just implement technology for technology’s sake,” he said.

Carilion Clinic’s Dr. Morgan, who has championed the use of technology to improve care quality and physician efficiency since 1999, echoed this sentiment. He argued that the integration of new technology must align with an organization’s overall strategy, otherwise the effort will likely falter. “It’s not just about technology,” Dr. Morgan said. “You need people, processes and

technology to make innovation work.” In 2018, Carilion Clinic earned designation as a Next Generation Innovator from the National Quality Forum and was listed among healthcare’s Most Wired by the American Hospital Association’s Health Forum.

As the founding director of Geisinger’s Steele Institute for Health Innovation, Dr. Murphy oversees several initiatives aimed at addressing the rising cost of care and improving care delivery. One such effort, currently in its planning phases, aims to reduce clinician clerical burden with the aid of artificial intelligence. The AI-powered clinician digital assistant will capture and synthesize patient-provider conversations, thereby allowing physicians to focus directly on the patient interaction without concern about documenting every detail in real-time via keyboard. In this instance, the innovation is designed to support Geisinger’s overall strategy of delivering better outcomes and a more satisfying experience to both patients and individual providers across the system’s 12 hospital campuses.

“Our goal to distinguish ourselves from competitors is to really focus on service,” Dr. Murphy

“ Investments in back office and operations sometimes fall lower on the priority list. However, we’re starting to see a real shift toward prioritizing some of those initiatives … because they’re becoming so important to maintaining relationships with patients.”

Kerri Schroeder Bank of America Healthcare Credit Executive

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On the Frontlines of Innovation: Executives weigh in on big tech, barriers to innovation and the future of healthcare

said. “Technology isn’t strategy, it enables strategy.”

Before new technology can be incorporated into workflows, leaders must first ensure they’ve built a cultural framework that supports the successful adoption and application of new solutions. Executives focused on innovation should first ensure their providers and clinical leaders are aligned in pursuit of the same long-term goals. When staff members think of innovation at their facility, they shouldn’t simply recall the most recent application of a new solution, but rather think of their organization’s big picture — their steadfast commitment to continually improving processes for the purpose of achieving more economical care that supports better outcomes.

3 tips for overcoming barriers to innovation

A culture of innovation accounts for and prevents barriers to progress, such as a lack of physician buy-in. During the discussion, executives shared insights that could help organizations overcome common barriers to the adoption and successful application of new technologies.

Here are three tips for overcoming barriers to innovation:

1. Engage physicians and prioritizechange management: Failure togenerate buy-in among providersis one of the primary barriers tothe adoption of new processes andtechnologies. More than 45 percentof respondents to the Becker’s-Bank of America survey selectedprovider adoption as one of theirorganization’s primary barriers toinnovation, making it the second-most selected obstacle on thesurvey behind budgetary constraints.

Physician engagement is an essential component of innovation. Beyond ensuring individual providers are aligned behind the same goal, physician voices should also be heard when selecting new technologies or designing new processes and workflows.

According to Mr. Gomes, who heads up the design and implementation of digital innovations at Thomas Jefferson University and Jefferson Health, which has an annual operating budget of more than $5 billion, healthcare leaders sometimes struggle to communicate the vision of innovation efforts.

“I think we just have to become

way better storytellers,” he said, citing difficulties leaders sometimes encounter when addressing common concerns around how technologies, such as AI and automation, will affect workflows and patient interactions. “We have to communicate that the solutions we’re working on actually address some of the concerns physicians have about technology taking time away from direct interactions with patients.”

Ms. Schroeder, who also serves as Bank of America’s national credit executive for its healthcare businesses, agreed with Mr. Gomes, adding that employees will sometimes be inclined to stick with the complicated and inefficient processes they’re familiar with rather than learn something new. Therefore, Ms. Schroeder said it’s important for executive leadership “to paint a compelling vision for how change and innovation will shape the company in the future and how ultimately those changes will benefit the organization as a whole.”

2. Fix broken processes beforegoing digital: Dr. Murphy saidprojects designed to eliminatepaper and speed up workflowsshould not simply digitalize thepaper-based processes alreadyin place. The application of new


digital solutions offers providers the chance to reassess current workflows and protocols. Slapping fresh paint on a broken system will not solve a hospital or health system’s deeper operational inefficiencies.

“We should not be digitalizing current processes — the processes should be new,” Dr. Murphy said. “If you digitalize a bad process, you might come up with the bad digital innovation … we need to be keenly aware of each process we digitalize.”

Dr. Murphy’s comments emphasize the importance of addressing strategic concerns prior to the launch of innovation efforts. Processes should be assessed and conceptually optimized prior to the launch of a digitalization effort.

3. Innovate with the patient in

mind: With patient satisfaction tied to reimbursement and patients paying more out of pocket for healthcare services than in the past, patient engagement has become a primary target for quality improvement efforts. Healthcare executives looking to help position their organizations for a consumer-centric future should focus on innovations that could better serve healthcare’s most important stakeholder — the patient. Launching innovation programs without first giving careful consideration as to whether the efforts will help patients undermines both ongoing and future attempts to integrate technology. Giving priority to solutions that don’t ultimately improve the patient experience or care quality in some way can be a waste of resources in today’s increasingly value-based, consumer-centric healthcare

industry. Patients want improved access to care, more convenience and a more transparent financial experience.

Mr. Gomes suggested providers have struggled to reach patients in the past because decision-makers at these organizations have not traditionally thought about patients as individual people who exist outside the boundaries of their medical need. “Patients just consider themselves as people, especially when they leave the hospital. If you think about patients as people, then you’re going to think about different ways you can engage them outside the hospital,” he said.

Building on Mr. Gomes’ comments, Dr. Murphy said providers should consider including patients in the design process of solutions rather than

“ I can see … some of the work big tech is doing being really complimentary for healthcare providers. On the other hand, they’re also starting to put a toe into territorial waters … so, positioning your organizations to compete with those disruptive forces is really critical to maintaining patient relationships long-term and maintaining relevancy with folks, particularly those younger, healthy consumers.”

Kerri Schroeder Healthcare Credit Executive, Bank of America

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just relying on assumptions about what patients want, adding that health systems can take a page from the big tech disrupters’ playbook when it comes to consumer engagement.

“We need to be much more engaged with patients as opposed to just thinking we know what patients want,” Dr. Murphy said.

Big tech — Friend or foe?

The entry of Silicon Valley blue chips like Amazon, Apple and Google into healthcare promises disruption in an industry plagued by rising costs and rife with inefficiency. For years, these tech giants have done what leading healthcare organizations aspire to do — know and, in some cases, predict their customers’ needs. It’s not completely clear what the entry of these companies into healthcare means for hospitals and health systems. Speculation from industry thought leaders varies: Some worry about competition for patients

as Apple and Amazon launch primary care clinics for employees, others have expressed excitement about collaborative opportunities and access to new consumer products. These dual outlooks were represented in Becker’s conversation with executives.

Ms. Schroeder said she believed current projects in development with big tech companies could yield significant benefits for providers. Additionally, the cooperative effort between Google, Amazon, Microsoft and others to create healthcare data-sharing standards could help untangle one of healthcare’s thorniest technology problems — interoperability. On the other hand, Ms. Schroeder does believe some of these companies will compete with traditional healthcare organizations for patients.

“I can see … some of the work big tech is doing being really complimentary for healthcare providers,” Ms. Schroder said.

“On the other hand, they’re also starting to put a toe into territorial waters … so, positioning your organizations to compete with those disruptive forces is really critical to maintaining patient relationships long-term and maintaining relevancy with folks, particularly those younger, healthy consumers.”

While tech giants have the edge over health systems in terms of delivering a consumer-friendly digital experience, health systems have the edge over tech giants when it comes to care management, especially for more critically ill patients. Tech companies will likely not be able deliver healthcare services completely independent of traditional providers. Still, during the conversation, multiple executives said they’re already working on projects to compete with big tech, describing the entry of these companies into healthcare as a galvanizing force in the industry.


“This is a call to arms to try to figure out how we start to move forward faster [on the digital experience], take some risks and fail fast, because we do feel the competition,” Dr. Morgan said.

Mr. Gomes described big tech’s entry into healthcare as a “wake-up call” that could bring about major change. “I see it as a big positive,” he said. “Sometimes to move forward on innovation, especially transformative and not incremental innovation, you have to have good reason for it, and many times that good reason is new competition.”

A bright, value-based future

Mr. Gomes’ comment describing industry disruption as a great opportunity was indicative of a

general theme that underpinned the executive roundtable conversation and emerged from the Becker’s-Bank of America survey — optimism.

More than 80 percent of survey respondents said they were either moderately optimistic, optimistic or very optimistic about their organization’s ability to remain competitive in the future. This optimism exists in the face of some considerable financial constraints — more than 32 percent of respondents said their organization’s most recent annual operating margin was 3 percent or lower and more than 72 percent listed budgetary constraints as a primary barrier to innovation.

So, the optimism about healthcare’s future? It’s possible

they agree with Geisinger’s Dr. Murphy, who believes a true transition to value-based care will come to fruition. Currently, most providers occupy a liminal space between fee-for-service and value-based models — having to navigate bifurcating care continuums may be exhausting resources and limiting the capacity of some organizations to initiate meaningful innovation.

“What gives me the most encouragement is that we seem to be moving seriously toward risk reimbursement,” Dr. Murphy said. “I think the move to value and accepting risk will accelerate innovation, because we’ll have to do it. And I think we will move to a much, much better place.”

General disclaimer for Bank of America Merrill Lynch, visit baml.com/disclaimer.

“ This is a call to arms to try to figure out how we start to move forward faster [on the digital experience], take some risks and fail fast, because we do feel the competition.”

Stephen Morgan, MD Senior Vice President and Chief Medical Information Officer at Roanoke, Va.-based Carilion Clinic

“ What gives me the most encouragement is that we seem to be moving seriously toward risk reimbursement. I think the move to value and accepting risk will accelerate innovation, because we’ll have to do it. And I think we will move to a much, much better place.”

Karen Murphy, PhD, RN Executive Vice President and CIO with Danville, Pa.-based Geisinger

“ If you think about patients as people, then you’re going to think about different ways you can engage them outside the hospital.”

Neil Gomes Chief Digital Officer and Executive Vice President of Technology Innovation and Consumer Experience at Philadelphia-based Thomas Jefferson University and Jefferson Health

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Bank of America article, 2019


18

“ One of the most effective fraud preparation tools is a tabletop exercise that can walk the organization through a simulated ransomware event.”

Staying safe in a world of healthcare data breaches

Healthcare organizations have become frequent targets of cybercriminals, putting organizations and their patients, employees and communities at risk. According to a 2018 analysis by Thales Security, 77% of U.S. healthcare organizations have reported experiencing a data breach, and 48% of organizations say they have been breached in the past year.1 Healthcare providers must not only care for patients and communities, but also understand how to protect an increasing number of electronic records, online portals and connected devices. Here are solutions that can help protect your organization and help you combat fraud when it occurs.

Common types of attacks and breachesHealthcare organizations face the same universal cyber fraud incidents seen by all businesses, across all industries. There are three main fraud cases that put healthcare organizations at risk:

1. Unauthorized access of treasury — Occurs when criminals gain access to an organization’s treasury or employees’ financial information to trick the system into sending a check or payment for a nonexistent transaction, or persuade an employee into wiring a payment to a fraudulent bank account.

2. Malware/ransomware installed — Occurs when criminals try to install malware onto an organization’s computer network, demanding a ransom to restore the system and its data to normal operations.

3. Theft of personal info — Occurs when hackers break into an organization’s database of information to steal the personal, medical or financial information of patients and employees.

How can you protect your patients, your organization and your employees against cyber fraud? Here are a few approaches to help make your data and systems safer and more secure:

1. Protect your data. Hospitals have become a key target for cyberattacks because they hold large volumes of valuable information — from patient and employee records to the information used to access corporate bank accounts and insurance monies. Legacy IT issues often make healthcare organizations particularly susceptible to cyber fraud. To protect your data, healthcare providers need a data storage plan and policies for data retention, privacy and disposal that extend across the entire organization.

author

John HesselmannNational Head of Healthcare Bank of America

2120


“ A strong vendor management program includes regularly checking the data protection policies of vendors, third-party services and strategic partners to make sure everyone has necessary levels of cybersecurity.”1Thales Healthcare Data Threat Report, 2018.

2Protenus, Cost of a Breach: A Business Case for Proactive Privacy Analytics, 2017. 3Bank of America Merrill Lynch, Fighting Fraud: How Healthcare Organizations Can Stay Safe, 2018.

“ Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA.

Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed.©2019 Bank of America Corporation. All rights reserved. ARKC3X9X 10-19-0075

2. Keep your systems safe and up to date. As patient records are migrated from paper to digital, organizations need to be vigilant in keeping track of records and how they are handled. This involves regularly backing up data stored in computer systems and installing firewalls to limit employee internet access while on the system. Organizations should also create a software management plan that includes checking for software updates, updating antivirus software and installing software patches on a regular basis to keep records and systems safe at all times.

3. Teach employees to recognize and handle potential fraud. In 2017, total damages from data breaches cost the industry $6.2 billion, according to Protenus.2 Data breaches are often accomplished via old-fashioned and low-tech phishing techniques. The most well-meaning employees can make an error in judgment by clicking on a link or responding to a fraudulent email that ends up creating a system-wide problem. Employees need training on how to recognize phishing emails and understanding their potential consequences. One way to keep staff alert is to test them by periodically sending out fake phishing emails.

4. Create policies that support cybersecurity efforts. Organizations don’t always have a cybersecurity chief in place, and many have yet to establish solid policies to protect computer systems and data. To support cybersecurity health within an organization, establish data protection policies for employees working off-site and institute a clear policy for professionals bringing their own devices into a facility, especially when those devices are used to access patient or hospital data. Organizations can also implement dual approvals as a requirement for any significant financial transactions to avoid confidential information being intercepted by cyber criminals.

5. Keep your vendors on the same page. A strong vendor management program includes regularly checking the data protection policies and procedures of vendors, third-party services and strategic partners to make sure everyone has necessary levels of cybersecurity in place. To keep everyone aligned, review your vendors’ cybersecurity policies to find out if your system is affected if their systems are breached and then develop clear vendor policies, including guidelines for access to information, data security, liability and loss recovery.

6. Be prepared for a fraud event. According to Bank of America, 90% of fraud attempts come through phishing emails directed at an organization’s weakest link: its users, who are often unaware and unprepared.3 One of the most effective preparation tools is a tabletop exercise that can walk the organization through a simulated ransomware event. Organizations should construct a plan to deal with fraud events, ransomware and other situations that affect data and potentially freeze the system.

7. Stay informed. To get ahead of cybersecurity threats overall, organizations can stay updated on the newest types of cyber threats and criminal activity by monitoring trade publications and business news, and by keeping in touch with partners who have a global view of fraud across markets and industries.

By staying up to date on cybersecurity trends in the news, educating all members of the organization and preparing for a potential threat, healthcare organizations can protect patient data and care, successfully maintain the trust of the public and the organization’s reputation, and combat fraud when it occurs. Healthcare companies must understand the risks and take precautions to protect their patients, employees and communities.

1Thales Healthcare Data Threat Report, 2018. 2Protenus, Cost of a Breach: A Business Case for Proactive Privacy Analytics, 2017. 3Bank of America Merrill Lynch, Fighting Fraud: How Healthcare Organizations Can Stay Safe, 2018.

“ Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA.

Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed.©2019 Bank of America Corporation. All rights reserved. ARKC3X9X 10-19-0075

https://www.thalesgroup.com/en/market-specific/critical-information-systems-and-cybersecurity/news/2018-thales-healthcare-data

http://marketing.protenus.com/hubfs/Content/20160923_Cost_of_a_Breach.pdf?hsCtaTracking=8a783f15-aacc-4442-b521-a699fb7a3803%7C215dd5c7-a1f4-44f0-9444-8d099d0fe204&utm_campaign=Cost+of+a+Breach&utm_medium=email&_hsenc=p2ANqtz-_Z8QeQKU-b-dn8HZvtLtL7lN2MPMr4

https://www.bofaml.com/content/dam/boamlimages/documents/PDFs/fighting_fraud.pdf

http://www.sipc.org

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Bank of America article, 2019


22

“ You will need to remain resilient, track and understand risks as they evolve and work with your employees and partners to adapt new defenses.”

Are Cyber Criminals Targeting Your Company?How to identify risks and head off potentially devastating attacks

Key takeaways

� Crimes against businesses are nothing new, but today’s cyber versions are much more dangerous. A cyber attack can wipe out a business’s assets and reputation

� Digital connections to the internet and other companies make all businesses vulnerable

� Effective preventive measures and prompt responses to cyber breaches can help minimize damage

Digital connections to suppliers and customers are essential to your company, and your employees depend on the internet to carry out many of the small and large tasks of running a business. But those connections provide easy inroads for anyone intent on doing harm, and companies’ risk has ballooned. The average cost of cyber crime has risen 72% over the past five years, and losses now amount to a staggering $13 million per company.1

Attackers scan the internet looking for companies with security lapses or openings they can exploit, and like a criminal trying doorknobs, they find many doors unlocked. Smaller companies with fewer resources may be especially at risk, even when they aren’t the primary target. Over the next five years, the global value at risk from cyber crime is expected to reach $5.2 trillion, with almost a quarter of that amount affecting companies that weren’t primary targets, but rather were hit in order to gain access to a larger target.2

As people and the organizations they work for become ever more connected, the landscape of threats grows ever larger, and the risk of cyber attacks increases exponentially. Businesses of all sizes must understand their risks and the steps they can take to protect themselves.

How cyber attacks can hobble your business The first major cyber attack came in 1988, when a rogue program known as the Morris worm targeted the world’s nascent cyber infrastructure, replicating itself remarkably quickly and bringing thousands of computers to a halt.3 Repairing the damage took 72 hours and hundreds of thousands of dollars.4

Today, of course, such consequences seem almost quaint. Cyber assaults can come from anywhere, costs have skyrocketed and every move by companies to protect themselves is met with a more sophisticated method of attack. Understanding what is at stake is crucial.

Data breach/reputational risk: When you lose control of data — particularly your customers’ data — the immediate and lasting damage may include a tarnished brand and loss of trust. Depending on your business, it could also mean regulatory fines and other legal implications. In one recent case, medical testing companies were sued for allowing patient data to be compromised — a

Crimes against businesses are nothing new, and they can take many forms — from fraud and embezzlement to theft of trade secrets. Now, those same crimes (and more) come in the form of cyber attacks. They are difficult to defend against and can not only wipe out financial and digital assets, but also destroy a reputation that took years to build.

$5.2 trillion Expected cost of cyber crime over next five years

24 25

Bank of America article, 2019balancing innovation and risk

are cyber criminals targeting your company?

that if your business operates in rented spaces, you may not have direct control of such devices and any security that may be in place to protect them.

To further complicate matters, not all antivirus systems work with every IoT device. Your security protocol will need to take into account these added risks.

Three questions to ask about your devices and platforms:1. What systems and procedures

does my company have in place to protect employees who work remotely or while traveling?

2. What rules and guidelines do we have for employees regarding apps and programs they download and use?

3. Do our IoT devices and cell phones comply with our overall security policies? What is our policy if someone loses a phone or other device?

At risk: You and your employees. Cyber attacks often target the people at a company via email or social media, floating offers and communications designed to engage them, thereby creating a conduit for malware or other threats to your data and operations. These assaults can exploit weaknesses in several areas.

�Email and other communication tools: Various kinds of communication attacks may target your business. Phishing involves an outsider posing as a legitimate company and targeting employees to introduce malware. Variations include vishing (fraudulent phone calls), smishing (bogus text messages) and BEC, discussed above. When someone at your company responds to one of these messages by clicking on a link or downloading a file, malware can compromise your company’s entire cyber infrastructure. Email is particularly dangerous, accounting for 94% of malware delivery. Some 45% of the time, the malware carrier is an attached Microsoft Office document.12

Recent research has shown that smaller companies are particularly likely to be hit with malware and other email-based attacks, with attachments posing the greatest danger.13 BEC can also come in the form of “spoofing,” with messages sent from what looks like an internal email address to request immediate wire transfers or other fraudulent actions.14 Training your workforce in email hygiene — looking carefully at the email address, particularly with emails that include a payment request, as well as general instruction in browsing and downloading, can provide powerful protection.

�Social media: A hacker or other bad actor can glean a tremendous amount of information from social media networks such as LinkedIn and Twitter, whether your employees use them personally or for work. A LinkedIn account will often include information about a company’s hierarchy that can then be used to impersonate top officials in BEC schemes, for example. Personal and business social media accounts can also be mined for company email addresses and likes and dislikes; the email addresses may then be targeted with fine-tuned spam.15 Like email, social media sites can also be used to spread malware, particularly through posts that feature shortened web addresses, which can be difficult to assess at first glance.16 When someone clicks on the link, malware may be inadvertently downloaded. Training can help employees to identify and avoid malware and learn to recognize risks. Businesses should also monitor their social media presence to avoid disclosing unnecessary information.

Three questions to ask about your employees:

1. What is our company’s incident response procedure for employees who see a suspicious email or are concerned about other possible cyber attacks?

2. How do we train our workers to recognize and respond to cyber threats?

3. What policies and procedures, such as having two people authorize invoices, are in place to reduce the risk of business email compromise?

90%of pre-infected

so�ware attacks target connectedcameras and routers

94% of malware is delivered by email


breach that came through a contractor.5 You could also lose trade secrets or have your operations disrupted. Hackers could steal your financial data, employee records, lists of processes or other essential information, and then change it, destroy it or hold it for ransom. A data breach of publicly traded companies can affect stock prices.

Business interruption: Cyber attacks can shut down your business. Malware, malicious computer code that can find its way into your information technology systems in a variety of ways, can destroy data or cripple your digital operations. Distributed denial-of-service (DDoS) attacks are expressly designed to take part or all of your system offline. Ransomware can freeze or capture your data and release it only when you meet the attacker’s price. While ransomware attacks on cities and public agencies have made headlines, businesses now account for 81% of all such infections.6

Financial loss: A cyber attack can also serve as a conduit for various kinds of fraud. Perpetrators may pose as vendors or contractors and send false invoices from familiar email addresses (a tactic known as business email compromise, or BEC). The ultimate aim is to siphon money from the business to the attacker’s accounts by deceiving the email recipient.

Understanding your company’s risksCyber assaults against your business may come from criminals, company insiders, “hacktivists” (hackers with a political purpose) or even foreign governments. Motivated to steal, disrupt or destroy your information, attackers have become adept at probing for weaknesses and taking advantage of any opportunity. You may have several distinct areas of risk:

At risk: Your information technology infrastructure. This includes all of your hardware (computers and routers, as well as any and all internet-connected devices, including phones) and your software (operating systems and programs). Protecting this backbone of your operations serves as a first line of defense against cyber attacks. Failing to install and constantly update firewalls, software patches, security work processes and other cyber security tools could leave your company at risk. The Baltimore city government, for example, was recently compromised in a ransomware attack that took advantage of the city’s failure to update its software with a readily available patch.7 To assess your company’s exposure, start with a detailed inventory of all of your hardware and software. Create a full and complete record of every device and every program, from servers to connected cameras to each and every version of your word-processing software. Each device and program carries risk; knowing what you have is essential to understanding how to protect it. Once you know all of your points of risk, focus on your policies and procedures for managing the protection of your systems.

Three questions to ask about your infrastructure:1. What are all of the ways in which

my company is exposed to potential cyber attack? This may include hardware, software and any third-party online partners.

2. What is my company’s alert system for attacks on its infrastructure, and what is the response plan?

3. What is the business continuity plan to keep us up and running after an attack on our infrastructure?

At risk: Your devices and data. With today’s emphasis on 24/7 operations, employees may need access to company systems from beyond the reach of the defenses protecting your physical structures. They may use vulnerable phones, laptops and other personal devices — rather than company-issued devices — for company business, and they may use unsecured Wi-Fi connections in public places or at home. In addition, companies of every size increasingly depend on remote servers to run applications and store data, with 53% using the cloud for storage.8 All of these platforms and devices present risks.

�The cloud: Many businesses require their employees to travel, and while away from the office they may use mobile apps for payment, communication and other company functions. While these apps make work easier, they may also provide hundreds of additional avenues for attack. For example, employees may download apps for their own use on computers or phones that they use for work. According to a recent Symantec study, most chief information officers, or CIOs, believe their companies’ employees are using approximately 40 cloud-based apps, while the actual number is closer to 1,000.9 All of these apps, which may collect information about users and connect them to remote servers, represent possible points of attack. Work with your IT team or consult the National Institute of Standards and Technology (NIST) to create a mobile app policy, and provide your employees with the necessary training to identify and avoid risky apps.10

� IoT devices: Smart appliances, sensors, locks, cameras and other internet-connected gadgetry — often known collectively as the internet of things (IoT) — are essentially computing devices. They can be used, exploited or attacked via the internet. Some devices may even arrive preloaded with infected software. In 2018, routers accounted for 75% of pre-infected software attacks, and connected cameras for 15%.11 Your company’s cyber risk inventory should include all connected devices, including automated systems, phones, cameras, routers and even thermostats. Bear in mind

!of ransomware attacksare on businesses 81%81%

!

26 27

Bank of America article, 2019balancing innovation and risk


What you can do to help keep your company safe While there’s no such thing as absolute security, it’s crucial to install technological defenses and train personnel at all levels of your business to prepare, prevent, detect, mitigate and respond to attacks. Effective preventive measures, combined with prompt, efficient responses to cyber breaches, will minimize damage to your company’s operations, reputation, customers and shareholders. Your strategy may include:

Identifying the “crown jewels.” For some businesses, losing access to their servers for a day would be an annoyance. For others, it could be devastating. Determine which of your company’s assets are at greatest risk, have the most value or would have the worst impact on your business if stolen or corrupted. This can help you decide where to focus your resources. If you store crucial data in the cloud, be certain that you have a backup plan and that you can restore your data should your cloud solution fail.

Educating your employees. Institute an awareness program that informs your employees about all of the ways the company may be at risk, shows them how to spot and avoid problems and makes cyber security part of their daily routine. When employees are educated about the grave risk that cyber threats pose, they are more likely to comply with company rules and report security threats. Cyber security should be integral to the overall training you provide.

Developing a formal cyber security program. Your cyber security program needs to be specific to your company, and it will start with understanding what matters to your business and how exposed you are to particular kinds of cyber risks. Larger companies are likely to have more areas of risk than smaller ones, although it’s also likely that they will have greater resources and a dedicated IT team to help manage security. Companies without IT staff may choose to focus on response and recovery, which will help them develop cyber resilience — an ability to deflect attacks and to protect key assets. Younger companies, in particular, have an opportunity to make a security-first mindset central to their operations from the outset.

Assessing your partners and vendors. Your business is only as secure as the suppliers, vendors, customers, other companies and people it connects to. Attacks on business supply chains increased by 78% in 2018, in part because finding a way past the often minimal defenses of a small company can provide an easy, lucrative conduit to larger prey.17 Third-party vendors have served as the point of entry for some of the largest security breaches affecting government agencies, health care organizations and credit companies. One of the challenges presented by third-party breaches is that you may not know if or when a third-party contractor or vendor has been breached. A 2019 security report noted that 56% of data breaches took months or longer to be discovered.18

Any compromise of a supplier or vendor involving your data is your responsibility; you’ll be on the hook for legal costs, and you’ll also need to repair damage to your reputation and meet consumer expectations for recovering and protecting their information. Insist that all of the businesses you work with, regardless of size, protect themselves in addition to protecting your information. You’ll need to assess their preparedness and their response plans as well as their ability to detect intrusions. Be sure to read the data privacy agreements of all of the companies you work with, and find out what cyber security frameworks they use (NIST is the gold standard). Also ask how often they update their security systems and about the details of their data recovery processes and disaster plans.

What does the future hold?The strategies and tips in this article are intended to help you safeguard your data and protect your business’s reputation, and to encourage you to make cyber security one of your top business priorities, if it isn’t already. After all, the only thing certain about the future is that cyber threats will continue to proliferate, and that those who take aim at your company will become ever more sophisticated, devious and creative.

According to a recent security report,19 the three highest threat categories emerging in the future include managing identity and authentication (ascertaining the identity of the person behind a login);20 phishing; and accidental inside threats (such as carelessness with online credentials or data).21 Tomorrow will surely bring new and as-yet-unknown threats. You will need to remain resilient, track and understand risks as they evolve and work with your employees and partners to adapt defenses that can help keep your company secure. Combining these ideas into an ongoing strategy of heightened vigilance and protection can help ensure a future for your business.

78%78%

Increase in supply chainattacks, an easy routeinto large companies

How to protect your business• Identify your “crown jewels”• Educate employees• Develop a cyber security program• Assess partners and vendors


1 accenture.com/_acnmedia/PDF-96/Accenture-2019-Cost-of-Cybercrime-Study-Final.pdf#zoom=502 Ibid.3 fbi.gov/news/stories/morris-worm-30-years-since-first-major-attack-on-internet-1102184 livescience.com/64007-what-was-first-cyberattack.html5 krebsonsecurity.com/2019/06/collections-firm-behind-labcorp-quest-breaches-files-for-bankruptcy/ 6 symantec.com/security-center/threat-report and img03.en25.com/Web/Symantec/%7B984e78e2-c9e5-43b8-a6ee-417a08608b60%7D_ISTR_24_2019_April_en.pdf?elqTrackId=3b60

a2f23b38434c9ca9afa7ce30e0a8&elqaid=6820&elqat=27 fortune.com/2019/06/01/baltimore-nsa-ransowmare-microsoft-windows-eternalblue/8 img03.en25.com/Web/Symantec/%7B54b82618-3f43-4838-92f8-9787161e0d4f%7D_CloudSecurityReport-grey-107.pdf?elqTrackId=9666f8cf1d604fc5b9f56d2252fe2a2f&elqaid=7

435&elqat=29 symantec.com/content/dam/symantec/docs/other-resources/eight-essentials-rethinking-security-for-the-cloud-generation-en.pdf?om_ext_cid=biz_email_welcome&aid=elq_1790410 nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-163r1.pdf11 symantec.com/security-center/threat-report and img03.en25.com/Web/Symantec/%7B984e78e2-c9e5-43b8-a6ee-417a08608b60%7D_ISTR_24_2019_April_en.pdf?elqTrackId=3b60

a2f23b38434c9ca9afa7ce30e0a8&elqaid=6820&elqat=212 enterprise.verizon.com/resources/reports/2019-data-breach-investigations-report.pdf13 symantec.com/security-center/threat-report and img03.en25.com/Web/Symantec/%7B984e78e2-c9e5-43b8-a6ee-417a08608b60%7D_ISTR_24_2019_April_en.pdf?elqTrackId=3b60

a2f23b38434c9ca9afa7ce30e0a8&elqaid=6820&elqat=214 krebsonsecurity.com/2015/03/spoofing-the-boss-turns-thieves-a-tidy-profit/15 thesecurityawarenesscompany.com/2017/06/06/cyber-security-risks-social-media-5-ways-users-vulnerable/ 16 Ibid. 17 symantec.com/security-center/threat-report and img03.en25.com/Web/Symantec/%7B984e78e2-c9e5-43b8-a6ee-417a08608b60%7D_ISTR_24_2019_April_en.pdf?elqTrackId=3b60

a2f23b38434c9ca9afa7ce30e0a8&elqaid=6820&elqat=218 enterprise.verizon.com/resources/reports/2019-data-breach-investigations-report.pdf19 img03.en25.com/Web/Symantec/%7B54b82618-3f43-4838-92f8-9787161e0d4f%7D_CloudSecurityReport-grey-107.pdf?elqTrackId=9666f8cf1d604fc5b9f56d2252fe2a2f&elqaid=7

435&elqat=220 krebsonsecurity.com/2018/09/u-s-mobile-giants-want-to-be-your-online-identity/21 ca.com/content/dam/ca/us/files/ebook/insider-threat-report.pdf

“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch Professional Clearing Corp., all of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA.

Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed.

©2019 Bank of America Corporation. All rights reserved. ARVMJMBR 08-19-0611

https://www.accenture.com/_acnmedia/pdf-96/accenture-2019-cost-of-cybercrime-study-final.pdf#zoom=50

https://www.thesecurityawarenesscompany.com/2017/06/06/cyber-security-risks-social-media-5-ways-users-vulnerable/

https://www.fbi.gov/news/stories/morris-worm-30-years-since-first-major-attack-on-internet-110218

https://www.livescience.com/64007-what-was-first-cyberattack.html

https://krebsonsecurity.com/2019/06/collections-firm-behind-labcorp-quest-breaches-files-for-bankruptcy/

https://www.symantec.com/security-center/threat-report

https://img03.en25.com/Web/Symantec/%7B984e78e2-c9e5-43b8-a6ee-417a08608b60%7D_ISTR_24_2019_April_en.pdf?elqTrackId=3b60a2f23b38434c9ca9afa7ce30e0a8&elqaid=6820&elqat=2


https://fortune.com/2019/06/01/baltimore-nsa-ransowmare-microsoft-windows-eternalblue/

https://img03.en25.com/Web/Symantec/%7B54b82618-3f43-4838-92f8-9787161e0d4f%7D_CloudSecurityReport-grey-107.pdf?elqTrackId=9666f8cf1d604fc5b9f56d2252fe2a2f&elqaid=7435&elqat=2


https://www.symantec.com/content/dam/symantec/docs/other-resources/eight-essentials-rethinking-security-for-the-cloud-generation-en.pdf?om_ext_cid=biz_email_welcome&aid=elq_17904

https://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-163r1.pdf




https://enterprise.verizon.com/resources/reports/2019-data-breach-investigations-report.pdf




https://krebsonsecurity.com/2015/03/spoofing-the-boss-turns-thieves-a-tidy-profit/






https://enterprise.verizon.com/resources/reports/2019-data-breach-investigations-report.pdf



https://krebsonsecurity.com/2018/09/u-s-mobile-giants-want-to-be-your-online-identity/

https://www.ca.com/content/dam/ca/us/files/ebook/insider-threat-report.pdf

http://www.sipc.org

29

Reprinted from HealthLeaders Media, 2019

28

“ If we’re serious about being successful in a value-based payment world, one of the things we’re going to change is how we work with the third-party payers.”

NONPROFITS INSTILL FINANCIAL DISCIPLINE TO COMBAT MARGIN WOESSucceeding as a nonprofit health system in the rapidly consolidating provider market is a challenge. Margins are tight and the financial leaders of these organizations are constantly tasked with finding reliable sources to drive revenue.

These executives need to balance short-term goals with expectations for long-term stability. There are several other factors that contribute to their sizable workload, including negotiations with payer organizations, approaches to cutting costs without reducing the amount of full-time employees, and initiatives that seek to break down the traditional barriers to care in order to meet patients where they are.

In this HealthLeaders Roundtable, the panel discussed such topics as instilling financial discipline within their respective organizations, handling shrinking operating margins, and expense control strategies.

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Robert Ehinger Senior Vice President of Financial OperationsTower HealthWest Reading, PA

John P. McGovern Senior Vice President of Financial PlanningNorthwell HealthNew York, NY

Rob McMurray Chief Financial OfficerChristiana Care Health SystemNewark, DE

Magda HaydenMarket ExecutiveBank of America Merrill LynchNew York, NY

Jack O’Brien (Moderator) Finance EditorHealthLeadersMiddleton, MASP

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“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation, including Bank of America, N.A., Member FDIC.

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We are allocating more time in governance meetings for strategic issues and what it means to assume responsibility for the health, well-being, and total cost of care for a defined population. If the governance committees don’t understand what this means, then we’re in for some challeng-es down the road. The challenge is getting all of us ready for that value-based world.

HealthLeaders: When you talk about expense control, what sort of strategies go into that?

McGovern: We recently launched an initiative called “Ideas at North-well.” We’ve built out a platform to capture ideas from the grassroots level up.

Anyone—nurses, clinical staff, administrative staff—can try to bubble up ideas. In addition to enhancing employee engage-ment, there could be ideas that will be successful at controlling cost. We also continually look at the basics: staffing efficiency, staffing hours, nursing care hours, full-time employee (FTE) tracking, overtime control, all of the nuts and bolts of expense management.

Magda Hayden: Unlike for-profit businesses, many nonprofits do not generate operating surpluses, even after accounting for reve-nue sources such as tuition or membership fees. They typically operate at breakeven to support their mission.

McMurray: When it comes to expense control, it should never stop. We’re in the process of taking out $100 million of cost perma-nently over a three-year period, and we’re starting it differently

than I would say a traditional cam-paign like this would go. You would think the low-hanging fruit is the easy stuff and you would chunk your largest part in year one.

We’re doing it differently. We’re saying there’s a $10 million goal in year one, a $30 million goal in year two, and a $60 million goal in year three. We’ve achieved the year one goal, but it took the orga-nization a while to think about this and what it meant. With 60% of our expenses in labor, the real savings are in becoming more efficient.

HealthLeaders: What are some novel approaches that you’ve uti-lized to effectively cut costs with-out reducing your FTEs?

Robert Ehinger: We had a surgi-cal sterile pack that would come

Robert Ehinger Senior Vice President of Financial Operations

Tower HealthWest Reading, PA

in and it had 10 [items] in it. Eight were used, two were never used, and there was a third that was rarely used. They went back and priced it and said, “Let’s get a custom pack,” getting our pack down to be seven things and then [having] number eight on the shelf while getting rid of the other two. [The 10 item pack] was at one hospital, it had generated a cou-ple hundred thousand dollars a year—but then you take it across a system, that’s huge, and some-body starts adding commas to it. This was something that someone had negotiated thinking they were

HIGHLIGHTSHealthLeaders: What’s the most significant obstacle impeding your organization’s financial success?

John McGovern: The most sig-nificant obstacle is maintaining our margin. We are a large orga-nization, and we have a relatively modest margin. I would say that up until recently, we were primarily focused on growth of top-line rev-enue, volume, and everything that drives revenue. Keeping that vol-ume trend going, acquiring phy-sician practices who contribute to that volume—that’s one side of the margin equation.

Expenses are the other side, and we’re evolving into a phase where we’re focused on optimiz-ing our assets, expense control, and ideas to operate more effi-ciently. We look at all the opportu-nities that exist within the scale of a $12 billion operation to control expenses while keeping the reve-nue growth apace and expanding that margin.

Rob McMurray: The first thing that comes to mind are revenue pressures, and because of those revenue pressures, we’re seeing decreases in the rate our revenue grows. There are pressures from both the governmental payers and commercial payers.

During the past two years, our expenses grew at a rate faster than our revenue. I looked back at the 15 years before that, and it only happened one year.

There are a lot of things that come into play, and I think that some of the challenges are not only convincing our organization that we need to be better pre-pared for a value-based payment world, [they’re] educating our gov-ernance groups and our board.

McMurray: It comes down to accountability and execution, which ultimately leads to disci-pline. From a finance perspec-tive, there’s a whole continuum of where we can be in managing the budget process. We can be gatekeepers, and we can be the ones that say no. We can moni-tor every last expenditure, or we can turn it completely over to the departments and say, “Tell me your budget. Run with it. I’ll ask you questions throughout the year.” Somewhere in there, depending upon the culture and level of trust you have, is where you’ll land.

We’re currently intentionally pushing away from the gatekeep-er side, in part because we’re after that $100 million expense goal, and giving more authority and accountability to the operating departments. It’s based on trust and communication throughout the year to convince the depart-ments that if you tell me what your accurate budget is and don’t pad it, I’m not coming after you during the year to say, “OK, you need to not hire that position,” or, “You need to not do that program.”

HealthLeaders: How do you balance setting your organiza-tion up for short-term success but also striving for long-term financial stability?

Ehinger: We do what’s called inte-grated strategic financial planning; it’s a five-year plan, and that’s the guide by which we drive our next budget and subsequent ones. Now, we do an update every year to adjust for the reality versus what you would hope for, and you have to make the adjustments based off of that.

With the trust of the depart-ments, we work collaboratively to build the best budgets and finan-cial models possible.

We’ve been diligent about asking when [departments] are

HealthLeaders: What have been the most effective approaches your organization has made to instill financial discipline for the enterprise?

Ehinger: We share our financial results on a monthly basis with our leadership team. We have a monthly leadership meeting where we put up our gross rev-enue, net revenue, and expens-es, compared to the budget. We challenge our departments when we see variances as we’re going through the month end, asking them why their supplies are up $300,000. We have a parameter, but it’s “why are your purchase services going up?” They’ve got to be able to substantiate what that cost is and whether or not it’s needed.

saving money, but then the day-to-day person says, “This is ridic-ulous; I keep throwing them out.”

McMurray: There’s a great oppor-tunity to shift some of the ways we think and look for cost savings or efficiencies. One of the areas in which we are having success is in supply chain. The traditional way supply chain contributed to cost savings was by focusing solely on unit price. Through effective col-laboration between supply chain leadership and our service line phy-sician leaders, the goals of supply chain are aligned with the goals of the service lines. The end result is a better total cost of ownership, of which unit cost supported by effec-tive negotiation is a component. Total cost of ownership takes into account much more than unit cost; it includes other costs such as logis-tics, clinician labor, and security. By connecting with physicians, we are able to consider unit cost as a component of value from a patient perspective.

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doing their budget, “Did you buy anything this year?” Even when we’re approving capital expendi-tures, make sure you put in your budget that maintenance ele-ment for whenever it comes in. Even though it’s going to drive up your cost, we’d rather have it in the budget to know about it than have it pop up. You can see that it starts like a snowball—things start clicking because you’re not adversarial.

Hayden: At Bank of America, we are constantly looking at long-term and short-term growth as it relates to our employees, our clients, and our communities. For example, Bank of America Merrill Lynch assists the boards and investment committees of our not-for-profit clients in managing their endowments. [The bank] pro-vides investment management services that seek to align the investment process with the goals of the nonprofit, with the goal of enabling the endowment to serve as a steady source of support for the organization.

McMurray: It’s challenging to bal-ance the short term versus long term. We have the five-year fore-cast, we compile it and run all the ratios to show what the picture is, but it’s more of a strategic vision builder for the executives. There are several ways that we have to then manage that message, and one of them is to the organization, but the other is to the governing body saying, “Yes, we believe we want to achieve an acceptable operating margin.”

We have a certain margin as a floor that helps sustain what we do, but while we may want an even higher margin, we realize that to maintain that margin in the future, we have to make investments. We’ll deliver a certain budget to the board for approval and say, “We have this margin target, but

John P. McGovern Senior Vice President of Financial Planning

Northwell HealthNew York, NY

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continuum, postacute, urgent care, the hospitals, and the doc-tors. We all love fee-for-service, but at what point do we reach the time where the essential pro-vider in the network is unable to obtain the increases needed to cross-subsidize the increasing amount of Medicare and Medicaid patients we have?

We also have “payer bad behavior”; the increasing per-centage of denials that we have is astounding. It’s a contentious, somewhat adversarial relationship because they want to pay less and we want to get paid for the services provided. There is room for improvement, but I would sug-gest that it is preferable that the providers and payers figure it out together and not have the govern-ment come in with reform towards a single-payer system.

McMurray: Our ability to nego-tiate payer contracts is good because I feel like the payers are our partners. Yes, there are moments when it’s adversarial, and we continue to struggle with denials, the cost of managing denials, and a significant amount of waste goes into that. But in the end, we’re trying to provide care to members of our commu-nity. The third-party payers are trying to create a way that the community members can access insurance to get care, and at the end of the day, we spend time debating contracts, denials, and other issues.

Is there a different way to start over and think about new types of partnerships?

If we’re serious about being successful in a value-based pay-ment world, one of the things we’re going to change is how we work with the third-party payers and negotiate differently, partner differently. There’s no playbook on it; we have to sit down and figure it out.

difficult right now. They want to reduce the way they’re cur-rently paying us, and as health-care expenses regionally and nationally increase, providers are looking for ways to balance the bottom line while providing the highest-quality care. There’s that difficulty, but on the other end, you’ve got both sides looking at trying to do these other types of shared savings risk models, because we know the change is coming. Nobody is willing to give up the current system, but they’re slowly peeling that off.

McGovern: We’ve been suc-cessful over a long period of time in being a must-have provider network in our market. We’ve amassed this system, the whole

for supplies, we will realize even greater cost savings.

Hayden: I go back to our Simplify and Improve at Bank of America. They went to certain businesses and said, “If you achieve those savings, you’ll have the power to reinvest it into your business-es.” This is ongoing, and it is our sum of the big businesses as we move from one business to anoth-er. They all have their objectives continuing Simplify and Improve at some big processes. Our CEO was personally involved meeting heads of every business to ask where they think they can have cuts, how they are going to do it, and where they are going to improve.

HealthLeaders: How would you assess your ability to negotiate payer contracts? Do you see any room for improvement?

Ehinger: It’s right in line with what we were talking about: It’s

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HealthLeaders: Do you think pay-ers are equally as open to chang-ing the rules of the game?

McMurray: In a low-margin busi-ness, who risks getting cut out? It’s the intermediaries. They see it, and they’re willing to have those discussions. The hard part of those discussions is leaving our baggage outside of the room and sitting down with someone who, weeks or months ago, we had a discus-sion around settling some long-stay cases or going to arbitration. Trying to forget all that stuff and starting over is a challenge, but I am confi-dent they’re open to it.

McGovern: I’m going to inject a little skepticism against that point and maybe bring baggage in. I think you’re right about that, but it goes back to institutional and organizational sponsorship struc-ture and purpose. A lot of the com-mercial payers are large, consoli-dated public companies that exist to maximize shareholder value, which doesn’t necessarily align with community health.

I do think there are some inherent-ly structural differences and pur-poses when you talk about going in with that blank sheet of paper. It has to happen—and you’re right, they are at risk of getting disinter-mediated—but there are structural impediments to getting to that.

Ehinger: I agree, and some of the incentive that will force them to change is keeping that market share for themselves, because it’s becoming more competitive amongst [insurers] since employers are shopping to control their costs.

On the other side, you’ve got hospitals that are looking for the top side of their income statement. They’re going to have to become more innovative in those areas to say, “OK, how can we partner so we both are successful?”

Magda Hayden Market Executive

Bank of America Merrill LynchNew York, NY

a lot has changed in the last year.” And it continues to change since there is a real shift towards val-ue-based payment models.

HealthLeaders: Discuss how each of you are breaking down the traditional barriers to care so you can meet patients and con-sumers where they are.

Hayden: Digitization is a big dif-ferentiator for how we are able to serve our clients. We know that by 2020, more people will have mobile phones than electricity, running water, or cars. As mobile devices have become more prev-alent in our personal lives, they are becoming more relevant in our business lives.

Through our digital platform, we provide our clients with access to their accounts 24/7 from any location via their mobile devices. In the event of a natural disas-ter or other emergency, this can

will be 55 urgent care centers throughout our market that we’ve developed over the last three to four years in a joint venture. I t ’s co-branded Northwel l Health-GoHealth Urgent Care. Five years ago, urgent care was nowhere near the presence that it is now, where you can’t drive down the street without seeing several. But not to exclusive-ly focus on urgent care, we do have a network of ambulatory surgery centers that we’ve devel-oped over the last several years because that care is moving out of the hospital walls.

We are expanding and invest-ing in nontraditional points of access across the spectrum, which relates to value-based payments. We want to have various options to care for our community and do it in low-cost settings. However, the flip side of it is that it doesn’t take away the need to maintain hospitals. That’s the dilemma of

being a health system and having to commit the capital to own these expensive and increasingly inten-sified places of care.

Ehinger: I agree, we acquired an urgent care company and we’re looking to grow the number of urgent care facilities [we have] over the next five years. I was thinking

about the fact that 50% of millen-nials don’t want a relationship with the doctor, they don’t want to sit in a waiting room. They want to go in, get taken care of, and leave.

Another aspect that we look at as a positive for the urgent care is it helps our primary care physicians, putting less pressure on them because now they can have regular hours and don’t have to worry about getting calls on weekends. The ability to have that tied to your network so that it’s not some place [the patient] goes where they don’t know who the provider is. If there’s a relation-ship, [urgent care] has the abil-ity to say, “You have Dr. Smith, we’re going to send him a note.” His records are tied to ours and he’ll have this updated so [the patient] can follow up with him if [the patient] has that relationship with the primary care.

We also have a partner-ship with an ambulatory surgery [center.] We’ve only had a few but we’re looking to grow those because treatment that you would have had five years ago in the hospital, [patients] now want to do them in an ambulatory

surgery center. It’s expanding more with pressure from the insurance industry because it’s a lower cost setting. However, that doesn’t mean that you have less obligation at the brick and mortar mothership, we still have to maintain that.

Hayden: How do you incent the doctors to be cost conscious?

McMurray: I will say from my perspective that we have not yet given them the full opportunity to be part of the decision-making process with certain clinical sup-plies. The supply chain has goals that, in the past, haven’t been linked with clinical goals. We’ve seen positive results with physi-cians as decision-makers in our bundle programs, and we realized cost savings. I think that if we con-tinue to provide physicians with a fair chance to become leaders in the decision-making process

Rob McMurray Chief Financial Officer

Christiana Care Health SystemNewark, DE

“THERE’S A GREAT OPPORTUNITY TO SHIFT SOME OF THE WAYS WE THINK AND LOOK FOR COST SAVINGS OR EFFICIENCIES. ”

make a world of difference. For example, the American Red Cross used digital disbursements to pro-vide emergency funds to those impacted by Hurricane Harvey in Houston in real time.

McGovern: The least tradition-al access point has become an important access point. There

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“ This recent M&A movement toward vertical integration involving nontraditional partners suggests that the healthcare industry is undergoing a major transformation…”

H E A L T H L E A D E R S M E D I A . C O M / I N T E L L I G E N C E

PERSPECTIVE . . . . . . . . . . . . 2

ANALYSIS . . . . . . . . . . . . . . . . 4

SURVEY RESULTS . . . . . . . . . 8

METHODOLOGY . . . . . . . . . 22

RESPONDENT PROFILE . . . 23

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An Independent HealthLeaders Report Powered by:

NAVIGATING THE M&A LANDSCAPE: ACHIEVING CLINICAL AND FINANCIAL OBJECTIVES

INTELLIGENCE REPORT68%of respondents say they expect the CVS-Aetna merger to have

major impact on the competitive landscape among U.S.

healthcare providers within the next three years

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PERSPECTIVEand Partnerships Survey, the top three non-financial reasons respon-dents say that an M&A was abandoned before or during the due diligence phase are mistrust between parties (30%), concern about governance (27%) and incompatible cultures (21%).

Culture of Learning/Effective Lines of Communication to Key Stakeholders. The culture of the organization should embrace collaborative learning, best practices and process/performance improvement. Key medical staff and clinical leadership should be able to effectively model and communicate an aligned culture around organizational improvement. The same weaknesses and opportuni-ties known to the governing bodies should not be a mystery to clinical stakeholders so that agenda-laden or uninformed objections to executing on the long-term strategic plan should be lessened. Communications to Stakeholders should reinforce the culture.

Organizational Emphasis on Sustainability. Sustainability will in large part be influenced by the operations and organization meeting the Triple Aim, achieving relevance/attractiveness with employers and payers and the convenience and connectivity with actual patients, both in terms of the digital ease of patient encounters and conve-nience of care delivery access points. While responses to the 2019 HealthLeaders Mergers, Acquisitions, and Partnerships Survey indi-cate that no single financial objective is responsible for driving M&A activity, respondents state four tightly clustered reasons: improve

“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed. ©2019 Bank of America Corporation. ARN5JXVH

financial stability (60%), increase market share within geography (55%), improve operational cost efficiencies (54%), and expand geographic coverage (53%). And survey respondents say the top care delivery objective for M&A activity is to improve their position for care delivery effi-ciencies (60%). Sustainability will likely require that the organization collaborate with other third parties to meet community needs and address competencies not possessed (e.g., population health, capitation management, post-acute care, etc.).

The non-exhaustive list of categories above will hopefully confirm your existing progress on the journey or serve as a challenge for areas that need to be addressed. I trust your answer to the opening question is that your healthcare system is committed to preparing both the organization and all Stakeholders for a non-linear journey towards the New Healthcare Order that will likely require col-laboration, course corrections and discipline.

PERSPECTIVE

Mission, Vision and Values. An orga-nization’s Mission and Vision state-ments should outline an achievable yet ambitious future that resonates with the clinicians, staff, management, board and other relevant stakehold-ers (“Stakeholders”). The statements should not create skepticism but be sincere guardrails for future strategic plans and decision-making, used rou-tinely by executives and easily articu-lated by all key Stakeholders.

Governance. The system-wide and local governing boards that govern the system should be proactively educated about the New Healthcare Order. Endemic macro and micro

issues facing their organization and health-care facilities should not be a surprise but, rather, they should be transparently engaged and aligned in the curative steps, whether or not difficult or previously inconceivable, that may be necessary to ensure sustainabil-ity. Too often, governing bodies are naive or uninformed about the relative strengths and weaknesses of their organization or broad-er demographics. In my experience, such a lack of “education” may be fatal or signifi-cantly disruptive to an ongoing collaboration or merger negotiation. As mentioned in the 2019 HealthLeaders Mergers, Acquisitions,

It is hard to dispute the notion that the mission of today’s health systems, predominantly hospital-centric over the last 50+ years, is undergoing a significant transformation. Some might even refer to the transformation as happening at warp speed compared to the historically modest rates of change seen over the last few decades. Are we witnessing the advent of healthcare’s own version of Moore’s Law, which described the disruptive, exponential increase in micropro-cessor size, speed and capacity advancements?

The rapid transformation of our system has clearly induced stressors, the symptoms of which are evidenced by rating agency warnings and weakening financial performance due to a plethora of factors. The factors impacting our legacy health systems include: 1) the significant shift from fee for service to value-based care that is disrupting mar-kets and geographies at an uneven pace; 2) the decrease of inpatient utilization due to technology and increase of other lower-cost and more convenient ambulatory/outpatient care settings; 3) the macroeconomic factors resulting in increased cost of capitaland the failure of overall reimbursement to keep up with healthexpense inflation and the costs of unfunded governmental man-dates; and 4) the reaction of competitors (both horizontal and vertical)that impact market share and attributable lives.

The above level setting should cause healthcare leaders and boards to ask: ‘Will your organization enter the New Healthcare Order proactive, self-guided and agile or more like a rudderless vessel being towed to harbor?’ The answer to this question may not be binary and certainly will be influenced by vision, leadership and proactive stewardship. Healthcare leaders may want to consider the following areas:

WILL YOUR ORGANIZATION ENTER THE NEW HEALTHCARE ORDER PROACTIVE, SELF-GUIDED AND AGILE OR MORE LIKE A RUDDERLESS VESSEL BEING TOWED TO HARBOR?

Brent McDonald Head of Healthcare

Strategic Advisory Services, Managing DirectorBank of America

Merrill Lynch

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ANALYSISorganizations combine scale, technology, and innovative structures.

However, there is no need for providers to panic—these megamergers are still in the early stages of implementation, and the fundamental mission of healthcare has not changed.

“I don’t think people fully understand the real business purpose of this type of activity yet, or what these organizations are trying to get out of their connections,” says Kevin Brown, president and CEO of Piedmont Healthcare, a Georgia-based nonprofit health system with 11 hospitals and nearly 600 locations, and advisor for this Intelligence Report. “Time will tell regarding the impact they will have on the industry landscape and its different segments.

“I haven’t spent a lot of time thinking or worrying about these new developments. Generally, I spend my time thinking about what we are doing on a day-to-day basis as an organization to fulfill our mission and take care of the communities we serve. I’m certainly aware of these developments, but it’s important not to get distracted from our core purpose,” Brown says.

Financial and clinical impacts. From a practical standpoint, the healthcare industry will continue to function in some version of its current form for some years to come, regardless of megamerg-ers, and providers engaged in M&A activity must remain focused on achieving their core financial and clinical objectives.

In general, survey respondents indicate that M&A activity has had a positive financial impact on their organization, with 76% saying that net patient revenue either increased (57%) or remained the same (19%), and only 8% indicating that it decreased (Figure 6). Similarly, 66% say that operating margin either increased (32%) or remained the same (34%), and 17% say that it decreased.

However, survey respondents are less positive about the impact on the cost of providing care, with 59% saying that costs either increased (20%) or remained the same (39%). Viewed another

way, a nearly equal percentage say that costs increased (20%) as decreased (21%), which suggests that M&A activity has not always succeeded in the important mission of bringing down costs.

Brown points out that increasing scale through M&A activity doesn’t necessarily yield cost efficiencies in every aspect of a healthcare organization, and that the most attractive opportunities are not at the bedside.

“I don’t think you get a lot of efficiency from scale directly at the bedside, such as in terms of labor costs. You get efficiency from scale for things like drug costs and eliminating the duplication of expensive services, hardware, and software. The supporting cast for cap-turing efficiency from increased scale comes from costs that are away from the direct bedside, such as the electronic health record platform or from having a single payroll sys-tem that allows you to process payroll at the lowest possible cost,” he says.

The story for clinical impacts from M&A activ-ity is also promising, with respondents most-ly reporting positive views on the impacts their organization experienced after its most recent M&A activity (Figure 6). For example, a greater percentage say that patient readmis-sions decreased (18%) than increased (8%), although a large percentage (44%) report that this remained the same. And a greater percentage say HCAHPS scores increased (11%) than decreased (6%), although 48% say this remained the same. Lastly, a greater

ANALYSIS

MEGAMERGERS ADD SPICE TO M&A ACTIVITY

deals and completing deals underway (Figure 10). This means that nearly three-quarters (73%) of respondents will be exploring poten-tial deals during this period.

Megamergers take center stage. While steady healthcare industry M&A activity has been with us for some time, a series of new and rumored megamergers and part-nerships is capturing the headlines these days. This recent M&A move-ment toward vertical integration involving nontraditional partners suggests that the healthcare indus-try is undergoing a major transfor-mation, one that will likely alter the landscape in unanticipated ways.

The majority of respondents in our sur-vey say that they expect significant industry impact from these megamergers (Figure 1), led by CVS Health’s merger with Aetna (68%), Walmart’s potential deal with Humana (57%), and Amazon’s partnership with JPMorgan Chase and Berkshire Hathaway (49%). While information regarding the latter two develop-ments is in short supply, respondents see the potential for large-scale impact.

Faced with such far-reaching and transfor-mative new relationships, what are health-care providers to do? As things currently stand, even the largest health systems lack the scale to negotiate on equal footing with most insurers, and these new hybrid

Despite continued and sometimes unsettling M&A activity in the industry, the fundamental mission of healthcare has not changed. Merger, acquisition, and partnership (M&A) activity within the healthcare industry shows no sign of diminishing, with nearly all indicators pointing to continued consolidation. The fundamental need for greater scale, geographic cover-age, and increased integration remains unchanged for pro-viders, and this will sustain M&A activity for years to come.

Evidence of the M&A trend’s resiliency is found through-out our 2019 HealthLeaders Mergers, Acquisitions, and Partnerships Survey. For example, 91% of respondents expect their organizations’ M&A activity to increase (68%) or remain the same (23%) within the next three years (Figure 12), an indication of the trend’s depth. Note that only 1% of respondents expect this activity to decrease.

Likewise, 38% of respon-dents say that their orga-nization’s M&A plans for the next 12–18 months consist of exploring potential deals, up six percentage points over last year’s survey, and another 35% say that their M&A plans consist of both exploring potential

Jonathan Bees Research Analyst

of respondents say (in a tie) that incompatible cultures and disagree-

ment about organizational mission are why their most recent M&A

activity fell short of expectations

43%

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ANALYSISrelationship, but not M&A (23%)—down six points, the most interesting result is for no activity.

Nearly one-quarter (23%) of respondents say that their organiza-tion has had no activity recently, almost double last year’s result (12%). Whether this is an indication of some softening in the M&A trend is certainly subject to debate, particularly given the strong data from other survey questions related to M&A activity.

Another example of softening is the survey result for cumulative total dollar value of the M&A activity organizations will be exploring over the next three years (Figure 14). Respondents indicate that 55% of the cumulative total dollar value falls below $50 million, and 22% is $50 million and above. Compared with last year’s survey, there appears to be a shift toward lower cumulative total dollar value: the less-than-$50-million range is eight percentage points higher (55% versus 47%) than last year, and the $50 million and more range is eight points lower (22% versus 30%). Translation: respondent M&A budgets appear to be decreasing slightly.

It’s not you, it’s me. When providers begin the difficult task of performing due diligence, there are no guarantees that a formal agreement will be concluded. There are a number of ways that a potential deal can fall apart, both financially and operationally, and both sides must come to a consensus for a deal to move forward.

On the financial side of the slate (Figure 15), respondents say that the top three reasons that an M&A involving their organization was abandoned before or during the due diligence phase are concerns about assumption of liabilities (23%), regulatory issues (22%), and concerns about risk/revenue sharing (20%). Note that the response for regulatory issues is nine percentage points higher than in last year’s survey, suggesting that recent high M&A activity may be attracting government attention.

On the operational side (Figure 16), respondents indicate the top three reasons that an M&A involving their organization was

abandoned before or during the due dili-gence phase are mistrust between parties (30%), concern about governance (27%), and incompatible cultures (21%). This represents a change in sequence over last year’s survey where the order was incompatible cultures (30%), concern about governance (24%), and concern about operational transition plan (21%).

The importance of cultural compatibility is a common theme in any discussion of M&A success or failure, as is establishing a basis for trust between the two organizations. Brown says that it’s critical to do your homework up front on these key issues, and he says not to underestimate their importance or assume that differences can be easily overcome later.

“We do a lot of work on the front end to make sure that it’s going to be a success on the back end,” says Brown. “If we can’t get through the front end, we move on to other opportunities.”

Jonathan Bees is a research analyst for HealthLeaders.

ANALYSISpercentage say quality outcomes increased (23%) than decreased (8%). Forty-six percent indicate this remained the same.

For the 8% of respondents who experienced a decrease in quality outcomes and 46% that report this remained the same after an M&A, Brown questions the merit of making this sort of financial commitment. “Why would you do this if you can’t improve quality?”

“First and foremost, Piedmont Health’s M&A activities focus on care delivery and creating a more integrated product for the communi-ties that we serve. The goal is to have an integrated product where everything is coordinated and connected, and through that we deliver a higher-quality, lower-cost model for our patients,” he says.

Another somewhat troubling survey finding for clinical impacts are the high response rates for “don’t know.” The responses are 30% for patient readmissions, 36% for HCAHPS scores, and 23% for quality outcomes, indicating a disconcerting lack of respondent awareness of these important metrics.

“We look at the approximately 26 metrics associated with the Leapfrog Composite, which allows us to see performance in real time,” says Brown. “And we’ve been able to determine that every-body that has joined the Piedmont family demonstrates improve-ment in these metrics fairly quickly. And not only that, many of the organizations that join us do some things around quality that are actual-ly better, and we adopt those practices as well.”

M&A again? While it is clear that most respon-dent organizations expe-rienced positive impacts from their M&A activity, the high levels for “don’t know” responses and

mediocre results for increasing quality out-comes leaves the door open to an interest-ing question. Would respondents say their organization would choose to participate again in their most recent M&A activity?

Revealingly, two-thirds (66%) of respondents say that their organization would choose to participate again in its most recent M&A activity (Figure 8), a positive finding given the costs and complexity of such undertakings. Note, however, that this result is down seven percentage points over last year’s survey. In a similar vein, 16% of respondents—double last year’s percentage—indicate that they would not choose to participate again. These data points will be something to watch in subsequent surveys.

Case for softening growth. Note that these data points aren’t the only ones suggest-ing that healthcare organizations may be thinking about tapping the brakes. While the outlook for continued growth in M&A activity appears strong and the majority of survey data suggests several more years of growth, there are a handful of results that suggest that activity levels may be on the verge of easing.

One such example is the survey question that asks about the nature of respondents’ most recent M&A activity (Figure 4). While the results show slightly increased activity in acquiring another organization (31%)—up five percentage points over last year—and slightly decreased activity for a contractual

of respondents say their organization would choose to

participate again in its most recent M&A activity

66%

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Figure 2

What are the financial objectives of your merger, acquisition, and/or partnership (M&A) planning or activity?> Range of financial objectives. The range of financial objec-

tive responses indicates that no single objective is respon-sible for driving M&A planning or activity. The four highestresponses are separated by only seven percentage points:

SURVEY RESULTS

Improve financial stability

Increase market share within our geography

Improve operational cost efficiencies

Expand geographic coverage

Improve position for payer negotiations

Expand position in care continuum

Improve access to capital

Improve access to operational expertise

Improve access to financial management

Other

60%

55%

54%

53%

47%

47%

32%

23%

17%

5 %

Base = 133, Multi-response

FINANCIAL OBJECTIVES

The range of financial objective responses indicates that no single objective is responsible for driving M&A planning or activity. The four highest responses are: improve financial stability, increase market share within geog-raphy, improve operational cost efficiencies, and expand geographic coverage.

improve financial stability (60%), increase market share within our geography (55%), improve operational cost efficiencies (54%), and expand geographic coverage (53%).

> Results comparable to last year. The top threeresponses in last year’s survey are comparableto this year’s results: improve financial stability(63%), improve operational cost efficiencies(61%), and increase market share within ourgeography (60%).

> Top objectives based on organizational size.The top response for large organizations isimprove operational cost efficiencies (70%),while for small (65%) and medium (64%)organizations the top response is improvefinancial stability.

SURVEY RESULTS

Figure 1

Which of these deals do you expect to have a major impact on the competitive landscape among U.S. healthcare providers within the next three years? > Healthcare industry impact. Respondents expect significant

industry impact from megamergers such as the CVS Health’smerger with Aetna (68%), Walmart’s potential deal with Humana(57%), and Amazon’s partnership with JPMorgan Chase andBerkshire Hathaway (49%). While details of the latter two devel-opments are still emerging, respondents see the potential forlarge-scale impact.

DEALS WITH MAJOR IMPACT ON COMPETITIVE LANDSCAPE


68%

57%

49%

30%26%

7%

Percent of respondents who expect major industry impact from megamergers such as CVS Health’s merger with Aetna.

> Correlation with organizational size. Agreater share of respondents from largeorganizations (74%) than medium (64%)and small organizations (63%) say that theyexpect CVS Health’s merger with Aetna tohave a major impact, and a greater shareof respondents from medium (79%) andlarge (74%) organizations than small organi-zations (48%) say that they expect Walmart’spotential deal with Humana to have amajor impact.

CVS Health’s merger with

AetnaWalmart’s

potential deal with Humana

Amazon’s partnership

with JPMorgan Chase and Berkshire Hathaway

Cigna’s merger with

Express Scripts

Walgreens’ collaboration with Microsoft

Other

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Figure 4

Please describe the nature of your most recent M&A activity. > Acquiring vs. partnering with another organization. The response

“we acquired another organization” (31%) tops the list of respons-es, an increase of five percentage points over last year’s result.Note that the response for a contractual relationship, but not M&A(23%), while second highest, declined six points compared withlast year.

> No activity response nearly doubles. Nearly one-quarter (23%) ofrespondents say that their organization has had no activity recent-ly, almost double last year’s result (12%). Whether this result is an

The response “we acquired another organization” tops the list for respondents describing the nature of their most recent M&A activity.

SURVEY RESULTS

31%

23%

23%

10%

9%

4%

We acquired another organization

A contractual relationship, but not M&A

We were acquired by another organization

A merger of two organizations into one

Other

No activity

Base = 121

indication of some softening in the M&A trend is open to debate, particularly given the robust data from other survey questions related to M&A activity.

> Correlations with industry setting. A greatershare of health systems (50%) than hospitals(19%) say that they have acquired anotherorganization, and a greater share of hospi-tals (35%) than health systems (10%) mentioncontractual relationships, but not M&As astheir most recent M&A activity. Further, agreater share of hospitals (19%) than healthsystems (7%) say they have had no activity.

DESCRIPTION OF M&A ACTIVITY

Figure 3

What are the care delivery objectives of your M&A planning or activity?> Top three care delivery objectives. Improve position for care

delivery efficiencies (60%), improve position for population healthmanagement (58%), and improve clinical integration (53%) are thetop three responses for care delivery objectives of respondents’M&A planning or activity.

> Health system and hospital focus. Respondents from healthsystems and hospitals have a strong interest in population healthmanagement and improving clinical integration. For example, the

SURVEY RESULTS

CARE DELIVERY OBJECTIVES

Percent of respondents who say improving their position for care delivery efficiencies is their top care delivery objective for M&A planning or activity.

top two care delivery objectives for health systems are improve position for popula-tion health management (67%) and improve clinical integration (67%), and for hospitals it’s improve clinical integration (62%) and improve position for population health man-agement (58%).

> Relatively few divesting. Only a small num-ber of respondents mention divest to sharpenstrategic mission (14%), an indication thatM&A activity hasn’t expanded organizationalscope such that providers have strayed fromtheir core strategic missions. On the otherhand, a greater share of large organizations(17%) mention divesting than small (13%) andmedium (7%) organizations, an indicationthat larger organizations may be slightlymore susceptible to strategic drift.

Improve position for care delivery efficiencies

Improve position for population health management

Improve clinical integration

Expand position in care continuum

Gain care delivery cost efficiencies through scale

Expand into new care delivery areas

Improve or enhance clinical talent

Divest to sharpen strategic mission

Other

60%

58%

53%

44%

44%

40%

30%

14%

6%


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SURVEY RESULTS

Figures 6 and 7

Please describe the financial and clinical impacts your organization experienced after its most recent M&A activity.Financial Impacts> Positive financial reviews. Respondents generally report positive

financial impacts after their organization’s most recent M&A activity.Seventy-six percent say that their net patient revenue increased (57%)or remained the same (19%), and only 8% say that it decreased. Likewise,66% say that operating margin increased (32%) or remained the same(34%), and 17% say it decreased (up six percentage points over lastyear’s result). The response for cost of providing care is somewhat lesspositive, with 59% saying that this increased (20%) or remained the same(39%). Note that a nearly equal percentage say that costs increased(20%) as decreased (21%).

Financial Impacts Increased Remained the same Decreased Don’t know

Net patient revenue 57% 19% 8% 17%

Operating margin 32% 34% 17% 17%

Cost of providing care 20% 39% 21% 20%

Base = 90, Of those involved in M&A activity

FINANCIAL AND CLINICAL IMPACTS

Clinical Impacts Increased Remained the same Decreased Don’t know

Patient readmissions 8% 44% 18% 30%

HCAHPS scores 11% 48% 6% 36%

Quality outcomes 23% 46% 8% 23%

Sixty-six percent say that operating margin increased (32%) or remained the same (34%). Also a greater percentage say quality out-comes increased (23%) than decreased (8%).

Clinical Impacts> Positive clinical impacts. Respondents

mostly indicate positive clinical impacts aftertheir organization’s most recent M&A activ-ity. For example, a greater percentage saythat patient readmissions decreased (18%)than increased (8%), although 44% reportthat this remained the same. And a greaterpercentage say HCAHPS scores increased(11%) than decreased (6%), although 48% saythis remained the same. Encouragingly, agreater percentage say quality outcomesincreased (23%) than decreased (8%). Forty-six percent indicate this remained the same.

> “Don’t know” responses troubling. Whileresponses overall are positive, the highresponse rates for “don’t know” for clini-cal impacts are troubling. These responsescome in at 30% for patient readmissions,36% for HCAHPS scores, and 23% for qualityoutcomes, indicating a disconcerting lack ofawareness for these critical metrics.


SURVEY RESULTS

Figure 5

What kind of entity was involved in your most recent M&A activity? > Health systems and hospitals most active. The top two respons-

es for the kind of entity involved in survey respondents’ mostrecent M&A activity are health systems (37%) and hospitals (25%),which represent 62% of the total M&A activity. Compared withresponses in last year’s survey, health systems increased fourpercentage points and hospitals increased six points.

ENTITY INVOLVED IN M&A ACTIVITY

The top two responses for the kind of entity involved in survey respondents’ most recent M&A activity are health systems (37%) and hospitals (25%), which represent 62% of the total M&A activity.

> M&A organizational preference. Note thatsome of the general preferences for healthsystems and hospitals can be explained bythe fact that 30% of the respondent base forthis survey is from health systems, and 26%is from hospitals (see Respondent Profile,p. 23), and respondents generally preferM&A activity with a provider from the sameor a similar setting.

For example, 57% of respondents fromhealth systems say that a health systemwas involved in their most recent M&Aactivity, and 21% mention a hospital. Forhospital respondents, 48% say that a healthsystem was involved in their most recentM&A activity, and 43% mention a hospital.These responses suggest that providersfavor increasing scale along similar lines ofbusiness, and that increasing infrastructurediversity throughout the care continuum is asecondary strategy.

Health system

Hospital

Physician organization

Physician practice

Ancillary, allied (e.g., home health, rehab, lab)

Health plan, insurer

Long-term care, SNF

Ancillary (e.g., diagnostic, therapeutic, custodial)

Ambulatory surgery center

Retail clinic/urgent care clinic

Other organization

37%

25%

10%

9%

4%

2%

2%

2%

0%

0%

9%

Base = 92, Of those involved in recent M&A activity

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SURVEY RESULTS

Figure 9

What are some reasons why your organization’s most recent M&A activity fell short of expectations?> Top reasons M&A fell short. Respondents say that the top two

reasons their organizations’ most recent M&A activity fell short ofexpectations are incompatible cultures (43%) and disagreementabout organizational mission (43%) in a tie. These are followed byresponses for operational transition problems (36%) and costs tosupport the transaction too high (36%).

Respondents say that the top two reasons their organizations’ most recent M&A activity fell short of expectations are incompatible cultures (43%) and disagreement about organizational mission (43%), in a tie.

> Cultural compatibility critical. In Figure 16,incompatible cultures (21%) is one of the topthree operational reasons respondents men-tion for an M&A involving their organizationbeing abandoned before or during the duediligence phase. Cultural incompatibility isbest discovered before an M&A takes place;otherwise, the new relationship could be adifficult one.

Base = 14, Multi-response, Of those who say would not participate again in M&A activity

Incompatible cultures

Disagreement about organization’s mission

Operational transition problems

Costs to support the transaction too high

Financial goals not achieved

Lack of community support

Governance problems

Other

Don’t know

43%

43%

36%

36%

29%

29%

21%

29%

0%

REASONS WHY EXPECTATIONS NOT MET

SURVEY RESULTS

Figure 8

Looking back, would your organization choose to participate again in its most recent M&A activity?> Majority would do M&A again. Two-thirds (66%) of respondents

say that their organization would choose to participate again inits most recent M&A activity, a positive finding given the costsand complexity of such undertakings. Sixteen percent of respon-dents—double last year’s percentage—indicate that they wouldnot choose to participate again.

66%Yes

16%No

19%Don’t know


Percent of respondents who say that their organization would choose to participate again in its most recent M&A activity.

> Correlation with organizational size.A greater share of respondents from large(77%) and medium (75%) organizations saythat their organization would choose to par-ticipate again in its most recent M&A activitythan small organizations (62%).

PARTICIPATE AGAIN IN M&A

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SURVEY RESULTS

Figure 11

What entities does your organization have a high interest in pursuing through M&A activity within the next year?> Physician practices in demand. Forty percent of respondents

say that their organization has a high interest in pursuing aphysician practice through M&A activity within the next year,down eight percentage points from 48% in last year’s survey.This response is followed by ancillary, allied (e.g., home health,rehab, lab) at 33%—up 10 points over last year’s survey—andphysician organizations at 31%, up four points. The solidresponse for physician practices is likely because primary

care physicians are a key component of population health management and clinical integration initiatives.

> Health system and hospital responsedeclines. Responses for health systems (29%)and hospitals (27%) declined eight points andtwo points, respectively. It is still too early totell whether respondent appetite for healthsystems and hospitals is beginning to fade.

> Preference for similar entity. A correlationexists between industry setting and the type ofentity respondents say their organization hasa high interest in pursuing through M&A activ-ity, with respondent organizations generallypursuing like or similar entities. For example,the top two entities for hospitals are hospitals(60%) and physician practices (53%), and thetop three entities for health systems are physi-cian organizations (50%), health systems (46%),and physician practices (46%). For physicianorganizations, it’s physician practices (56%)and physician organizations (44%).

Percent of respondents who say their orga-nization has a high interest in pursuing a physician practice through M&A activity within the next year.TYPE OF ORGANIZATION

INTERESTED IN PURSUING

Base = 85, Multi-response, Of respondents exploring potential deals

Physician practice

Ancillary, allied (e.g., home health, rehab, lab)

Physician organization

Health system

Hospital

Ambulatory surgery center

Long-term care, SNF

Ancillary (e.g., diagnostic, therapeutic, custodial)

Retail clinic/urgent care clinic

Health plan, insurer

Other organization

40%

33%

31%

29%

27%

25%

19%

16%

14%

13%

8%

SURVEY RESULTS

Figure 10

Please describe your organization’s M&A plans for the next 12–18 months.> M&A activity remains strong. Thirty-eight percent of respondents

say that their organization’s M&A plans for the next 12–18 monthsconsist of exploring potential deals, up six percentage points overlast year’s survey. Further, 35% of respondents say that their orga-nization’s M&A plans consist of both exploring potential deals andcompleting deals underway, producing a combined result of 73%for exploring potential deals. Only 19% of respondents say theyhave no plans for future M&A activity.

M&A ACTIVITY NEXT 12–18 MONTHS

Percent of respondents who say their organizations’ M&A plans for the next 12–18 months consist of a combination of exploring potential deals and completing deals underway.

> Correlation with organizational type. Agreater share of respondents from hospitals(31%) say they have no M&A plans for thenext 12–18 months than respondents fromphysician organizations (14%) and healthsystems (10%).

Base = 117

Exploring potential deals

Both exploring potential deals and completing deals underway

No M&A plans

Completing deals underway

38%

35%

19%

8%

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SURVEY RESULTS

Figure 14

Please estimate the cumulative total dollar value of the M&A activity your organization will be exploring over the next three years. > Budget cuts? Respondent estimates for cumulative total dollar

value of the M&A activity their organizations will be exploring overthe next three years indicate that 55% of the total dollar value fallsbelow $50 million, and 22% is $50 million and above. Comparedwith last year’s survey, there appears to be a shift toward lowercumulative total dollar value: the less-than-$50-million range iseight percentage points higher (55% versus 47%) than last year,and the $50 million and more range is eight points lower (22%versus 30%).

Respondent estimates for cumulative total dollar value of the M&A activity their organizations will be exploring over the next three years indicate that 55% of the total dollar value falls below $50 million, and 22% is $50 million and above.

CUMULATIVE TOTAL DOLLAR VALUE

Less than $5 million

$5 million – $9.9 million




$500 million or more

Don’t know

22%

17%16%

9%6% 7%

23%

> Softening total spend. Although respondentexpectations for M&A activity levels remainsstrong (Figure 12), the survey results forcumulative total dollar value may suggesta slowing in the number of transactions perprovider organization over the next threeyears.

Base = 82, Of respondents exploring potential deals

SURVEY RESULTS

Figures 12 and 13

Within the next three years, do you expect your organization’s M&A activity and/or the dollar value to increase, remain the same, or decrease?Level of MAP Activity> Activity levels remain strong. Sixty-eight percent of respondents

expect their organizations’ M&A activity to increase within thenext three years, a solid indication that M&A activity levels willremain strong for some time. Approximately one-quarter (23%)say they expect M&A activity to remain the same, and only 1%expect this to decrease.

> Activity level and profit status. A greater share of respondentsfrom for-profit organizations (81%) expect their organizations’ M&Aactivity to increase within the next three years than nonprofitorganizations (65%).

Dollar Value of MAP Activity > M&A dollar value increases. Seventy-one percent of respon-

dents expect the dollar value of their organization’s M&A activityto increase within the next three years, and 16% expect the M&Adollar value to remain the same. Only 7% expect this to decrease.These results indicate a continued interest by respondents in M&Aactivity with higher-dollar value organizations.

> Dollar value and profit status. As with the level of M&A activity,a greater share of respondents from for-profit organizations (84%)expect the dollar value of their organizations’ M&A activity toincrease within the next three years than nonprofit organizations(60%).

71%

16%

7% 6%

Increase Decrease Don’t knowRemain the same

Value

LEVEL AND VALUE OF M&A ACTIVITY



68%

Increase

23%

1%7%

Decrease Don’t knowRemain the same

Activity

Sixty-eight percent of respondents expect their organizations’ M&A activity to increase within the next three years, and 71% of respondents expect the dollar value of their organization’s M&A activity to increase during that same time period.

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SURVEY RESULTS

Figure 16

Thinking back to the last time an M&A involving your organization was abandoned before or during the due diligence phase, which of the following were among the operational reasons that the deal did not proceed? > Top three operational reasons. The top three operational rea-

sons respondents say that an M&A involving their organizationwas abandoned before or during the due diligence phase aremistrust between parties (30%), concern about governance (27%),

OPERATIONAL REASONS FOR ABANDONMENT

Mistrust between parties

Concern about governance

Incompatible cultures

Concern about fate of organization’s mission

Concern about operational transition plan

Other party’s decision, for reasons I don’t know

Lack of community support

OtherDid not abandon negotiations due to

operational reasonsNo activity

Don’t know

30%

27%

21%

13%

13%

11%

6%

2%

0%

20%

13%

Percent of respondents who say the top operational reason an M&A involving their organization was abandoned before or during the due diligence phase is mistrust between parties.

and incompatible cultures (21%). This represents a change in sequence over last year’s sur-vey where the order was incompatible cul-tures (30%), concern about governance (24%), and concern about the operational transition plan (21%).

Base = 90, Multi-response, Of those involved in M&A activity

SURVEY RESULTS

Figure 15

Thinking back to the last time an M&A involving your organization was abandoned before or during the due diligence phase, which of the following were among the financial reasons that the deal did not proceed?> Top three financial reasons. Responses for the top three finan-

cial reasons that an M&A was abandoned before or during thedue diligence phase are clustered in a tight group: concernsabout assumption of liabilities (23%), regulatory issues (22%), and

concerns about risk/revenue sharing (20%). The response for regulatory issues is nine percentage points higher than in last year’s survey, perhaps indicating that elevated M&A activity may be attracting government attention.

> Concern about regulatory issues. A greatershare of respondents from medium (36%)organizations mention regulatory issues thanlarge (26%) and small (19%) organizations,and a greater share of respondents fromfor-profit organizations (32%) cite regulatoryissues than nonprofit organizations (17%).

Top financial reasons that an M&A was abandoned before or during the due diligence phase are clustered in a tight group: concerns about assumption of liabilities (23%), regulatory issues (22%), and concerns about risk/revenue sharing (20%).

FINANCIAL REASONS FOR ABANDONMENT

Base = 107, Multi-response, Of those involved in M&A activity

Concern about assumption of liabilitiesRegulatory issues

Concern about risk/revenue sharingCosts to support the transaction too high

Concern about priceCould not agree on capital expense commitments

Other party’s decision, for reasons I don’t knowUncertainty about the economy

Unable to arrange financingOther

Did not abandon negotiations due to financial reasonsNo M&A activity

Don’t know

23%

2%

22%

20%

16%

15%

14%

14%

7%

6%

3%

14%

10%

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RESPONDENT PROFILE

CEO, PRESIDENT> CEO, President > Chief Executive

Administrator > Chief Administrative

Officer > Board Member > Executive Director > Managing Director > Partner

OPERATIONS LEADERSHIP> Chief Operations Officer > Chief Strategy Officer > Chief Compliance Officer > Chief Purchasing Officer > VP/Director Operations

Administration > VP/Director of Compliance > Chief Human Resources

Officer > VP/Director HR/People > VP/Director

Supply Chain/Purchasing

FINANCIAL LEADERSHIP> Chief Financial Officer > VP/Director Finance > VP/Director Patient

Financial Services > VP/Director Revenue

Cycle > VP/Director

Managed Care > VP/Director

Reimbursement > VP/Director HIM

CLINICAL LEADERSHIP> Chief Medical Officer> Chief Nursing Officer > Chief of Medical Specialty

or Service Line > VP/Director of Medical

Specialty or Service Line > VP/Director of Nursing > Chief Population Health

Officer> Chief Quality Officer > Medical Director > VP/Director Ambulatory

Services > VP/Director

Clinical Services > VP/Director Quality > VP/Director Patient Safety> VP/Director

Postacute Services > VP/Director

Behavioral Services > VP/Director

Medical Affairs/ Physician Management

> VP/Director Population Health

> VP/Director Case Management

> VP/Director Patient Engagement, Experience

MARKETING LEADERSHIP> Chief Marketing Officer > VP/Director Marketing > VP/Director Business

Development/Sales

IT LEADERSHIP> Chief Information

Technology Officer > Chief Information Officer > Chief Technology Officer > Chief Medical

Information Officer > Chief Nursing

Information Officer > VP/Director IT/Technology > VP/Director

Informatics/Analytics > VP/Director Data Security

24%

32%26%

18%

RESPONDENT REGIONS

TITLE

Clinicalleadership

Financial leadership

CEO, President

IT leadership

OtherOperations leadership

Marketingleadership

South

Midwest

Northeast

West

TYPE OF ORGANIZATION Base = 100Health System (IDN/IDS) 30%

Hospital 26%

Physician Organization (MSO/IPA/PHO/Clinic) 22%

Home Health Agency 5%

Ancillary Services Provider (Diagnostic/Therapeutic/Custodial) 5%

Assisted Living Facilities 4%

Skilled Nursing Facility/Nursing Homes 4%

Ambulatory Surgical Center 2%

Payer/Health Plan/Insurer (HMO/PPO/MCO/PBM) 2%

NUMBER OF PHYSICIANS Base = 1001–9 10%

10–49 17%

50+ 71%

N/A 2%

NUMBER OF BEDS Base = 1001–199 22%

200–499 20%

500+ 22%

Do not have a standard number of beds 36%

PROFIT STATUS Base = 100For-profit 41%

Nonprofit 59%

NET PATIENT REVENUE Base = 100$1 billion or more (large) 23%

$250 million-$999.99 million (medium) 14%

$249.9 million or less (small) 63%

RURAL STATUS Base = 100Yes 29%

No 71%

43% 22% 16% 9% 3% 2% 5%

Base = 100

METHODOLOGYThe 2019 HealthLeaders Mergers, Acquisitions, and Partnerships Survey was conducted by the HealthLeaders Intelligence Unit, pow-ered by the HealthLeaders Council. It is part of a series of thought leadership studies. In January 2019, an online survey was sent to the HealthLeaders Council and select members of the HealthLeaders audience at healthcare provider organizations. A total of 154 completed surveys are included in the analysis. Base size varies between 14 and 154 according to respondents’ knowledge of the question. The margin of error for a base of 154 is +/- 7.9% at the 95% confidence interval. Survey results do not always add to 100% due to rounding.

Opinions expressed are not necessarily those of HealthLeaders. Mention of products and services does not constitute endorsement. Advice given is general, and readers should consult professional counsel for specific, legal, ethical, or clinical questions.

What Healthcare Leaders Are SayingHere are selected comments from leaders regarding the advice they would give an executive at an organization considering a potential M&A.

Copyright ©2019 HealthLeaders, a Simplify Compliance brand 100 Winners Circle, Suite 300, Brentwood, TN 37027

CLICK HERE TO JOIN THE COUNCIL TODAY!

“Make sure that the parties are aligned and have committed in writing to the goals and rationale for the merger and that there has been enough due diligence to ensure that the deal makes financial sense.”

—Chief strategy officer at a large health system

“Pay attention to the nontraditional deals and the disruption that is occurring (and will occur).”

—CNO at a large health system

“Understand the difference of how care is delivered in an urban versus rural setting. Understand the impact of geography and population density.”

—CEO at a small hospital

“It’s all about effectively merging cultures.”—VP of strategy at a medium health system

“Take your time and always ensure transparent communication throughout your organization.”

—VP/director of operations/administration at a large health system

“Make sure all of your current operations are running smoothly and are financially solid.”

—CIO at a small physician organization

About the HealthLeaders Intelligence Unit The HealthLeaders Intelligence Unit, a divi-sion of HealthLeaders, is the premier source for executive healthcare business research. It provides analysis and forecasts through digital platforms, print publications, custom reports, white papers, conferences, roundtables, peer networking opportunities, and presentations for senior management.

Research Analyst JONATHAN BEES

Senior Manager, Product & Content ADRIENNE TRIVERS [email protected]

Content Manager ERIKA RANDALL [email protected]

Client Services Manager JEFF KONYK [email protected]

Contributing Editor STEVEN PORTER [email protected]

Contributing Editor JACK O’BRIEN [email protected]

Art Director DOUG PONTE [email protected]

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“ Just like the due diligence you do on all other sides of your organization, a mission due diligence is a critical piece as well.”

1 healthleadersmedia.com n October 2019

A HEALTHCARE-SPECIFIC FRAMEWORK FOR ESG PRINCIPLESEnvironmental, social, and governance (ESG) criteria have been used for years to assess a company’s performance beyond the black-and-white lines of a profit-and-loss statement, challenging executives to measure the value their businesses create in the context of more fundamental ethical values. For healthcare organizations, an ESG framework calls for sustainable energy and waste management systems, prods investment in community health, and demands that leaders embrace diversity and inclusion as essential duties. These and other initiatives recognize the fact that running a good healthcare business requires a sense of communal responsibility.

In this roundtable, a panel of executives with hands-on experience employing ESG principles discusses what it looks like to adopt an ESG framework in healthcare as consumer expectations, the industry, and ESG itself evolve.

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Rashard Johnson President, Advocate South Suburban Hospital & Advocate Trinity HospitalHazel Crest, IL, and Chicago, IL

Sam Ross, MD Chief Community Health Officer, Bon Secours Mercy HealthPresident, Bon Secours Baltimore Health SystemBaltimore, MD

Kendra N. SmithDirector, Social Determinants of HealthProMedicaToledo, OH

Donald R. Lurye, MDCEOElmhurst Clinic, LLCElmhurst, IL

Lynn WiatrowskiExecutive Vice PresidentBank of America Boston, MA

Steven Porter (Moderator) Strategy EditorHealthLeadersMiddleton, MASP

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ROUNDTABLE: ESG FRAMEWORK STRATEGIES

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healthleadersmedia.com n October 2019 2

HealthLeaders: How should we think about environmental priori-ties in healthcare?

Rashard Johnson: One of the things we focus on when we talk about how environmental factors and healthcare overlap is making sure we are focused on environ-mentally friendly products and materials sustainability, conser-vation of natural resources and things that protect the human dig-nity. We look at it holistically.

The meat that we utilize, we want that product to be raised without antibiotics. The waste that we generate from construction projects, we want to be able to recycle that—and about 70% of our entire system has recyclable waste from construction projects.

Then it goes down to mak-ing sure we have recyclables as it relates to our medical devices. That one, we can track with an ROI, and we save about $3.1 million sys-temwide from utilizing recyclable medical devices.

HealthLeaders: How should we think about social priorities in healthcare?

Sam Ross: Health systems think we have this list of what we should prioritize, what should matter, then we actually get into true communi-ty engagement—and if we’re truly committed to that practice, then we’re asking what matters to you, the community. That’s where we start to have to decide what we’re going to invest in, and how we’re going to address the social deter-minants and social influencers of health outcomes.

The reason we at Bon Secours got into housing 20-plus years ago was because the community said

the No. 1 concern they had around health was rats and trash. Well, what was the source of rats and trash? The source was all the vacant board-ed-up housing because Baltimore used to be a city of a million people but is now a city of about 625,000 people. All that blight is there because people use vacant homes as dumps, drug havens, and stuff like that. The housing intervention was that response to what the communi-ty said was the highest priority.

Lynn Wiatrowski: The prosperity of our organizations is inextricably linked to the communities that we serve and the challenges that they face. This is true for healthcare and banking. The health of the people in our communities has a direct correlation to our ability to thrive, and there are multiple factors to consider. We are in 300 different cities around the country, each with unique needs. We organize those cities into 92 discrete markets and have market presidents lead activi-ties to think about the top priorities for each community. You’ve got to do the needs assessment and fig-ure out what the local priorities are.

HealthLeaders: How should we think about governance priorities in healthcare?

Donald Lurye: As a leader, what you have to help your organization understand is that this can’t just be something that looks good on a PowerPoint deck for the next board meeting. It’s a long haul.

Wiatrowski: You have to have the board’s commitment, but it does start with the CEO. When Brian Moynihan became Bank of America’s CEO in 2008, the bank-ing industry and economy were

extremely fragile, with very real risk of financial demise. Notwithstand-ing these enormous headwinds, one of his first acts as CEO was to establish and become the global head of our diversity and inclusion council. It would be easy to expect a laser focus on asset sales and other strategies to raise capital to ensure financial survival, but he made it his top priority to create an environment where all employees felt welcome and accepted.

Kendra Smith: No matter if you are in the C-suite, if you’re a direc-tor, if you are in patient experience, if you are a provider, our anchor mission/CEO’s vision is in our stra-tegic plan. It is the road map. It’s what we do. We make the business case to the board, and we couple that with the qualitative case.

Sam Ross, MD Chief Community Health Officer,

Bon Secours Mercy HealthPresident, Bon Secours Baltimore Health System

Baltimore, MD

Lurye: We doctors were all original-ly trained in a culture of autonomy and individual heroism. If you look at medical groups, even as recently as 10 years ago, what you see isn’t real-ly a group. What you see is “practic-ing alone together.” So we created a hybrid local leadership structure and got everybody engaged with a mission, vision, and strategy with four clear strategic executive objectives: access, quality, growth, and a fulfilling work environment.

When I interview candidates, my job is to figure out, “Do you fit here? Are you going to be happy

HIGHLIGHTS

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Smith: When you ask people what they want and what they need, you often get a level of feedback that makes you think, “Wow, I’m going to be retired 97 times before that can even happen.” You have to have a realistic conversation with folks. What can we do in the next six to 12 months? What is the need? What does this look like in the next couple of years, and then what’s that long-term vision?

At ProMedica we talk a lot about implementation planning. It’s one thing to create a front-end plan, but when you think about implementa-tion—what partnership needs to be in place, what resources need to be identified––that’s really where we get some hesitancy. Everyone is ready to be at the table when we’re saying, “What do you want to happen?” It’s a little harder to get people at the table when you’re saying, “Now we’re going to talk about how we’re going to make these things happen.”

But for us, the implementation planning process is really where we talk to people about how they opera-tionalize the priorities that have come out of these needs assessments. When we’re inviting people to that table, it’s a very clear ask to either put some time, resources, talent behind this so nobody thinks they’re just there to spew their grievances.

Ross: Whether you’re a health system getting into housing or food insecurities, or you’re a bank that’s getting into the social deter-minants as well, it influences you to behave differently. The reality is that the bank can’t do it by them-selves. We can’t do it by ourselves. If there’s an academic partner, they can’t do it by themselves. But we all have a stake in the outcome of that community being healthier.

There’s no business that their market plan is to go into a place that’s failing. And we know those who are in a place that’s failing don’t end up staying there.

the other, that’s where we get in trouble because that’s when we’re back to silos.

Depending on the audience, how we talk about environment is one way, how we talk about social factors is another. But most of the language we use isn’t what the community uses or isn’t what the physicians use. I think it’s help-ful that we start thinking about what we really mean when we talk about these priorities.

Johnson: That’s where leaders come into play and relationships and how you convey that vision. It’s critical for us and for those we lead to begin to form that vision as to why all of this is important.

Smith: That translation has to be able to go up and down the ladder. It has to travel from system leadership to the community and vice versa.

HealthLeaders: How do you pri-oritize worthwhile projects and avoid shiny distractions?

here? Am I going to be spending an hour a day dealing with you?” And when I have the answers to those questions, I’m confident some-body’s going to thrive in our envi-ronment. We’ve got a very low turn-over rate. Physicians can always find something to complain about, including me. But if you ask any-body in our organization, “Would you like to work somewhere else?” they would say, “No way.”

HealthLeaders: Why do we group E, S, and G together?

Lurye: They’re the three sides of a three-sided coin. You can’t have one without the others.Ross: You have to have all three of those elements in order to accom-plish what we’re talking about. If you try to separate one from

ROUNDTABLE | ESG Framework Strategies

HealthLeaders: When you think about partnership and collabora-tion, how thoroughly can you vet another entity’s ESG priorities?

Wiatrowski: Bank of America seeks to work with companies that rank well on ESG metrics, and we attempt to avoid companies that do not. Before we partner with someone, we study whether they have an ESG philosophy.

One of our equity analysts stud-ied companies across the country, and those that had a strong ESG agenda, literally all of them, avoid-ed financial trauma and difficulties. Research found a direct correlation between lower earnings volatili-ty and companies in the top 20% in terms of ESG ratings. So distill-ing your list of those you’re willing to partner with to only those that implement ESG as part of their busi-ness framework is pretty important.

Ross: Just like the due diligence you do on all other sides of your organization, a mission due dili-gence is a critical piece as well. When we start looking at communi-ty investments, we have to again go a little bit deeper. If we’re investing in that company, are they really investing in the community at the level that we need to see change?

Johnson: When you look at part-nerships, one of the most import-ant things that you can center on is, “What defines success?” If I sat across the table from a partner, what’s success to you and what’s success to me? Are our values aligned?

Our CEO has been adamant that we partner with organizations that have the philosophy to help people live well, whose values are aligned with our values. We’re a $12 billion organization, so if we’re going to put our stake in the ground and partner, we have to make sure that our core values are related and we’re interwo-ven and helping us meet our mission.

Rashard Johnson President, Advocate South Suburban Hospital & Advocate Trinity HospitalHazel Crest, IL, and Chicago, IL

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clients and communities at times of natural disaster is a great exam-ple. In the past year, many com-munities across the country have experienced severe weather. The Bank has partnered with organi-zations like American Red Cross to be sure that relief workers and members of the impacted areas have access to financial resourc-es, through traditional and digital solutions like Zelle payments. Like-wise, based on client demand, we are developing a solution to let consumers make digital donations to support communities in need.

I’m proud that the bank takes time, thinks about real-life prob-lems, and invests in those. And now we will commercialize that solution, so it is good business as well.

HealthLeaders: What do you think this conversation will look like 10, 20, or even 30 years from now? Where is ESG headed in a healthcare context?

Ross: It’ll probably have another name. People won’t call it ESG. We just need to make sure that we continue to develop leaders who share the same vision and values, and other things, particularly in the infrastructure perspective that sup-port that. But the future is bright.

Smith: Maybe something will be added to ESG. For me, that missing piece is policy. We’re never going to be able to out-build our commu-nities’ housing needs. We’re never going to be able to feed everyone who needs it under the current sys-tem. At a certain point, some of this is only very surface-level interven-tion. How do you start to make sys-temic improvements that allow us to change the conversation about why these things have to happen, at what pace they have to happen, and the role that we need to play?

It’s one thing to say, “I’m going to change healthcare delivery models,” but there are some very real opportu-

More globally, we are not only affiliated with but aligned with Edward Elmhurst Health. We partic-ipate in the medical staff develop-ment plan. We don’t just randomly say, “Oh, yeah, let’s bring this person on.” We know where our primary service area is, we know our sec-ondary service area, and we know where we’re penetrated and where we’re not. Good medical staff plan-ning serves the community and cre-ates its own return on investment.

Wiatrowski: For us, one of the best outcomes from our long-term and sustained ESG commitment has been that we continue to find innovative ways to deploy our own capital, including intellectual capital and technology, to solve global challenges and address societal priorities. Our support of

partner with people who align with our principles, our morals, and our goals. So we’re committed to recy-cling our construction waste and ensuring diversity is ingrained into the fabric of our project.

Lurye: At a clinical level, one of the advantages of participating in value-based insurance programs, and particularly the Medicare Shared Savings Programs, is you get to see how you compare to other people—and we weren’t doing such a hot job with colon cancer screening. And we’ve now made that dramatically better.

One of the things we imple-mented was a telephonic screen-ing program to where people don’t have to come in and have an appointment with a gastroen-terologist first. If they are funda-mentally low-risk, like the young elderly who should have a colo-noscopy screening, they’re basi-cally healthy and don’t really need an office visit. And we’ve seen that number come up.

ROUNDTABLE | ESG Framework Strategies

nities to think about what that means for affordable housing, financial sta-bility, other social determinants, and what our government and policy partners are doing. At what point does everything come together?

Johnson: I think our consumers, their expectations will change even more so when you think about the disruptors that are coming into the healthcare space now. So that tra-ditional model of how we carry this out within the brick-and-mortar four walls of our buildings and our mind-set as leaders will adapt.

Lurye: I’m an optimist. If you take a very long view, people have solved some unbelievably difficult problems collectively. Sometimes the platform has to be on fire to get to do it, but in healthcare, you attract smart committed people. And they’re going to figure this out. You see much more team-based care. You see much more collaboration across the spectrum of the community. Maybe it could be in a grocery store. It could be in the pharmacy. Traditional provid-ers are trying to connect all of that.

Wiatrowski: I am similarly opti-mistic because not only are we having this conversation with for-profit and not-for-profit health-care providers, it has also become front and center on the broader corporate agenda. The transpar-ency around ESG activities has increased significantly.

We also need to look at who our future leaders will be. They’re millennials, 87% of whom say ESG is important. We won’t even have to have the conversation because the top- and middle-tier leaders in our companies will be setting the agenda—the groundswell comes from there, and ESG, sustainabil-ity, and corporate social respon-sibility become ubiquitous busi-ness terms; they are part of every company’s DNA.

Lynn Wiatrowski Executive Vice President

Bank of America Boston, MA

Sponsored Material healthleadersmedia.com n October 2019 4

HealthLeaders: What have been some of your biggest ESG success stories?

Smith: For us, one of the greatest success stories has been the cre-ation of our social determinants of health infrastructure within Pro-Medica. To create this framework where we’re looking at clinical integration, data and research, and community, and to build a team of experts that can navigate that system, I think has been huge.

Having that infrastructure in place allows us to think across those three silos and start to really meld them together, and it will trickle up and down that ladder of ESG topic areas in a way that I think could be really significant for the system footprint.

While we’ve made a really great qualitative case about why

these types of programs work, the quantitative data is trickling in. In the food space, we’ve seen a 15% reduction in per-member per-month (PMPM) costs.

We have a financial ROI that we show our board, staff, team, and the community we’re investing in. The other piece of this, though, is that we evaluate all of the projects by a health impact matrix. We have five categories of health. Every project is not just evaluated for the financial feasibility, but how it’s moving the health needle and in what time frame.

Ross: The project that’s probably given us the most attention these days is our reentry program. Unfor-tunately, the largest percentage of inmates in the Maryland correctional system comes from our primary and secondary ZIP codes. So we go into one men’s prison, one women’s prison six months before inmates are released, and we begin to reac-climate them to what they’re going to experience coming out.

We pick them up the day they’re released, and they come to the center, and we start a five-week program where we walk them through the basics. Our main goal there, in addition to reducing recidivism rate, is to give them a skill so they can be employed and have a livable wage.

Johnson: Our system executive leadership team did an indepen-dent audit and brought a con-tractor in to assess our diversity and inclusion on the clinician and administrative levels. The report came back and showed that we were vastly missing the mark in terms of our workforce diversity as a reflection of the communities we are privileged to serve. Vastly. From that moment on, we’ve seen our board of directors and our CEO say, “From this point forward, this will be measurable, this will be palpable. This will be on execu-tive and leadership performance reviews.”

Our organization made a com-mitment to have diverse talent around the table and to leverage people’s backgrounds and pas-sions. I’m extremely proud of this

commitment. Before a candidate is hired, we ensure we have a diverse slate of talent in the pool. We track the turnover rates of diverse can-didates for clinicians, as well as team members. We then take it a step further and we track supplier diversity as well as construction diversity spend to assure alignment with women- and minority-owned businesses. This is all implemented through the lens of building healthi-er communities and helping people live well. Extremely powerful.

As for my operations respec-tively, at South Suburban Hospital, we’re in the process of construction. We have a $90 million expansion and renovation of our perioperative services that’ll create new operating rooms, new cath labs, new endos-copy suites, new waiting areas, et cetera. It’s a substantial investment into the South Chicagoland com-munity. If we’re spending that type of money, the best way to make our statement is to say we’re going to

Donald R. Lurye, MD CEO

Elmhurst Clinic, LLCElmhurst, IL

Kendra N. Smith Director, Social Determinants of HealthProMedicaToledo, OH

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Bank of America report, 2019

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“ Though offering an HSA with an HDHP isn’t required, most employers offer this health-expense savings vehicle — and the majority of employees take advantage of the benefit.”

RETIREMENT & BENEFIT PLAN SERVICES

2019 Workplace Benefits Report Expanding the financial wellness conversation

building resilience

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Bank of America report, 2019building resilience

Table of ContentsTable of Contents

In this year’s report

The state of workplace financial wellness ................................................................................4

The role healthcare costs play in financial wellness...........................................................8

The unspoken burdens of caregiving...........................................................................................12

How diversity & inclusion contribute to wellness in the workplace..........................18

Tips for employers looking to increase employee wellness...........................................22

53%Workplace financial wellness programs are offered by 53% of firms, twice as many as four years ago3

Women continue to lag men in terms of feeling financially well and saving for retirement

11% HSAs are misunderstood, with only 11% of employees able to correctly identify its attributes

62% 62% of employees who are caregivers think their employer does not know

Only 51% of firms offer diversity and inclusion 51%programs and only 49% of employees participate when they are aware they are offered

3 Bank of America Merrill Lynch 2015 Workplace Benefits Report, April 2015.

2019 WORKPLACE BENEFITS REPORT

Let’s expand the financial wellness conversation

At Bank of America, we believe employers can positively impact their employees’ financial wellness by providing comprehensive financial education and solutions. As finances transcend all areas of one’s life, research has shown financial wellness programs can lead to increased work productivity and less stress.1

We serve employers across the country by offering integrated retirement and benefit plan services that can help retain talent and provide the support their employees are looking for. We design our workplace solutions to help employees gain financial knowledge and confidence so they can pursue goals now and into retirement.

Listening is powerful. That is why each year we conduct a survey that drills into the issues and challenges that contribute to employee financial wellness, and share the key learnings.2 In the past we have focused on fundamental financial topics, like saving for retirement, debt management and general financial skills.

This year, we expanded the conversation and went beyond financial topics to look at other factors that can contribute to an employee’s sense of wellness at home and work. We explored how healthcare costs are affecting them and how well they understand Health Savings Accounts (HSAs) as a tool to help manage these costs in the future. We looked at the impact caregiving responsibilities have on employees’

1 Bank of America Merrill Lynch 2018 Workplace Benefits Report, August 2018. 2 For survey methodology, please see page 24.

time and finances, as well as the emergence of important caregiving benefits. And we examined how diversity and inclusion programs are being used in the workplace to promote a more diverse environment and make employees feel included, regardless of their life stage, ethnicity, culture or gender.

This latest research is part of our ongoing commitment to examining important topics and bringing those insights into all that we do. From longevity to caregiving, employees are navigating an increasingly complex financial journey. By better understanding the factors, we can better support employers with financial wellness solutions that offer a holistic approach to integrated benefits and address people wherever they are, so employee benefits are personal and financial wellness actionable.

As a result, you experience financial benefits as people benefits.

Lorna Sabbia Head of Retirement & Personal Wealth Solutions Bank of America

Bank of America is a marketing name for the Retirement Services business of Bank of America Corporation (“BofA Corp.”). Banking activities may be performed by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A., Member FDIC. Brokerage services are provided by wholly owned brokerage affiliates of BofA Corp., including Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”), a registered broker-dealer and Member SIPC.

Investment products:

Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value

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more likely

Financial Wellness

A majority of employees feel financially well

More than half of employees rate their own financial wellness as good or excellent. We are seeing a slight decrease in employees who say they are doing well when compared to last year, as well as a drop in those who say they aren’t doing well.

Poor or Fair Average Good or Excellent

2019

20184

16% 29% 55%

19% 20% 61%

Certain factors contribute significantly to feelings of financial wellness

When employees who feel financially well are compared to those who feel less well, a mix of short- and long-term factors contribute directly to the feeling of financial wellness.

Can effectively Feel savings for Are able to pay manage day-to-day retirement are on the bills and save for

expenses right track future goals

When compared to employees who are not financially well, employees who are financially well are more likely to say they:

29% more likely

23% 17% more likely

4 Bank of America Merrill Lynch 2018 Workplace Benefits Report, August 2018.


Financial Wellness

The state of workplace financial wellness

Financial Wellness

What is financial wellness?

At Bank of America, we view financial wellness as a journey. It includes creating a balance between financial well-being today and managing the day-to-day while preparing financially for tomorrow.

This includes addressing behaviors that promote positive financial decision-making as well as identifying those that might negatively impact an employee’s financial situation. Helping employees understand and manage their finances is an ongoing process because life happens and priorities, needs and goals change.

Why does financial wellness matter?

When employees live their best financial lives, it shows in the workplace. We believe when employees feel financially in control, they are able to be more productive and focused in the workplace.

Finances are connected to all areas of our lives. Employers who understand the need to provide support and focus on employees’ financial wellness take a holistic approach to their benefits. We believe best-in-class workplace financial wellness programs should focus on both complex and basic needs. They can provide workplace benefits that are personal, address overall financial health and provide access to actionable guidance to help improve employees’ financial lives.


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Financial Wellness

Women are less likely to say And women have far less they feel financially well saved for retirement

Unfortunately, women continue to lag in financial wellness

65% 43%

Men Women

Men Women

$100,000 $30,000

Median retirement savings

The feeling of financial wellness has many components

Bank of America has spoken to many employees about financial wellness through surveys, focus groups and interviews. This dialogue has shown that education and tools that address topics like effective debt management, budgeting skills, the ability to save for retirement and the future and providing for one’s family, just to name a few, can all contribute to a sense of financial wellness.

Employee emotions and company health are intertwined

Just as employee financial wellness can have a direct impact on a company’s bottom line, there are other factors that can negatively impact employees at work. Bank of America focused on three additional important factors that we believe can contribute directly to employees’ feelings of well-being, and potentially company performance.

Employees’ ability Employee obligations Employee feelings to manage as a caregiver about having a diverse

healthcare costs outside of work and inclusive workplace


Employers play an important role in supporting financial wellness

The availability of workplace benefit programs that help address employees’ overall financial situations can have a direct impact on how financially well employees feel. Maybe that is why we have seen a marked increase in the availability of workplace financial wellness programs in the last four years.

Percentage of employers who offer financial wellness programs5

53%

24%

2015 2019

While employees could benefit from financial wellness programs, certain features are more highly valued by employees than others.

1 Advice from a professional, such as a financial advisor, planner or accountant

2 Information on financial topics separate from 401(k) education

Employees’ ranking of financial wellness 3 Availability of financial products/services that help employees

program features

4 Review/evaluation of employees’ individual financial situations

Online financial tools or calculators, such as debt payoff, car/mortgage payment 5 or college planning tools

5 Bank of America Merrill Lynch 2015 Workplace Benefits Report, April 2015.


Financial Wellness

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Healthcare Costs

Current healthcare expenses are not an employee’s only concern. In retirement, Medicare may only cover up to 65% of certain employee medical costs,9 so they will need to plan for paying healthcare premiums and out-of-pocket costs that can be significant, potentially eating into retirement savings.

The financial burden of healthcare is staggering

Percentage of employees who skipped:

Medical appointments 32%

Medical test/procedures 21%

Purchase of medications 14%

Hospital visits or stays 10%

Skipped health insurance 7%

53% of employees have skipped or postponed at least one of these activities to save money

Purchase of supplies 4%

And the burden continues past an employee’s working years

Projected healthcare-related expenses

in retirement have increased

23% in the last 4 years.10

In retirement, a 65-year old couple will need

$296,000 to cover their out-of-pocket healthcare costs.10

9 Medpac, June 2018 Data Book: Health Care Spending and the Medicare Program. Total spending on health care services for noninstitutionalized fee-for-service Medicare beneficiaries. 10 EBRI Issue Brief 460, October 2018.


Healthcare CostsHealthcare Costs

The role healthcare costs play in financial wellness

Healthcare costs are a significant financial burden

When employees think about healthcare, many don’t consider its impact on financial wellness. In fact, in 2018 when employees were asked what the core building blocks of financial wellness are, managing healthcare costs was ranked last.6

While healthcare coverage continues to be a common employee benefit, more healthcare costs are being shouldered by employees as overall costs increase and employers move towards offering high-deductible health plans (HDHPs) that have higher out-of-pocket costs.

$2,138 Out-of-pocket

expenses7

$5,547 Health insurance

premiums8

$7,685 Total average

annual expenses7,8

6 Bank of America Merrill Lynch 2018 Workplace Benefits Report, August 2018. 7 Bank of America 2019 Workplace Benefits Report, September 2019. 8 2018 Employer Health Benefits Survey, Kaiser Family Foundation, October 2018.


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However, understanding of HSAs is lacking

Healthcare Costs

Employees are not only using their HSAs, a majority also say they have a good understanding of how their HSA works. However, a deeper analysis shows that full understanding of HSA benefits is lacking.

57%

Empl

oyee Say they Correctly

of HSAs

11% of HSAs

have a good identified 4

understanding basic attributes

Percent of employees that correctly identified each HSA attribute:

Offers a “triple” tax advantage13 30%

Funds in the account can be invested14 37%

Funds in the account do not expire 74%

Requires enrollment in an HDHP 78%

And employer understanding is lacking too

65%

Empl

oyer

Say they Correctly

of HSAs

7% of HSAs

have a good identified 4

understanding basic attributes

13 About Triple Tax Advantages: Participants can receive tax-free distributions from their HSA to pay or be reimbursed for qualified medical expenses they incur after they establish the HSA. If they receive distributions for other reasons, the amount withdrawn will be subject to income tax and may be subject to an additional 20% tax. Any interest or earnings on the assets in the account are tax free. Participants may be able to claim a tax deduction for contributions made to the HSA. We recommend that applicants and employers contact qualified tax or legal counsel before establishing a HSA.

14 Investing involves risk, including possible loss of principal value invested.


Healthcare Costs

Health Savings Accounts can help employees manage healthcare expenses

A Health Savings Account (HSA) is a tax-advantaged savings account that helps those with qualified HDHPs prepare to pay for healthcare expenses when needed, like doctor visits, vision and dental care and prescriptions. HSAs also provide a number of important benefits:

Pre-tax contributions, potential gains and withdrawals used for qualified medical expenses are exempt from federal and most state taxes.

Any unused balance carries over from one year to the next.

HSA funds can be invested to provide growth potential over time to help supplement long-term savings for healthcare expenses.11

There is no time limit on when to use HSA funds — the funds never expire and can be passed to a beneficiary upon death.

For some employees, an HSA can help

For employees enrolled in a qualified HDHP — a health insurance policy with higher deductibles, but lower premiums — an HSA may be a powerful tool to help save for and manage healthcare expenses with the added benefit of being able to save additional funds in an HSA to cover healthcare costs in retirement.

Due to their lower premium cost, the prevalence of HDHPs among employees who receive healthcare as a workplace benefit has increased significantly in the past decade, at the expense of traditional healthcare plans.

HSAs and HDHPs go hand in hand

Though it is not required to offer an HSA in conjunction with an HDHP, the vast majority of employers do offer this health expense savings vehicle, and the majority of employees take advantage of the benefit.

90% 76% of employers of employees that

that offer HDHPs have an HDHP are also offer HSAs also enrolled in to employees an HSA

More than

40% of employees are

enrolled in an HDHP nationwide12

11 Investing involves risk, including possible loss of principal value invested. 12 Centers for Disease Control and Prevention, NCHS Data Brief No. 317, August 2018.


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Caregiving

Caregiving is more prevalent than employees recognize

When asked if they are a caregiver, less than a quarter of employees see themselves as a caregiver. Surprisingly, almost an equal number of employees perform caregiving activities, but do not label themselves as a caregiver.

“I have given up hours at work as well as hours with my own family to be a caregiver. It is very stressful because my family needs me, but so does the person that I am a caregiver for at this time.”

— Survey respondent

55% Not caregiver

Just as importantly, employers underestimate how many of

their employees are caregivers, estimating that only 29% are engaged in these activities.

23% Self-identified as caregiver

22% Perform caregiving

activities but do not label themselves

as caregiver

Caregiving is about more than caring for children

Taking care of children

Taking care of other adults 78%

20%

Women are more likely to be serving as caregivers Caregivers also span the ages

Percentage of women who are caregivers

Percentage of men who are caregivers 39%

51%

48% 47% 36% Of ages 18 to 44 Of ages 45 to 64 Of ages 65+


CaregivingCaregiving

The unspoken burdens of caregiving

Caregiving is having a dramatic impact on employees and employers

Employees today are more likely to care not just for children, but also for elderly family. Employees who are working while fulfilling these duties face an added burden of balancing their roles of worker and caregiver, which can affect employees as well as their employers.

Caregiving is a blessing and a burden15

While caregivers often speak about how they feel fulfilled, caregiving can incur significant costs in terms of their finances, health, time and leisure, work and their other relationships.

15 Age Wave/Merrill, 2017, “The Journey of Caregiving: Honor, Responsibility and Financial Complexity.”


78 79


Caregiving

41%ofcaregiverstakeonthisrolesuddenlyandunexpectedly.16

Caregiversreportmissinganaverageof12hourspermonthofworkbecauseoftheircaregivingresponsibilities.

Employers and employees are not talking about caregiving

Eventhoughnearlyhalfofemployeesarecaregivers,thetopicisnotonethatisopenlydiscussedintheworkplace.Someemployeesdon’tthinkofthemselvesascaregiversanddon’trelatetocaregivingsupportthatmaybeoffered.Othersmaybeconcernedabouttherepercussionsofaskingforhelpfromanemployer.Andinsomeinstances,employersarenotpromotingthesupportthatcaregiverscantakeadvantageof,soemployeesdon’tknowtobringthetopicup.

Butonly29%ofemployeesareawarethattheiremployerofferscaregivingresources

88%ofemployersoffersometypeofcaregivingresourcesfortheiremployees

“[Caregiving]hasaddedmorestresstomydailylife.I’vehadtorearrangemyworkhourstoattenddoctor’sappointmentsortripstothehospital.Iworklatetomakeuptime.AndIhavetotrytonotuseupallmyPTOincasesomethingmajorhappens.”

62%ofemployeeswho

arecaregiversthinktheiremployerdoes

notknow

—Surveyrespondent

Andonly34%ofcaregiveremployeeshavetakenadvantageofemployerresources

16 Age Wave/Merrill, 2017, “The Journey of Caregiving: Honor, Responsibility and Financial Complexity.”

2019WORKPLACEBENEFITSREPORT

Caregiving

Caregiving tasks are varied, yet demanding

Caregivers provide a wide range of support to those they are helping. For some, caregiving can be viewed as a second job with a number of demands that happen around the clock. Caregivers take on an average of 3.3 new responsibilities as part of their caregiving.

Top caregiving tasks:

Taking someone to a medical appointment

Purchasing groceries for someone 75% Resolving household issues (e.g., repairs) of caregivers perform

more than one of Preparing a meal or meals

these tasks on a regular basis.Helping manage someone’s finances

Personally paying a bill

Assisting with self-care

Caregiving also has a measurable demand on a caregiver’s time and finances

Child caregivers

Nonchild caregivers

19% 59%22%

34% 34%31% Less than 10 hours 10–20 hours a month 20+ hours a month

Annual outofpocket expenses

$6,604 “I have 4 weeks of vacation and I tend

Child caregivers to save 2 weeks to help my mom with things she may need.”

$3,263 — Survey respondent

Nonchild caregivers


80 81


“I sometimes have to miss work because someone has a doctor or dental appointment and I have to take them… I sometimes get really stressed having to make decisions for them.”


Caregiving

2019 W2019 WORKPLACE BENEFITS REPORTORKPLACE BENEFITS REPORT

Caregiving

1Leaveofabsenceorsick

daysforemployeestogivecaretofamilymembers

2Flexibleschedulingtoaccommodatecaregivingneeds

3Theabilitytowork

fromhomewhenneeded

Employees are asking for help managing the time burden of caregiving

Giventhesignificanttimeandfinancialdemands,caregiversrecognizetheimpactonthemselvesandtheirworkthatcaregivingtaskscanhave.Infact,theycitearangeofwaystheythinktheiremployercouldhelp.

Top benefits caregivers say would be most helpful

Inadditiontoseekinghelpwiththetimeburdenofcaregiving,employeesalsoacknowledgethatcaregivinghasanegativeimpactontheirworkplaceperformance.

Percentage of employees who admit that caregiving results in

29% Moredifficulty 26% Missedtimehandlingstress atwork

2019WORKPLACEBENEFITSREPORT

82 83


Diversity & Inclusion

The top quartile of companies for ethnic diversity are

35% more likely

to have higher financial returns17

Organizations with inclusive cultures are

3 times more likely

to be high-performing18

Higher employee

satisfaction

Diverse workplaces with inclusive cultures

are shown to experience19

“It makes me feel valued and realize that my organization wants the best for all its employees. A diverse population helps us be the best we can be.”


Improved customer-orientation

Ability to win Enhanced and retain innovation top talent

17 McKinsey, “Delivering Through Diversity”, January 2018. 18 Deloitte Review, Issue 22. “The diversity and inclusion revolution: 8 powerful truths”, January 2018. 19 McKinsey, “Delivering Through Diversity”, January 2018 and Deloitte Review, Issue 22. “The diversity and inclusion revolution: 8 powerful truths”, January 2018.



How diversity & inclusion contribute to wellness in the workplace


Diversity and inclusion may have a material impact on the bottom line

The pressure for companies and organizations to embrace diversity and support a more inclusive workplace is not just a social trend — it is also an economic one.

What is diversity and inclusion?

While both can contribute to the performance of a company, diversity and inclusion are related and complementary goals:

• Diversity is the act of ensuring that a workplace represents the world atlarge with employees from a range of life experiences and personalitytypes, including veteran status, as well as representing all races, genders,sexual orientations, abilities, cultures, religions and perspectives.

• Inclusion is the proactive and intentional steps employers and companiestake to engage diversity in the workplace to make sure all points ofview are represented and valued while also creating opportunities forpeople from diverse backgrounds to engage and connect.


84 85



Diversity and inclusion programs still have a way to go

The benefits of a diverse workplace are well documented, but only half of employers have established diversity and inclusion programs in the workplace — and only a quarter are thinking about adding these programs in the future.

51% of employers

offer diversity and inclusion programs

27% of employers are

considering offering diversity and inclusion

programs in the future

Bank of America’s commitment to diversity and inclusion

At Bank of America, we believe diversity and inclusion

makes us stronger and is essential to our ability

to serve our clients. We believe that successful

workplace benefit programs go beyond traditional

retirement and health benefits to deliver resources

and support for employees across all life stages,

ethnicities, cultures, genders and experiences.

Workforces with diverse thinking and demographics

and a shared understanding of inclusion based on

fairness, respect and a safe and open culture are

truly people first.

Only 49%of employees who are aware of the diversity and inclusion programs at their workplace participate

“I feel happier that my workplace is so diverse and accepting. It brings a lot of new perspectives in and creates an open exchange of ideas and experiences.”




Employers who offer diversity and inclusion programs understand the benefits

Among employers who already have diversity and inclusion programs in place, they note a wide range of benefits that are contributing to the bottom line and the long-term health of their firm.

Top 5 benefits employers attribute to offering diversity and inclusion programs

1 They are the right thing to do

2 They build a strong company culture

3 They improve brand image

4 They are important for retaining current talent

5 They are necessary for keeping up with the industry

“It definitely makes work awesome and fun. It also feels nice to know that my job cares more about its workers… than about the business.”


These employers also noted that diversity and inclusion programs need strong buy-in from company leaders to be successful. When asked, employers identified the following as the most important elements for success of a diversity and inclusion program.

51% 42% 32% 27% 22%

Strong Widespread Measuring results Regular Embedding executive employee and holding touch points, the program support engagement managers like events throughout the

accountable organization


86 87


Tips for Employers

1 2

Promote the realities of growing healthcare costs and planning options, like an HSA, that can help employees better manage these expenses.

• Help tackle the lack of understandingaround HSAs that may be leading to alack of use by employees. Focus HSAeducation on the key benefits of HSAsand ways to use them as a planningtool for future healthcare costs.

• Promote the benefits of HSAs, includingthat there are no time limits on usingfunds; balances carry over year to year;funds can be invested for growthpotential; and when spent on qualifiedhealthcare expenses, HSA funds areexempt from federal and moststate taxes.

• Expand financial education content toinclude steps employees can considerto better manage current and futurehealth expenses.

Create a “culture of caring” from the top down. Bring the caregiving conversation out into the open so caregivers understand what support they have and feel confident asking for help when they need it.

• Develop a company-wide understandingof caregiving. Caregiving isunderestimated by employers and theemployee caregivers themselves, soeducation is needed to highlight all theways people serve in this important role.

• Train managers on the effects ofcaregiving and encourage them todispel incorrect assumptions aboutworking caregivers. Ensure managersunderstand the requirements of theFamily and Medical Leave Act (FMLA)and assist employees in filling outrequired forms.

• Expand workplace financial wellnessprograms to offer tools and support thattake into account caregiving demandson employees’ time and finances.

• Consider expanding the support groupsand benefits offered to caregivers andpromote these resources to employees,so they know what help is availableto them.

3

Work to expand both the availability and use of diversity and inclusion programs in the workplace.

• Support and encourage diversity andinclusion efforts — regardless of firmsize — to capture the clear benefitsto employees and employers thatthese programs offer.

• Educate managers and employeesabout the value of these programs.Talk with your employees in a waythat they can feel connected todiversity and inclusion and askmanagers to serve as an example,sharing their own experiences andbest practices.

• Embrace the diversity of your peopleby supporting employee networks tojoin others with shared backgroundsand interests.


Tips for EmployersTips for Employers

Tips for employers looking to increase employee wellness

Employers play a role in the financial journey of their employees

The financial journey of employees is becoming more and more complex. The challenges they face, from planning for retirement to managing healthcare costs and caring for family members, all contribute to their feelings of financial wellness.

With the health and wellness of employees having a profound impact on the health of a business, employers play an important role in helping employees address the challenges they face. Employers can do more by taking a more proactive role — which includes considering the action steps listed on the next page — in helping employees live their best financial lives.


8988

building resilience

About the 2019 Workplace Benefits Report Escalent conducted 15-minute online surveys between February 1, 2019 and February 26, 2019 with both retirement plan participants and benefits decision makers at firms across the United States. Respondents were not required to work with Bank of America, nor was Bank of America identified as the sponsor of the study.

Respondents with less than $20 million in plan assets 403

Respondents with $20 million to $100 million in plan assets 202

Respondents with more than $100 million in plan assets 199

Employers represented a range of retirement plan sizes:

804 respondents were employers

996 respondents were employees

Employees represented a mix of gender and ages:

40% Male

60% Female

Aged 18 to 44 394

Aged 45 to 64 470

Aged 65+ 132

Bank of America Retirement For more information about how we can help your company make the financial lives of & Benefit Plan Services your employees better, contact your Bank of

empower employers and America representative or call 877.902.8730. employees to take action

You can also visit us online at and work toward their baml.com/benefitsreport. financial goals today and into retirement.

This material should be regarded as general information on healthcare considerations and is not intended to provide specific healthcare advice or imply that Merrill financial advisors can now or in the future will provide specific healthcare advice. Questions regarding healthcare situations should be directed to healthcare, legal or tax professionals.

This report is designed to provide general information for employers to assist with planning strategies for their retirement plan and is for discussion purposes only. Bank of America is prohibited by law from giving legal or tax advice, and recommends consulting with an independent actuary, attorney and/or tax advisor before making any changes.

© 2019 Bank of America Corporation. All rights reserved. | ARRTSRF9 | 09/2019

Made with 10% post-consumer waste (PCW) recycled paper. By using PCW paper, Bank of America is helping to reduce greenhouse gas emissions from waste paper in our landfills. Leaf icon is a registered trademark of Bank of America Corporation.

“ With the health and wellness of employees having a profound impact on the health of a business, employers play an important role in helping employees address their challenges.”

The articles contained in this report were written by a third party and contain opinions of third parties not affiliated with Bank of America Corporation or any of its affiliates and are for information and educational purposes only. The opinions and views expressed do not necessarily reflect the opinions and views of Bank of America Corporation or any of its affiliates. Any assumptions, opinions and estimates are as of the date of this material and are subject to change without notice. Past performance does not guarantee future results.

“Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA.

Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed.

©2019 Bank of America Corporation. All rights reserved. 2822281 11-19-0572

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