The role of the modern Hospital & Health System CFO: 3 things to know

https://www.beckershospitalreview.com/finance/the-role-of-the-modern-cfo-3-things-to-know.html?utm_medium=email

Image result for evolution

The role of hospital and health system CFO has changed in recent years. CFOs are now change agents within their organizations and are deeply embedded in the day-to-day operations of the business.

Speaking on a panel called “The Evolving Role of the CFO” at the Becker’s Hospital Review 8th Annual CEO + CFO Roundtable in November, a panel of health system CFOs and finance leaders from across the country discussed how the finance chief role has changed and expanded.

The five panelists were:

  • Jeanette Wojtalewicz, senior vice president of Omaha, Neb.-based CHI Health
  • Nicholas Mendyka, vice president of system finance operations at Minneapolis-based Allina Health
  • Doug Welday, CFO of Evanston, Ill.-based NorthShore University HealthSystem
  • Kris Zimmer, CFO of St. Louis-based SSM Health
  • Mike Browning, CFO of Columbus-based OhioHealth

Here are three takeaways from the discussion:

1. CFOs are strategic leaders. The panelists noted that younger CFOs — those in their early 30s — come to the role with a fresh viewpoint. They are strategic and drive performance across the organization. Though CFOs who have been in the role for a decade or two may have a more traditional viewpoint, they’re adapting to the role of the modern CFO and embracing their more strategic position.

2. CFOs need different skills than in the past. The CFO role has expanded beyond traditional finance and accounting, and the skills CFOs need have changed too. When recruiting new members to their teams, the CFOs on the panel said they look for candidates with natural curiosity, data visualization skills and natural leadership abilities.

3. Clinician-finance partnerships are important. New payment models link quality of care to reimbursement, making it vital for CFOs and their teams to develop an understanding of the clinical side of the business. This has caused some health system CFOs to change their approach to training. The panelists said they try to help their teams develop an understanding of each department and learn how clinical and finance are connected.

 

NEW COVENANT HEALTH CFO AIMS TO LEAD ORGANIZATION’S FINANCIAL TURNAROUND

https://www.healthleadersmedia.com/finance/new-covenant-health-cfo-aims-lead-organizations-financial-turnaround

Image result for turnaround

 

The Tewksbury, Massachusetts–based health system strives to post its first positive balance sheet in more than five years.

Stephen Forney, MBA, CPA, FACHE, excels in fixing “broken” organizations and he has built a track record of achieving financial turnarounds at seven healthcare facilities, he tells HealthLeaders in a recent interview.

Forney has over three decades of experience as a healthcare executive, with a primary focus on problem-solving. He began his career fixing problems in areas such as information technology and supply chain, an approach and skill he has carried over into financial operations in the C-suite.

“In finance, it wound up being the same thing. Pretty much every organization I’ve gone to has been broken in some way, shape, or form,” Forney says. “I’ve developed a specialty doing turnarounds and this will be my eighth.”

Forney speaks about his new CFO role at the Tewksbury, Massachusetts–based Catholic nonprofit health system Covenant Health, which he joined in mid-September, and how driving revenue and reducing expenses must go hand-in-hand to achieve financial balance.

This transcript has been lightly edited for brevity and clarity.

HealthLeaders: Covenant is coming off its fifth straight year of operating losses. What is contributing to those losses and how do you plan to address those financial challenges?

Forney: The thing is, most turnarounds—to a greater or lesser extent—look a lot alike. With organizations that have [financial] issues, there are obviously always unique aspects to every situation, but virtually every healthcare organization that’s not doing well is because of the same relatively small handful of issues.

[For example,] revenue cycle is probably No. 1. Productivity has not been well attended to; expenses haven’t had a lot of discipline around them in a broad sense. That’s not to say that all decisions are bad, but in a systematic fashion, things haven’t been looked at. Frequently, driving volume and growing the business needs a better focus. 

In the case of Covenant … there has been a plan developed to address all those areas and we are addressing them already, even though we will be posting another operating loss in fiscal [year] 2019. But the trajectory is good and some of the things that we’re now looking at are what I would consider to be phase two–type initiatives. How do we accelerate and move them to the next level?

On October 1, we outsourced our revenue cycle. I’m pleased that we were able to get that accomplished. Obviously, it’s early but, at least anecdotally, initial trends look good.

HL: Where do you fall on the dynamic between focusing on expense control measures or revenue generation?

Forney: I always feel like you need to do both. Expense management and working towards expense strategies is easier, quicker, and more straightforward.

[Revenue growth strategies] take time, take effort, and tend to [have] a much higher degree of uncertainty around the volume projection. Those are necessary and they’re things that we need to invest in because, at some point, you can’t cut any more from your organization, you’ve got to grow the top line. To me, it’s sort of like step one is stabilize your revenue cycle and stabilize your expenses. Then while you’re doing that, work on growth that’s going to take place 12 to 18 months down the road.

HL: Are you optimistic about the federal government’s efforts to move the industry toward value-based care?

Forney: Going back about a decade, I thought the ACE program, which was [the federal government’s] bundled payment program, was a solid step in the right direction. It gave organizations a chance to collaborate in compliant fashion with physicians to bend the cost curve and have beneficiaries participate in the bending of the cost curve as well. I was with one of the pilot health systems that [participated], and it was a remarkable success.

Everybody got to win; CMS, patients, physicians, and systems won by creating value. Yes, I think that the government has a good role to play in [value-based care] because they have such a large group of patients that they’re willing to experiment like that. [The federal government] can come up with potentially novel ways to get people to buy into this.

HL: What is it like to be at the helm of a Catholic nonprofit system and how does it affect your leadership style?

Forney: From a philosophical standpoint, the principle of creating shareholder wealth and good stewardship are not significantly different. You’ve got an end goal in mind, which is, you’re taking care of the patients and a community. In one case, whatever excess is left goes to a private equity fund or shareholders. In the other case, [the excess] stays in your balance sheet and gets reinvested in the community.

HL: Given your three decades of healthcare experience, do you have advice for your fellow provider CFOs, especially some of the younger ones?

Forney: Focus on being that strategic right-hand person to the CEO. In my experience, that has been one of the things that marks a successful CFO from one that isn’t as successful.

CEOs are going to get ideas from everywhere. They’re outward and inward facing. They deal with the doctors and the community, and they’re going to get all sorts of great ideas.

The CFO needs to be that person [who is] grounded and says, ‘Well, what about this?’ That doesn’t mean saying no. The whole idea is how do you make it [sound] like a yes. To me, the CFO role just grounds all the discussions, from working with physicians to working with the community. 

CFOs over the last couple of decades have been operationally oriented. Now they need to start becoming clinically oriented.

There’s a real benefit in being able to sit down and talk with a physician and understand [what] they’re doing. … It winds up becoming a way to help ground the clinicians in the hospital operations because now you’re having a dialogue with them instead of them just saying, ‘You don’t understand. You’re not a clinician.’ That would be something that I would have a young CFO try to stay focused on, even though it’s dramatically outside the comfort zone for people that typically go into accounting.

 

Former CFO sues Texas hospital for defamation

https://www.beckershospitalreview.com/legal-regulatory-issues/former-cfo-sues-texas-hospital-for-defamation.html

Image result for defamation lawsuit

The former CFO of Huntsville (Texas) Memorial Hospital is suing the hospital for breach of contract and defamation, according to the SE Texas Record.

In his complaint, filed Aug. 28, Guy Gros claims he was hired as Huntsville Memorial’s CFO in February 2013. He was initially given a two-year contract and then a three-year contract with automatic renewals, according to the lawsuit.

Under the contract, the hospital could terminate Mr. Gros’s employment for cause. On Dec. 2, 2016 he was terminated for alleged cause. However, Mr. Gros asserts that he was fired for raising concerns about the hospital’s finances.  

Mr. Gros further alleges his reputation was damaged by false statements made by the hospital’s then CEO, who allegedly told a board member that Mr. Gros “did something illegal, something he should not have.”

Mr. Gros is seeking past and future wages, lost employment benefits and compensatory damages.

 

CFO of Children’s Health in Dallas steps down; 2nd finance leader to leave in a month

https://www.beckershospitalreview.com/hospital-executive-moves/cfo-of-children-s-health-in-dallas-steps-down-2nd-finance-leader-to-leave-in-a-month.html?origin=cfoe&utm_source=cfoe

Image result for children's health in dallas

Rich Goode, vice president and CFO of Dallas-based Children’s Health, resigned Sept. 24, about a month after another finance leader left the organization, according to The Dallas Morning News.

Hospital officials did not give a reason for his departure. The organization has not responded to Becker’s request for comment.

Mr. Goode’s resignation comes after the August departure of Ryan Bailey, head of investments at Children’s Health, who left to form an investment firm.

Mr. Goode served as CFO for three years, joining Children’s Health in 2016. He was previously vice president of finance and CFO at Cook Children’s Health Care System in Fort Worth, Texas.

Mr. Goode is credited with doubling the system’s net operating income and implementing analysis tools to offer better insights into its financial health during his tenure.

 

Critical Steps for a Hospital Turnaround

https://www.modernhealthcare.com/hospitals/critical-steps-hospital-turnaround

Image result for hospital turnaround

Operational changes can improve a hospital’s performance and prospects, but time is of the essence.

The challenges many community hospitals face have become so unrelenting as to threaten long-term financial viability. It’s important that this threat be met with prompt action and operational changes that can improve the immediate situation as well as sustainability. A formal turnaround plan includes analyses and actions, and becomes a roadmap to redirect hospitals and help them stay on track to serve as community resources for years to come.

What prevents some struggling hospitals from getting an earlier start on a turnaround plan?

JK: Leaders from ailing community hospitals sometimes don’t recognize the severity of their problems or that certain indicators call for quick, corrective action. Some common alarm signals that leaders may tune out at first include a downward trend of days cash on hand, shifts in patient volume across the delivery spectrum, medical staff dissatisfaction or defection, and even bond covenant concerns. Recognizing that problems need to be addressed and changes must be made is the first step toward improvement.

Once it’s clear that “business as usual” isn’t working, how does the turnaround process start?

JK: Typically, the process starts with an operational assessment to evaluate strategy, operations, supply chain, revenue cycle and leadership with the aim of reducing costs and increasing revenue—the tried-and-true formula for financial solvency. The analysis includes a review of data and documents, as well as interviews with board, executive and physician leaders. The process reveals any organizational problems or vulnerabilities that aren’t immediately apparent, and it forms the basis for a turnaround plan, including a detailed action plan. An open mind and fresh perspective are important to be able to see options to go beyond operations as they have always been.

What are some of the key areas an operational assessment looks at for potential savings and cost reduction?

JK: Almost every hospital has room to improve staff productivity. Labor is a hospital’s greatest expense, so optimizing productivity by having the right number and mix of staff can make a big impact. Community hospitals that do not have a productivity tool to achieve and maintain the right staffing levels can typically find savings of 15 to 20 percent in salaries and benefits by implementing a tool. In those hospitals where there’s already some productivity monitoring, implementing a more effective tool or improving processes can result in 5 to 10 percent savings. After labor, supply costs are the second highest expense for a hospital, so that’s another key focus area for cost reduction and savings. Industry benchmarks show that many community hospitals have an opportunity to reduce supply costs by as much as 20 percent.

Assessing revenue cycle is also imperative to help identify, monitor and collect every dollar a hospital is due. Gains can be made in this area by renegotiating health plan contracts, streamlining billing for faster payment, auditing medical record coding and reviewing the chargemaster.

Why do the early stages of a turnaround include benchmarking?

JK: Hospitals can potentially identify significant cost-saving opportunities by comparing themselves to hospitals of similar size and volume. Comparing clinical, operational and financial data also identifies areas for improvement and where to allocate time and money for improvement initiatives. For example, a CHC-managed hospital that recently underwent a successful turnaround had discovered through benchmarking that its staff ratios were higher and its benefits were more expensive compared to similar hospitals. This information prompted leaders to take a closer look at the hospital’s situation, and they found it made sense from a sustainability perspective to downsize staff and bring benefit packages to competitive levels. These actions slashed the hospital’s annual expenses by $5.3 million.

To support and sustain a turnaround effort, who needs to be involved?

JK: It’s a collaborative process requiring the participation of the board of trustees, executive leaders, physician leaders, and in many cases an outside management firm to evaluate the situation and develop a specific plan of action. As we discussed, leaders of struggling hospitals usually see the need for improvement but don’t recognize the severity of their situation. Because of that blind spot, it’s often external stakeholders or bondholders who set corrective action in motion by seeking outside assistance.