Healthcare is Hard: A Podcast for Insiders; June 11, 2020
Over the course of nearly 20 years as Chief Research Officer at The Advisory Board Company, Chas Roades became a trusted advisor for CEOs, leadership teams and boards of directors at health systems across the country. When The Advisory Board was acquired by Optum in 2017, Chas left the company with Chief Medical Officer, Lisa Bielamowicz. Together they founded Gist Healthcare, where they play a similar role, but take an even deeper and more focused look at the issues health systems are facing.
As Chas explains, Gist Healthcare has members from Allentown, Pennsylvania to Beverly Hills, California and everywhere in between. Most of the organizations Gist works with are regional health systems in the $2 to $5 billion range, where Chas and his colleagues become adjunct members of the executive team and board. In this role, Chas is typically hopscotching the country for in-person meetings and strategy sessions, but Covid-19 has brought many changes.
“Almost overnight, Chas went from in-depth sessions about long-term five-year strategy, to discussions about how health systems will make it through the next six weeks and after that, adapt to the new normal. He spoke to Keith Figlioli about many of the issues impacting these discussions including:
“Health equity means that everyone has a fair and just opportunity to be as healthy as possible. This requires removing obstacles to health such as poverty, discrimination, and their consequences, including powerlessness and lack of access to good jobs with fair pay, quality education and housing, safe environments, and health care.”
COVID-19 has unleashed a dual threat to health equity in the United States: a pandemic that has sickened millions and killed tens of thousands and counting, and an economic downturn that has resulted in tens of millions of people losing jobs—the highest numbers since the Great Depression. The COVID pandemic underscores that:
Pandemics and economic recessions exacerbate disparities that ultimately hurt us all. Therefore, state and local leaders cannot design equitable response and recovery strategies without monitoring COVID’s impacts among socially and economically marginalized groups.¹ Data disaggregation should follow best practices and extend not only to public health data on COVID cases, hospitalizations, and fatalities, but also to: measures of access to testing, treatment, personal protective equipment (PPE), and safe places to isolate when sick; receipt of social and economic supports; and the downstream consequences of COVID on well-being, ranging from housing instability to food insecurity.
Geographic identifiers would allow leaders and the public to understand the interplay between place and social factors, as counties with large black populations account for more than half of all COVID deaths, and rural communities and post-industrial cities generally fare worse in economic downturns. Legal mandates for data disaggregation are proliferating, but 11 states are still not reporting COVID deaths by race; 16 are not reporting by gender; and 26 are not reporting based on congregate living status (e.g., nursing homes, jails). Only three are reporting testing data by race and ethnicity.
While states and cities can do more, the federal government should also support data disaggregation through funding and national standards.
Our communities are stronger, more stable, and more prosperous when every person, including the most disadvantaged residents, is healthy and financially secure. Throughout the response and recovery, state and local leaders should ask: Are we making sure that people facing the greatest risks have access to PPE, testing and treatment, stable housing, and a way to support their families? And, are we creating ways for residents—particularly those hardest hit—to meaningfully participate in and shape the government’s recovery strategy?
Accordingly, policymakers should create space for leaders from these communities to be at decision-making tables and should regularly consult with community-based organizations that can identify barriers to accessing health and social services, lift up grassroots solutions, and disseminate public health guidance in culturally and linguistically appropriate ways. For example, they could recommend trusted, accessible locations for new testing sites and advise on how to diversify the pool of contact tracers, who will be crucial to tamping down the spread of infection in reopened communities. They could also collaborate with government leaders to ensure that all people who are infected with coronavirus (or exposed to someone infected) have a safe, secure, and acceptable place to isolate or quarantine for 14 days. Key partners could include community health centers, small business associations, community organizing groups, and workers’ rights organizations, among others. Ultimately, state and local leaders should measure the success of their response based not only on total death counts and aggregate economic impacts but also on the health and social outcomes of the most marginalized.
Race or ethnicity should not determine anyone’s opportunity for good health or social well-being, but, as COVID has shown, we are far from this goal. People of color are more likely to be front-line workers, to live in dense or overcrowded housing, to lack health insurance, and to experience chronic diseases linked to unhealthy environments and structural racism. Therefore, state and local leaders should empower dedicated teams to address COVID-related racial disparities, as several leaders, Republican and Democrat, have already done.
To be effective, these entities should: include leaders of color from community, corporate, academic, and philanthropic sectors; be integrated as key members of the broader public health and economic recovery efforts; and be accountable to the public. These teams should foster collaboration between state, local, and tribal governments to assist Native communities; anticipate and mitigate negative consequences of current response strategies, such as bias in enforcement of public health guidelines; address racial discrimination within the health care system; and ensure access to tailored mental health services for people of color and immigrants who are experiencing added trauma, stigma, and fear. Ultimately, resources matter. State and local leaders must ensure that critical health and social supports are distributed fairly, proportionate to need, and free of undue restrictions to meet the needs of all groups, including black, Latino, Asian, and Indigenous communities.
The Congressional response to COVID has been historic in its scope and speed, but significant gaps remain. Additional federal resources are needed for a broad range of health and social services, along with fiscal relief for states and communities facing historically large budget deficits due to COVID. Despite these challenges, state and local leaders must still find ways to take targeted policy actions. The following questions can help guide their response.
Who is left out?Inclusion of all populations will strengthen the public health response and lessen the pandemic’s economic fallout for all of society, but federal actions to date have not included all who have been severely harmed by the pandemic. As a result, many states and communities have sought to fill gaps in eviction protections and paid sick and caregiving leave. Others are extending support to undocumented immigrants and mixed-status families through public-private partnerships, faith-based charities, and community-led mutual aid systems. Vital health care providers, including safety net hospitals and Indian Health Service facilities, have also been disadvantaged and need targeted support.
Will protections last long enough?Many programs, such as expanded Medicaid funding, are tied to the federal declaration of a public health emergency, which will likely end before the economic crisis does. Other policies, like enhanced unemployment insurance and mortgage relief, are set to expire on arbitrary dates. And still others, such as stimulus checks, were one-time payments. Instead, policy extensions should be tied to the extent of COVID infection in a state or community (or its anticipated spread) and/or to broader economic measures such as unemployment. This is particularly important as communities will likely experience re-openings and closings over the next six to 12 months as COVID reemerges.
Have programs that meet urgent needs been fully and fairly implemented?Allexisting federal resources should be used in a time of great need. For example, additional states should adopt provisions that would allow families with school-age children to receive added Supplemental Nutrition Assistance Program (SNAP) benefits, and more communities need innovative solutions to provide meals to young children who relied on schools or child care providers for breakfast and lunch. States should also revise eligibility, enrollment, and recertification processes that deter Medicaid use by children, pregnant women, and lawfully residing immigrants.
Health, public health, and social infrastructure are critical for recovery and for our survival of the next pandemic, severe weather event, or economic downturn. A comprehensive public health system is the first line of defense for rural, tribal, and urban communities. While a sizable federal reinvestment in public health is needed, states and communities must also reverse steady cuts to the public health workforce and laboratory and data systems.
Everyone in this country should have paid sick and family leave to care for themselves and loved ones; comprehensive health insurance to ensure access to care when sick and to protect against medical debt; and jobs and social supports that enable families to meet their basic needs and invest in the future. As millions are projected to lose employer-sponsored health insurance, Medicaid expansion becomes increasingly vital for its proven ability to boost health, reduce disparities, and provide a strong return on investment. In the longer term, policies such as earned income tax credits and wage increases for low-wage workers can help secure economic opportunity and health for all. Finally, states and communities should invest in affordable, accessible high-speed internet, which is crucial to ensuring that everyone—not just the most privileged among us—is informed, connected to schools and jobs, and engaged civically.
These principles can guide our nation toward an equitable response and recovery and help sow the seeds of long-term, transformative change. States and cities have begun imagining and, in some cases, advancing toward this vision, putting a down payment on a fair and just future in which health equity is a reality. Returning to the ways things were is not an option.
Two board experts explain how in times of crisis or transformation, the CFO can serve as a rock in the boardroom, a critical arbiter of difficult decisions, and a scout for the future.
Critical business decisions cannot be made unless management teams and boards of directors are on the same page. Transparency, fair and balanced dialogue, and well-structured processes for gaining agreement on strategic plans—these dynamics must be present in every boardroom, in good times and, especially, in bad.
The CFO plays an important role in ensuring that they are.
In crises, such as the global spread of the novel coronavirus, the CFO is best-positioned to provide the most relevant and up-to-date facts and figures, which can help boards find clarity amid chaos. In corporate transformations, the pragmatic, data-focused finance leader is the only one who can prompt the board to actively consider all the short- and long-term consequences of proposed strategy decisions.
Barbara Kux and Rick Haythornthwaite, longtime board directors for multiple global organizations, shared these and other board-related insights with McKinsey senior partner Vivian Hunt in a conversation that spanned two occasions: a gathering of CFOs in London some months ago and, more recently, follow-up phone conversations about the COVID-19 pandemic.
These interviews, which have been condensed and edited here, explained the importance of finance leaders in serving both as scouts for the future and as trusted translators of critical market information.
Rick Haythornthwaite: The board’s most important functions in the wake of COVID-19 are threefold: one is making sure that employees are being treated decently and that the company is taking all the precautions it can. Second is obtaining an objective, insightful understanding of the business and trends. And third is anticipating and preparing for recovery. The key in all three areas is having high-quality data to inform the board’s decisions and to share with employees. Of course, getting data from a market in freefall is never easy. This is where you need CFOs to be absolutely on top of their game.
The board needs to know what is really happening to the top line, what short-term measures can be taken to preserve and boost cash, and all the actions you have to take during the early stage of such events to buy time. But the board must also have a handle on long-term issues.1 And now that we’re months into this crisis, people are starting to draw lessons from previous ones and bringing some historical data into board discussions. The CFO can use these data to construct hard-edge scenarios that prompt good conversations in the boardroom.
Barbara Kux: An important difference in the role of CFOs today, as compared with their role during the financial crisis in 2008, is that they need to simultaneously manage both short-term responsiveness and future recovery. The CFO must keep the ship floating through rough waters—safeguarding employees’ health, securing liquidity, monitoring cash flow and payment terms, ensuring the functioning of the supply chain, assessing effects on P&L and the balance sheet, reviewing customers’ and suppliers’ situations, and initiating cost-reduction programs. That is all very challenging indeed. But then the CFO must also serve as the ship’s scout—watching for key trends that are emerging or that have accelerated as a result of COVID-19, such as digitization and changes in consumer behavior.
The balance between opportunity and risk is being altered substantially for most companies. The CEO could be tempted to profit from immediate demands—“let’s make ventilators, let’s make disinfectants.” The CFO’s job, by contrast, is to point out the differences between quick-to-market options and long-term post-COVID-19 options. These post-COVID-19 options can be an important factor in motivating and engaging employees during these challenging times.
It is also important for the CFO to present the board with reports and pre-reads that paint the entire picture in an objective way, including potential scenarios for the future. That is the only way boards and senior management can take thoughtful and well-founded decisions—first for the recovery and then for a sustainable future for all stakeholders. The word “crisis” has two meanings, one being “danger” and the other being “chance.” Today’s CFO must consider both.
The word ‘crisis’ has two meanings, one being ‘danger’ and the other being ‘chance.’ Today’s CFO must consider both.
Barbara Kux: Outside of crisis periods, studies by INSEAD and McKinsey show, boards spend more than two-thirds of their time on “housekeeping”—financial reporting, compliance, environment, health and safety issues, regulatory issues, and the like. Only about 20 percent is spent on strategy. It is very important for boards to get out of this “compliance cage,” as I call it, and really focus on sustainable value creation. I’m thinking of the board of a leading oil and gas company that did just that. It recognized the importance of sustainable business development early on. The company gained first-mover advantages by diversifying toward a green business, including investing in solar and battery technologies.
At the end of the day, the board is ultimately responsible for the strategy, and the CFO is best-positioned to support strategy discussions. The finance leader can serve as a neutral party among the members of the C-suite, synthesizing their transformation ideas, supplementing them with comprehensive quantitative and qualitative data, and then working with the CEO to bring it all back to the board. This is even more important today to respond to COVID-19–related challenges early on.
Rick Haythornthwaite: The biggest challenge for any CEO, CFO, or other senior leader is to institutionalize new ideas without sucking the life out of them. Each C-suite leader plays a different but important role in this regard. The CFO needs to give transformation initiatives structure and rigor, while the CEO is probably better suited to take on the motivational aspects—for instance, the context for change and definitions of success. The whole team creates the strategy map—the markets and products affected, changes in pricing, the execution plan. But the CFO needs to ensure that the financial and operational underpinnings are there. Even if they are not visible to every single part of the organization, the board can see them through the CFO.
Barbara Kux: To serve as an effective scout, the CFO should establish nonfinancial KPIs, like net promoter and employee-engagement scores, that are critical for the future health and performance of the organization. CFOs should review the strategy process to see that risks and opportunities are being well-assessed. And they can raise the political antennae of the board—accessing global think tanks, for instance, to understand what’s going on in Washington, China, and other important regions or in the medical community. The CEO often is not the most long-term–focused person in the organization; we know this because our financial markets are still very much short-term oriented. The board has to be long-term oriented. The CFO, therefore, must maintain a good balance of both. That might mean introducing a lean-transformation program with a focus on short-term results while, at the same time, contributing to the definition and implementation of a sustainable strategy for the company to emerge strong from the COVID-19 pandemic.
Rick Haythornthwaite: Boards need CEOs who can handle multiple truths, who can be expansive in thinking, and who can live comfortably in the future and bring the company along for the ride. The CFO also needs to be a protagonist in the boardroom, but from a different base: you can’t move to the future until you are anchored in the present. The CFO provides that anchor. Having a balance between future and present, between CEO and CFO, is important. The board wants to feel that there is strategic momentum—but also that the company is not just heading off on a journey of delusion.
Barbara Kux: It is important for the CEO and CFO to get on well, but their relationship should not be too close. It is better for the CFO to be objective, even if that sometimes leads to constructive conflicts. At times the CEO defaults to presenting only the positive in the boardroom, which makes it harder for the CFO to play back a more objective story. But that is very much the role of CFOs. They need to raise those early warnings. As a board director, I feel better if the CFO sometimes states, “by the way, we are losing market share here.” It takes a great deal of self-assurance for the CFO to come into the boardroom and say something like that. An independent-minded CFO will always be transparent with the board. A good CEO will always strive to establish an open relationship with the CFO. It is important for the board to motivate this constructive behavior from both executives so it can truly understand what is going well or not so well.
An independent-minded CFO will always be transparent with the board. A good CEO will always strive to establish an open relationship with the CFO.
Rick Haythornthwaite: The senior-management team should not be delivering full solutions to the board at the outset; there should be a period of questions and discussion. The boardroom should be the place for CFOs and boards to engage in the cut and thrust of examination and exploration, with thoughtful planning and framing of dialogues to ensure that decision making is of the highest possible quality.
I’ll give you an example. CFOs used to be able to put traditional capital cases in front of the board about things like investments in plant and equipment, and there was typically a well-grooved dialogue. The kinds of actions they are talking about have changed, though. Think about companies’ investments in platform technologies, which can involve large sums being paid for targets with very low EBITDA—the idea being that value will ultimately come from the combination of entities rather than from a singular target.
Boards may be unfamiliar with such investment cases, so rather than jumping into quick, instinctive type-one decisions forced by the imposition of inappropriate and probably unnecessary time constraints, they will need an education. The board must take time to understand what, in practice, the acquisition of a platform would look like—how it might be scaled under new ownership, how that scaling would affect the bottom line, any risks involved, and so on. This is fundamentally a type-two decision, requiring time and deliberation. The CFO has an important role to play in making sure that this process happens, that it plays out over several board sessions rather than being squeezed into one meeting, and that conversations are grounded in hard numbers.
In the wake of COVID-19, of course, these dialogues may need to happen virtually; the quality of the conversation will still be good, as people are becoming accustomed to virtual meetings.2 They are fine for certain pro-forma tasks, where the issues are well-understood and processes are well-established. But when you’re trying to bring in new voices and new ideas, that’s when you need to be together in the same room.
Barbara Kux: The role of the CFO is so much more expansive than it was even five years ago, including additional responsibility for cyber and digital transformations and for IT initiatives. To get your arms around the role and grow in it, take a step back and look at the company objectively. “What other roles could I play in the company, and how does that overlap with what I am doing now?” “Which initiatives would make the most impact in the company, and how could I realize quick wins in those areas?” Maybe it’s a focus on digital or compliance or export control or political intelligence. The CFO’s professional response to COVID-19 crisis management could be a springboard for future development. Whatever it is, I would identify it and just start. Take any kind of training you can get; read as many business publications as you can. Train yourself in how to deal with activist investors. Step by step, your hat will become bigger.
Rick Haythornthwaite: Whether you are talking about COVID-19 or digital disruption or any other impact on the business, please remember that the board still wants to sleep at night, and when the details are lost, the board will be much less forgiving of CFOs than of CEOs. Don’t forget that part of it. Particularly in this challenging economic environment, it is very important. Chairs and boards? We like to sleep soundly at night.