Fifty-four percent of CFOs say that their CEOs are asking them to focus on cost reduction while 40 percent indicate that their CEOs want them honing in on strategy and transformation, according to Deloitte’s “CFO Signals Survey 2Q 2023.”
More than one-quarter of CFOs in the survey reported that their CEOs are asking them to focus on working capital efficiency and risk management while over one-third of CFOs said their CEOs want them focused on strategy and transformation, performance management, revenue growth, investment and capital/financing.
Since 2010, Deloitte has surveyed leading CFOs representing some of North America’s largest companies to provide insight into the business environment, company priorities and expectations, finance priorities and CFOs’ priorities.
Participating CFOs represent diversified, large companies, with 81 percent of respondents reporting revenue in excess of $1 billion. Twenty-three percent are from companies with more than $10 billion in annual revenue, according to Deloitte.
Radio Advisory’s Rachel Woods sat down with Advisory Board‘s Aaron Mauck and Natalie Trebes to talk about where leaders need to focus their attention on longer-term industry challenges—like growing competition, behavioral health infrastructure, and finding success in value-based care.
Rachel Woods: So I’ve been thinking about the last conversation that we had about what executives need to know to be prepared to be successful in 2023, and I feel like my big takeaway is that the present feels aggressively urgent. The business climate today is extraordinarily tough, there are all these disruptive forces that are changing the competitive landscape, right? That’s where we focused most of our last conversation.
But we also agreed that those were still kind of near-term problems. My question is why, if things feel like they are in such a crisis, do we need to also focus our attention on longer term challenges?
Aaron Mauck: It’s pretty clear that the business environment really isn’t sustainable as it currently stands, and there’s a tendency, of course, for all businesses to focus on the urgent and important items at the expense of the non-urgent and important items. And we have a lot of non-urgent important things that are coming on the horizon that we have to address.
Obviously, you think about the aging population. We have the baby boom reaching an age where they’re going to have multiple care needs that have to be addressed that constitute pretty significant challenges. That aging population is a central concern for all of us.
Costly specialty therapeutics that are coming down the pipeline that are going to yield great results for certain patient segments, but are going to be very expensive. Unmanaged behavioral needs, disagreements around appropriate spending. So we have lots of challenges, myriad of challenges we’re going to have to address simultaneously.
Natalie Trebes: Yeah, that’s right. And I would add that all of those things are at threshold moments where they are pivoting into becoming our real big problems that are very soon going to be the near term problems. And the environment that we talked about last time, it’s competitive chaos that’s happening right now, is actually the perfect time to be making some changes because all the challenges we’re going to talk about require really significant restructuring of how we do business. That’s hard to do when things are stable.
Woods: Yes. But I still think you’re going to get some people who disagree. And let me tell you why. I think there’s two reasons why people are going to disagree. The first reason is, again, they are dealing with not just one massive fire in front of them, but what feels like countless massive fires in front of them that’s just demanding all of their strategic attention. That was the first thing you said every executive needs to know going into this year, and maybe not know, but accept, if I’m thinking about the stages of grief.
But the second reason why I think people are going to push back is the laundry list of things that Aaron just spoke of are areas where, I’m not saying the healthcare industry shouldn’t be focused on them, but we haven’t actually made meaningful progress so far.
Is 2023 actually the year where we should start chipping away at some of those huge industry challenges? That’s where I think you’re going to get disagreement. What do you say to that?
Trebes: I think that’s fair. I think it’s partly that we have to start transforming today and organizations are going to diverge from here in terms of how they are affected. So far, we’ve been really kind of sharing the pain of a lot of these challenges, it’s bits and pieces here. We’re all having to eat a little slice of this.
I think different organizations right now, if they are careful about understanding their vulnerabilities and thinking about where they’re exposed, are going to be setting themselves up to pass along some of that to other organizations. And so this is the moment to really understand how do we collectively want to address these challenges rather than continue to try to touch as little of it as we possibly can and scrape by?
Woods: That’s interesting because it’s also probably not just preparing for where you have vulnerabilities that are going to be exposed sooner rather than later, but also where might you have a first mover advantage? That gets back to what you were talking about when it comes to the kind of competitive landscape, and there’s probably people who can use these as an opportunity for the future.
Mauck: Crises are always opportunities and even for those players across the healthcare system who have really felt like they’re boxers in the later rounds covering up under a lot of blows, there’s opportunities for them to come back and devise strategies for the long term that really yield growth.
We shouldn’t treat this as a time just of contraction. There are major opportunities even for some of the traditional incumbents if they’re approaching these challenges in the right fashion. When we think about that in terms of things like labor or care delivery models, there’s huge opportunities and when I talk with C-suites from across the sector, they recognize those opportunities. They’re thinking in the long term, they need to think in the long term if they’re going to sustain themselves. It is a time of existential crisis, but also a time for existential opportunity.
Trebes: Yeah, let’s be real, there is a big risk of being a first mover, but there is a really big opportunity in being on the forefront of designing the infrastructure and setting the table of where we want to go and designing this to work for you. Because changes have to happen, you really want to be involved in that kind of decision making.
Woods: And in the vein of acceptance, we should all accept that this isn’t going to be easy. The challenges that I think we want to focus on for the rest of this conversation are challenges that up to this point have seemed unsolvable. What are the specific areas that you think should really demand executive attention in 2023?
Trebes: Well, I think they break into a few different categories. We are having real debates about how do we decide what are appropriate outcomes in healthcare? And so the concept of measuring value and paying for value. We have to make some decisions about what trade-offs we want to make there, and how do we build in health equity into our business model and do we want to make that a reality for everyone?
Another category is all of the expensive care that we have to figure out how to deliver and finance over the coming years. So we’re talking about the already inadequate behavioral health infrastructure that’s seen a huge influx in demand.
We’re talking about what Aaron mentioned, the growing senior population, especially with boomers getting older and requiring a lot more care, and the pipeline of high-cost therapies. All of this is not what we are ready as the healthcare system as it exists today to manage appropriately in a financially sustainable way. And that’s going to be really hard for purchasers who are financing all of this.
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:
Corporate Governance. The decisions health systems will be forced to make over the next two to five years are staggeringly big, according to Chas. As a result, Gist is spending a lot of time thinking about governance right now and how to help health systems supercharge governance processes to lay a foundation for the making these difficult choices.
Health Systems Acting Like Systems. As health systems struggle to maintain revenue and margins, they’ll be forced to streamline operations in a way that finally takes advantage of system value. As providers consolidated in recent years, they successfully met the goal of gaining size and negotiating leverage, but paid much less attention to the harder part – controlling cost and creating value. That’s about to change. It will be a lasting impact of Covid-19, and an opportunity for innovators.
The Telehealth Land Grab. Providers have quickly ramped-up telehealth services as a necessity to survive during lockdowns. But as telehealth plays a larger role in the new standard of care, payers will not sit idly by and are preparing to double-down on their own virtual care capabilities. They’re looking to take over the virtual space and own the digital front door in an effort to gain coveted customer loyalty. Chas talks about how it would be foolish for providers to expect that payers will continue reimburse at high rates or at parity for physical visits.
The Battleground Over Physicians. This is the other area to watch as payers and providers clash over the hearts and minds of consumers. The years-long trend of physician practices being acquired and rolled-up into larger organizations will significantly accelerate due to Covid-19. The financial pain the pandemic has caused will force some practices out of business and many others looking for an exit. And as health systems deal with their own financial hardships, payers with deep pockets are the more likely suitor.”
HENRY KOTULA 