Hospitals are constantly faced with challenges that require them to reassess how they deliver care to their communities. Continuous improvement is necessary as expense inflation consistently outpaces reimbursement gains. However, more fundamental issues threaten hospital fiscal viability such as payor mix deterioration, population or market share declines, and utilization changes. Amplify this environment with a difficult EMR installation and a “perfect storm” creates a fiscal crisis that necessitates a turnaround.
If covenants are breached, bond agreements often require an external and independent consulting firm that is engaged to help create and oversee the implementation of a turnaround plan. Otherwise, a CEO must make a value judgment on whether to outsource the turnaround balancing cost considerations with an honest assessment of (1) their management team’s bandwidth, and (2) ability to prepare and execute a turnaround.
There are multiple models for outsourcing a turnaround. In a complete outsourcing, an engagement letter with the “performance improvement” consulting firm would include an assessment phase and the preparation of a comprehensive plan that covers all areas of operations followed by implementation support services. The firm may require an on-site presence of one year or more to assess, validate, and assist in the implementation of recommended interventions. This can be effective, but the fees can easily reach seven figures even for modest community hospitals. In addition, even in a complete outsourcing there is still a major demand on the time of senior leadership. As a result, management sometimes chooses to limit the scope of a performance improvement engagement, which results in a partial outsource. The limitation may be to only outsource the plan development in the form of a report. This would detail the operational interventions and the implementation steps, but it would leave the heavy lifting of implementation to existing leadership. Alternatively, the scope may be limited by excluding certain areas of review. While there may be valid reasons for the latter approach, limiting the areas of review can be counterproductive to a turnaround plan because many issues are systemic such as patient throughput or revenue cycle. Further, restricting certain areas for review may create the appearance of “untouchables” or “sacred cows,” which should be avoided in a turnaround.
While the CEO should always be the ultimate leader of the turnaround, the CFO is indispensable in the process whether it is fully or partially outsourced or done completely in-house. These abilities are not always in the CFO’s skill set; some executives are most effective in a steady-state as opposed to a turnaround environment. The CEO will be relying on the CFO to demonstrate the following traits, which require a large degree of emotional intelligence:
Human nature dictates that self-interest may compromise the CFO’s objectivity. There will be times when the best interest of the organization and the individual are in conflict. If the incumbent CFO is not up to the task, replacing them with an interim CFO with turnaround experience is a better option.
An experienced interim CFO in a turnaround situation has several advantages. First, it can afford the CEO the opportunity to underscore the urgency of the situation by making an example. The experienced interim CFO understands their primary role is to be a key asset in the execution of the turnaround. They are not there to make friends but to influence people (although the best ones do both). Because they are not angling for promotions or favor for future consideration from the board, they are apolitical, and their intentions are more transparent. Having been through turnarounds before, they possess the tools to assist the CEO and the board navigates the ups and downs. Perhaps most importantly, the interim CFO is in the best position to tell the CEO and the board things they may not want to hear such as the need to give up independence or consult bankruptcy counsel if the situation warrants.
Obviously, it is necessary that the hospital must continue to operate safely, securely, and legally during a turnaround. This can be a difficult balancing act, not just for the CFO but for all senior management. The CFO must continue to safeguard the assets of the organization. Likewise, other members of senior management must push back if a turnaround plan may imperil patients, visitors or staff, or violate the law. Consequently, it may be beneficial to bring in other interim C-Suite leaders who are able to effectively manage the multiple critical priorities during a turnaround in addition to, or instead of, an interim CFO. However, this must be carefully weighed against continuity of management and the organization’s ability to attract and retain talent. Senior management turnover creates stress on the organization and is ultimately a reflection on the CEO.
There is not a one-size-fits-all approach to creating and executing a turnaround plan. Outsourcing to consulting firms can infuse new ideas and analytical talent, but it is expensive and still often leaves management with the bulk of the responsibilities. Experienced interim management can add independence and objectivity to create a glidepath for execution.
President Trump said Friday the U.S. would halt its funding of the World Health Organization and pull out of the agency, accusing it of protecting China as the coronavirus pandemic took off. The move has alarmed health experts, who say the decision will undermine efforts to improve the health of people around the world.
In an address in the Rose Garden, Trump said the WHO had not made reforms that he said would have helped the global health agency stop the coronavirus from spreading around the world.
“We will be today terminating our relationship with the World Health Organization and redirecting those funds to other worldwide and deserving urgent global public health needs,” Trump said. “The world needs answers from China on the virus.”
It’s not immediately clear whether the president can fully withdraw U.S. funding for the WHO without an act of Congress, which typically controls all federal government spending. Democratic lawmakers have argued that doing so would be illegal, and House Speaker Nancy Pelosi threatened last month that such a move would be “swiftly challenged.”
The United States has provided roughly 15% of the WHO’s total funding over its current two-year budget period.
The WHO has repeatedly said it was committed to a review of its response, but after the pandemic had ebbed. Last month, Robert Redfield, the director of the Centers for Disease Control and Prevention, also said the “postmortem” on the pandemic should wait until the emergency was over.
As the Trump administration’s response to pandemic has come under greater scrutiny, with testing problems and a lack of coordination in deploying necessary supplies, Trump has sought to cast further blame on China and the WHO for failing to snuff out the spread when the virus was centered in China.
During his remarks, Trump alleged, without evidence, that China pressured WHO to mislead the world about the virus. Experts say that if the U.S. leaves the WHO, the influence of China will only grow.
“The world is now suffering as a result of the malfeasance of the Chinese government,” Trump said. “China’s coverup of the Wuhan virus allowed the disease to spread all over the world, instigating a global pandemic that has cost more than 100,000 American lives, and over a million lives worldwide.” (That last claim is not true; globally, there have been about 360,000 confirmed deaths from Covid-19, the disease caused by the coronavirus.)
When Trump earlier this month threatened to yank U.S. funding in a letter, Tedros Adhanom Ghebreyesus, the WHO director-general, would only say during a media briefing that the agency was reviewing it. But he and other officials stressed that the agency had a small budget — about $2.3 billion every year — relative to the impact the agency had and what it was expected to do.
Mike Ryan, head of the WHO’s emergencies program, said the U.S. funding provided the largest proportion of that program’s budget.
“So my concerns today are both for our program and … working on how we improve our funding base for WHO’s core budget,” Ryan said. “Replacing those life-saving funds for front-line health services to some of the most difficult places in the world — we’ll obviously have to work with other partners to ensure those funds can still flow. So this is going to have major implications for delivering essential health services to some of the most vulnerable people in the world and we trust that other donors will if necessary step in to fill that gap.”