CFOs need to prep for healthcare’s lagging inflation

Healthcare costs are expected to jump 6.0% next year. CFOs must prepare accordingly, advises WTW’s Tim Stawicki.

CFOs need to be prepared for a “higher tail” of medical inflation — even if general inflation eases in the near future, Tim Stawicki, chief actuary, North America health & benefits of Willis Towers Watson (WTW) told CFO Dive.

With the Consumer Price Index (CPI)  rising to 8.5% in July and the recent rise in the core Producer Price Index (PPI), the Federal Reserve will probably look to hike interest rates even farther. 

“CFOS need to be prepared for the case that if general inflation eases, there may be two or three more years where they need to think about how they are managing the costs of health care plans,” he said in an interview. 

Inflation, which can more immediately impact consumer prices, works somewhat differently when it comes to costs of medical care. “Employers are paying healthcare costs based on contracts that their insurer has with providers, which are multiple years in length. So if a deal with the hospital or contract does not come up until 2023, then that provider has the opportunity to renegotiate higher prices for three years,” said Stawicki. 

The recent Best Practices in Healthcare Survey by WTW consisting of 455 U.S. employers found that employers project their healthcare costs will jump 6.0% next year compared with an average 5.0% increase expected by the end of this year.

Further, employers see little relief in sight — seven in 10 (71%) expect moderate to significant increases in costs over the next three years. Additionally, over half of respondents (54%) expect their costs will be over budget this year.

Balancing talent retention and healthcare costs

Talent retention has also remained an entrenched challenge for CFOs over recent months and continues to be top of mind. 

Given inflationary pressures and a potential looming recession, employers are having trouble finding the workers they need to run their businesses. A rise in healthcare benefit costs will make this all the more challenging, said Stawicki. “Employers are looking around and saying ‘I need to find talent to help me run my business and I can’t do that if I have an ineffective program in healthcare benefits,’” he said. 

There is a direct link between business outcomes and in particular employee productivity and employees’ ability to manage their health and financial environment, according to WTW’s Global Benefits Attitude Survey. “Losing the ability to offer programs and benefits that meet employee needs is impacting business,” said Stawicki.

It comes down to finding the balance between cost management in an environment where talent is hard to come by, he said. In order for CFOs to be successful in financing benefit programs they need to look at finding ways to partner with their counterparts in human resources, said Stawicki. 

Sixty-seven percent of employers said that managing company costs was a top priority in the company’s August Best Practices in Healthcare Survey, versus the 42% who said that achieving affordability for employees was a top priority. In the near future, CFOs need to establish a relationship with HR counterparts that can facilitate “ways to manage company costs without shifting it to employees,” said Stawicki. 

Ultimately, company costs remain paramount for employers but running a successful business will also require keeping employee affordability top of mind.

CFOs continue talent retention battle

Dive Brief:

  • CFOs looking to attract and retain the right kind of talent amidst inflationary pressures, rising interest rates and other economic tensions need to “double down on recognition and meaningful work for employees,” said Jessica Bier, managing director of Deloitte Consulting, in an interview. 
  • In order to attract and retain viable talent to keep business afloat, 71% of CFOs indicated that a flexible workplace environment was their approach, 63% said clarity around career development and growth opportunities and 62% pointed to increased salaries, per the second wave of data in the Q3 CFO Signals report.
  • The report also revealed that CFOs who took steps to alter, reduce or streamline the type of work their finance organizations performed saw several benefits throughout the enterprise — 78% said one benefit was more time spent on higher-value activities and 71% indicated greater use of technology was another. Contrastingly, only 20% saw talent retention as a benefit, and even less (10%) saw higher quality talent as one.

Dive Insight:

The managers and workforce of financial departments are looking for five main things, said Bier, per the report — those being work environment flexibility, career growth and development, salaries, meaningful work and recognition, she said.

“As we think about the workforce experience, every CFO is also the chief talent officer,” Bier said. “Your HR business partner can support you but at the end of the day the way your managers work and the way you connect people to the work that they’re doing — that’s the CFO’s job to set that tone.”

In today’s macroeconomic environment, with inflation at its highest point in nearly four decades, meeting the expectations and needs of finance employees is all the more expensive, and important. 

One misconception, Bier said, is that a recession means workers will be happy just to have a job. “The people in the workforce who are the ones you want to keep, are the ones who are always going to have options,” she said. 

Talent retention continues to be a multifaceted challenge for CFOs and remains top of mind. Over half of CFOs (54%) cited hiring and retaining staff as the most difficult task over the next 12 months, according to a July Gartner study.

Companies mull benefits of interim CFOs

Interim CFOs can cut through politics to help navigate companies through murky waters, experts say.

As they face financial difficulties, leadership crises or other inter-company developments, many firms have ceded their financial reins to interim executives over recent months.

Retailer Bed, Bath & Beyond quickly named their chief accounting officer as interim CFO following the death of their previous financial head earlier in September, for example, while real estate investment trust (REIT) Tanger’s chief accounting officer also recently served a stint as their interim financial head after the REIT ousted their previous CFO, a 28-year company veteran.

One of the reasons to tap an interim CFO is simply to provide peace of mind for the company and its shareholders while the search to find a more permanent candidate is ongoing, said Shawn Cole, president of boutique executive search firm Cowen Partners in a recent interview.

While some searches are as short as 38 days, the majority of executive searches can take between four to six months, a period where remaining without financial leadership is untenable. Firms seeking interims must still consider several key factors when choosing such an executive, however, Cole said.

Companies seeking external candidates, for example — which can be due to inter-company turmoil or, as is often the case, because the company may lack the bench strength to pull forward an internal candidate, Cole noted — should take care to consider “professional interims” for the position as opposed to an unattached CFO, he advised.

“I would just be very cautious that you are not just hiring an unemployed CFO,” Cole said. “There’s plenty of wonderful professional interim CFOs out there that are excellent at consulting. You don’t necessarily want to get yourself into a position where you are engaging just an unemployed CFO, that needs a job.”

Getting a fresh perspective

Bringing in an external interim can also grant companies benefits they may not see with internal candidates, for that matter, explained Mike Harris, CEO of Patina Solutions. Patina, which focuses primarily on placing interim executvies, was acquired by fellow executive search company Korn Ferry this past April.

It can help other executives, notably the CEO, to get “fresh perspectives and viewpoints,” he said.

“If someone is coming in for six months they can tell it like it is, they can come in and make a quick assessment,” he said. “Candidly, it does take out the politics if you’re in there on a limited basis.”

Similar to Cole, Harris pointed to a growing population of what Harris terms as “career interims,” who are working in that capacity because they enjoy the flexibility of movement — they get to go in and get critical projects done for the company, he said.

Turning to an external interim can also help companies execute on particular goals such as a restructuring, said Harris, nothing that what companies need from someone taking on the position for six months could be “very different” than what firms may be looking for out of a permanent CFO. Their short tenure means interims can be “very objective” and have a “big impact” at a company in a short period of time, he said.

“The reason [interims are] usually coming in there is because they have something in their background that’s going to be very helpful for the situation that company is facing,” he said.

Companies may also take advantage of an interim CFOs’ skills as a sort of mentorship for their existing CFO — the executive in the permanent seat may lack M&A or other key experience, for example, that an interim may be able to provide during their short-term tenure.

Tapping insider knowledge

Pulling forward internal candidates to fill the CFO gap can also have benefits for firms if possible, as such candidates have intimate knowledge of the companies’ status and needs that outside executives may lack.  

This may be the case for struggling payment processor PayPal, another example of a firm who recently appointed an interim CFO — moving Gabrielle Rabinovitch, their SVP of capital markets into the seat for a second time after the newly-minted CFO departed for medical leave.

In PayPal’s case, the company needs “stability” in its financial chair, which has been lacking since the departure of its previous CFO John Rainey to retailer Walmart, said Josh Crist, managing director for Crist|Kolder Associates.

“It may be time to think about a young internal player as an interim,” Crist wrote in an email regarding PayPal’s CFO woes. “Institutional knowledge should be key given strategic issues the company faces.”

Such a candidate may prove to be a permanent fit at the company, for that matter, he said.

“I believe the current interim might actually be correct for the full time gig! I believe they need an internal player who has seen the nuts and bolts/knows the operating and strategic plan and can help execute,” Crist wrote in an email. “I don’t believe they need a high-level strategist.”

The future of the CFO seat

While companies must carefully consider what it is they are seeking out of an interim — or even a permanent — CFO candidate, qualified executives also have their pick of potential options as the market for executive talent grows more competitive.

CFOs who would have potentially retired or left their current roles years earlier, but were stymied by the pandemic, have now begun to do so, contributing to a narrowing of the potential talent pool. For that matter, the list of responsibilities handed to modern CFOs has grown over recent years, but companies may not have fully adjusted their leadership structure accordingly, Cole said.   

“The CFO is no longer the chief accounting officer,” Cole said. “They really effectively should be the right hand to the CEO. While many companies have increased demands of the CFO, they haven’t necessarily brought the CFO into that light. And so I think companies that can show a CFO candidate that they will have a position of significance of their organization, be that strategic business partner to the CEO, I think that goes a long way.”

9 best health systems to work for: Fortune

Fortune and Great Place to Work released their list of the “Best Workplaces in Health Care” on Sept. 7. 

Survey responses from more than 161,000 employees were analyzed to determine the best workplaces in the healthcare industry. To be considered for the list, organizations were required to be Great Place to Work-Certified and be in the healthcare industry. Learn more about the methodology here

Below are the nine best large health systems to work for, ordered by their corresponding number in the overall list of 30 organizations. Health systems with 1,000 or more employees were considered for the large category. 

1. Texas Health Resources (Arlington) 

3. Southern Ohio Medical Center (Portsmouth) 

5. Northwell Health (New Hyde Park, N.Y.) 

6. Baptist Health South Florida (Coral Gables) 

7. OhioHealth (Columbus) 

8. Scripps Health (San Diego) 

9. WellStar Health System (Marietta, Ga.) 

10. Atlantic Health System (Morristown, N.J.) 

21. BayCare Health System (Clearwater, Fla.) 

Fortune and Great Place to Work also released a list of the best small and medium healthcare organizations to work for. Organizations with up to 999 employees were considered for the small and medium category. No hospitals or health systems were listed in that category. 

4 health systems retaining talent with perks beyond pay

As hospitals and health systems continue to grapple with staffing shortages, employers are using perks beyond pay to recruit and retain talent. 

Incentives beyond the norm are attractive to employees: They prove the employer values them personally, beyond their work performance. 

These four health systems offer perks beyond pay, like extra paid time off, well-being coaches, adoption assistance and local discounts. 

Food, entertainment and staycations

Nashville, Tenn.-based Vanderbilt Health said it will launch a new employee awards program in September that offers workers perks, discounts and a grand prize “staycation.”

The month-long Work Perks program will feature a website where employees can play games to earn perks in music and entertainment, health and wellness, dining and Nashville-area attractions, according to an Aug. 29 news release shared with Becker’s.  

Workers will also be able to enter a drawing for a staycation. Five employees will win grand prizes including a one-night stay at a downtown hotel, passes to Nashville attractions, dinner at a local restaurant and a gift basket with items from Nashville businesses, including a winery and chocolate company, Vanderbilt Health said.

“We’re excited to show appreciation for our dedicated workforce in this way, and we’re grateful to so many generous partners to help make it happen,” Amy Schoeny, PhD, chief human resources officer, said in a release. “This is just one of the many benefits and perks that we offer to those who choose to pursue careers in making healthcare personal for our patients today and in the future.”

Work Perks will launch Sept. 5.

“We Hours” program

Marlton, N.J.-based Virtua Health told Becker’s it has instituted a “We Hours” program “to give employees more time to do the things that are important to them — from self-care to community service.”

The program offers eight additional hours of scheduled, paid time off per year for most of Virtua’s 13,000 employees. 

“The ultimate goal is to encourage mindfulness and a healthy work-life balance,” Rhonda Jordan, Virtua’s executive vice president and chief human resources officer, told Becker’s. “We Hours are intended for colleagues to pursue something rewarding or fulfilling, such as volunteering, recognizing a religious or cultural event, or ‘recharging their battery’ with extra time away.”

Ms. Jordan said Virtua workers may also use the program for practical matters, such as a physician’s visit or attending to household repairs.

The program name stems from Virtua’s “Culture of We,” a set of guiding principles that include continuous learning and innovation, open communication and inclusive teamwork, among others. 

A colleague committee developed the tenets in 2019, and employees are encouraged to share how they spend their We Hours in a private Facebook group, according to Ms. Jordan. She cited examples including photos from a visit to a botanical garden, a description of volunteer work helping nonprofit organizations, and a photo of the day one worker spent with her son, who’d been away serving in the U.S. Marine Corps.

“One of my favorite outcomes of the We Hours is that they invite us to learn more about our colleagues and the people, causes and activities that are most important to them,” Ms. Jordan adds.

Walking trails and well-being coaching 

Charlotte, N.C.-based Atrium Health encourages all-around health through their LiveWell programs. 

“[LiveWell] exists to support teammates in working meaningfully, eating healthfully, learning continuously and living fully … living their best lives so that we can deliver on the mission of Atrium Health,” Scott Laws, vice president of enterprise total rewards at Atrium Health, told Becker’s. 

Physical health is encouraged through perks like discounted gym enrollment, tobacco cessation programs and on-site walking trails at Atrium Health facilities. Financial assistance is provided through free webinars and individual medication management consultations. One-on-one well-being coaches encourage employees to consider personal health.

Those that take advantage of the LiveWell resources are rewarded. 

“By completing certain physical, personal and financial well-being goals — which include participation in wellness exams and programs or financial education — teammates are eligible for financial incentives, paid into their HSAs,” Mr. Laws said. 

Adoption assistance

Springfield, Ill.-based Hospital Sisters Health System offers adoption assistance as part of its benefits package.

“HSHS provides financial support up to $7,500 per child for eligible adoption expenses to qualified colleagues,” Catie Sheehan, vice president of advocacy and communications at Hospital Sisters, told Becker’s

Alicia Corman, an occupational therapist in the health system, was first to receive the benefit. After the adoption decree was signed, the human resources department helped her submit a breakdown of what the financial support would cover, Ms. Corman said in a video shared with Becker’s. The funds she received aided Ms. Corman and her husband in adopting their son. 

“I’m very grateful because if you look across the U.S., adoption is not very supported in a workplace,” Ms. Corman said.

What does ‘quiet quitting’ look like at hospitals?

The trend of “quiet quitting” has recently gained traction on social media, referring to a phenomenon in which workers to reduce their enthusiasm at work and stick to the minimum expectations of their role. Some professionals, including Generation Z workers, have embraced the concept as an increased form of work-life balance, and others see it as a lesser-version of actually quitting. Regardless of how an individual interprets the idea, the concept is not new among the U.S. workforce or in healthcare, according to Jeremy Sadlier, executive director of the American Society for Healthcare Human Resources Administration.

“Before the term quiet quitting was in vogue, we were talking about employees who would ‘quit and stay,'” said Mr. Sadlier, who previously served as a market director of human resources and provided operational support at Advocate Aurora Health, an organization with dual headquarters in Downers Grove, Ill., and Milwaukee. “In essence, it’s the same concept with a nearly identical motivation. No matter the term used, many disengaged employees will stick around long after they’re finding motivation and stimulation in their work.”

In healthcare, this phenomenon has only grown. An April Gallup poll found that 34 percent of U.S. employees were actively engaged at work in 2021, compared to only 32 percent this year. Healthcare professionals saw the largest dip in engagement, with their engagement scores dropping nine points year over year.

Mr. Sadlier noted that this trend can have significant effects in the industry.

“Any lack of engagement on the part of staff ultimately impacts patient care, teamwork, safety and throughput, all of which impact the financial health of an organization and the patient experience. It’s incredibly important for leaders to focus on engagement, growth opportunities, and to recognize and reward hard work. These are a few ways to focus on your employees to help them feel engaged with their work,” he said.

Still, quiet quitting doesn’t look significantly different in healthcare than it does in other industries, according to Mr. Sadlier. “Colleagues in other industries like hospitality and retail, for example, all talk about a lack of willingness among workers to pick up extra shifts, or work beyond the bare minimum requirements. That’s a sign of growing disengagement and may be quiet quitting,” he said. It is greatly concerning that, while the motivation may not be largely different than in other industries, the effects of quiet quitting in healthcare have a direct connection to patient care, quality and safety, according to Mr. Sadlier.

He also said lower patient experience scores may indicate that a hospital is experiencing decreased employee engagement, which can spread among all its staff.

“There’s an absolute hierarchy [in healthcare], and it doesn’t require somebody to work in healthcare to recognize that when physician engagement falters, that impacts nurses, and when nurses don’t feel engaged, that impacts the rest of the staff, whether it’s ancillary staff, support services,” he said. “There’s a trickledown effect to a lack of engagement at any part of the organization. Inevitably that impacts every position and is ultimately felt by those we serve.”

Additionally, he pointed to financial struggles at U.S. hospitals as a contributing factor for workloads increasing. On Aug. 29, Kaufman Hall released a new report that showed hospitals are experiencing some of the worst margins since the beginning of the COVID-19 pandemic. This means some organizations have had to implement layoffs and other cost-cutting measures.

“Cost-cutting measures are becoming harder to accomplish without having a direct effect on the care patients receive. When [full-time equivalents] are affected, in many cases the responsibilities are shifted to other members of the team. The additional responsibilities can lead to frustration and burnout and negatively impact employee engagement. These factors are what then lead to quiet quitting,” Mr. Sadlier said.

To avoid quiet quitting or disengagement, he recommends that hospitals provide open and honest communication, set and maintain realistic work expectations, closely monitor employee engagement, recognize and reward high performance through options that extend beyond pay, and provide opportunities for career growth.

At the same time, he acknowledged there’s no absolute formula to identify disengagement at the individual level.

“The more you round, the more that you spend time with your staff, the more likely you are to recognize changes in demeanor and perspective,” Mr. Sadlier said. “The sooner you recognize it, the sooner you’re able to have an influence on it. So that’s where the regular engagement for leaders and supervisors has the biggest benefit — recognizing [disengagement] early and trying to find a way to reenergize and reengage staff.”

During an interview with Fortune, Katarina Berg, Spotify’s chief human resources officer, said her company is working to avoid quiet quitting by encouraging a culture of trust where workers feel psychologically safe.

Her advice for leaders is to talk about “the part of quiet quitting that has to do with people not [being] trusted, and they also don’t trust their management team. Therefore, they don’t find any other resolution other than doing this type of very silent activism. So, I think with culture you always have to be proactive … and you have to be very deliberate and intentional.”

Recession fears are rising. Why are people still quitting their jobs?

Interest rates are rising, inflation is lingering at four-decade highs, the economy appears to be slowing and experts fear a recession is on the way. But Americans are still quitting their jobs at near-record rates in the face of growing economic uncertainty. 

The percentage of American workers who quit their jobs set a record earlier this year and has only dropped slightly as the economy slows from two years of torrid growth. After reaching 2.9 percent this spring, the quits rate dropped to 2.7 percent in July, according to data released Tuesday by the Labor Department.

The idea of quitting a job amid a period of increased cost of living and a dubious economic future may seem counterintuitive. But the labor market has remained stacked in favor of workers, who see ample opportunities to boost their earnings to supplant increased costs from inflation.

Despite recent declines, job openings still outnumber unemployed workers by a sizable margin, illustrating just how tight the labor market remains,” wrote AnnElizabeth Konkel, an economist at Indeed Hiring Lab, in a Monday analysis.

There were roughly two open jobs for every unemployed American, according to Labor Department data, giving job seekers ample opportunities to find new jobs with better pay or working conditions. Businesses are still scrambling to find enough workers to keep up with consumer spending — which is well above pre-pandemic levels — from a workforce that remains smaller than it was before COVID-19.

“It seems possible that employer demand would need to cool significantly more before recruiters start to notice an easing in recruiting conditions,” Konkel wrote.

In other words, employers still have too many open jobs and not enough candidates to avoid boosting wages and other perks to find talent. And that means workers still have ample incentive to quit for a better-paying job, particularly with inflation still high.

Job seekers on Indeed.com are looking for ever-higher wages, Konkel explained. The number of Indeed users seeking jobs with a $20 per hour wage rose above those seeking $15 per hour in June 2022, and the number of jobseekers looking for $25 per hour is up 122 percent over the past 12 months.

Konkel attributed the spike in job seekers looking for more money to the steady increase in advertised wages and the inflation they’ve helped to feed.

Once job seekers know it’s possible to attain a higher wage, their expectations may shift and act as a pull factor in searching for a higher dollar amount. In this case, the shift in job seeker expectations from searching for $15 to instead $20 is clear,” Konkel explained.

“On the flip side, inflation continues to take a bite out of workers’ paychecks,” she continued, noting that only 46 percent of workers saw wage gains that outpaced inflation.

The pressure to quit for a higher paying job has been highest in the private sector, where 3.5 percent of the workforce left their current employer in July. Workers in industries with historically low wages, tough working conditions and limited teleworking options have led the charge.

The leisure and hospitality sector posted a whopping 6.1 percent quit rate in July, down sharply from 6.9 percent a year ago but still nearly twice the national quit rate.

Restaurants and bars in particular have struggled to return to pre-pandemic employment levels despite rapidly raising wages. The pressure has also made it nearly impossible for those businesses to fire or lay off employees, even amid usual season turnover.

“Hospitality companies tell us that what was once a ‘one strike, you’re out’ rule for employees who failed to show up at work without notice is now more like a ‘ten strikes, you’re out’ rule. They cannot afford to fire workers because they cannot afford to replace them,” said Julia Pollak, chief economist at ZipRecruiter.

“The decline in terminations in industries like hospitality have been so large, they have more than offset the increase in layoffs in the tech sector,” she explained.

Quits have also remained high in retail (4 percent) and the transportation and warehousing sectors (3.5 percent), with both industries facing threats from a decline in goods spending and rising interest rates.

Even so, there are some signs of waning worker confidence, which may lead to a decline in quits.

ZipRecruiter’s job seeker confidence index dropped 4.5 points in August to an all-time low of 97.8, Pollak said, with a greater number of applicants looking for job security over higher wages.

Since the pandemic, job seekers have been looking for higher pay, less stress, and greater flexibility. In August however, job security rose to the second-place spot in their priority ranking,” Pollak explained.

“One in four employed job seekers say they feel less secure about their current job than they did six months ago. Rising risk of a recession, paired with a wave of recent tech layoffs, has made employees more concerned about the precarity of their jobs.”