Companies mull benefits of interim CFOs

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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.”

5 health systems hit with credit downgrades

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https://www.beckershospitalreview.com/finance/5-health-systems-hit-with-credit-downgrades.html?origin=CFOE&utm_source=CFOE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Credit rating downgrades for several health systems were tied to capital expenditures and cash flow issues in recent months.

The following five health system credit rating downgrades occurred since July:  

1. Tower Health (West Reading, Pa.) — lowered in September from “B+” to “CCC+” (Fitch Ratings) 
“The three-notch downgrade to ‘CCC+’ reflects Tower’s ongoing significant financial losses in fiscal 2022 … with an operating loss of $195 million, or a negative 1.8% operating EBITDA margin,” Fitch said. “Tower Health’s unrestricted liquidity position is also rapidly weakening, falling to just $341.5 million (when excluding $27.9 million in Medicare Advance funding), which results in a very weak cash-to-debt ratio of just 19%.”

2. ProMedica (Toledo, Ohio) — lowered in September from “Baa3” to “Ba2” (Moody’s Investors Service)
“The downgrade to ‘Ba2’ reflects material cashflow losses this year, which exceeded Moody’s prior expectations, a significant drain of liquidity even with one-time cash infusions, and narrowing headroom to quarterly bank covenants,” Moody’s said. “In addition to severe losses in the nursing home and assisted living business, the provider business will need to reverse the year-to-date cashflow loss following solid margins in fiscal 2021. Both operations will continue to be challenged by high labor costs and related capacity constraints.” 

3. Premier Health (Dayton, Ohio) — lowered in September from “A” to “A-” (Fitch Ratings)
“The downgrade of [Premier Health’s] revenue bond rating and IDR to ‘A-‘ is driven by multiple years of weak operating cash flow generation … and coronavirus pandemic-related operating challenges that delayed the realization of improvements expected at Fitch’s last review,” the credit rating agency said. 

4. MultiCare (Tacoma, Wash.) — lowered in August from “Aa3” to “A1” (Moody’s Investors Service) 
“The downgrade to A1 and the revision of the outlook to negative reflect a number of pressures which weaken MultiCare’s credit profile, including: an unexpected 24% increase in debt; a material decline in liquidity; very significant operating losses through the first six months of fiscal 2022; a pending acquisition which would initially be dilutive to credit metrics; and an ambitious capital plan which will entail sizable capital expenditures over the next five years,” Moody’s said. “Operations are expected to improve through the second half of fiscal 2022, but nevertheless full year results will remain weak, providing at best thin headroom to MultiCare’s debt service coverage covenant.” 

5. Memorial Health System (Marietta, Ohio) — lowered in July from “BB-” to “B+” (Fitch Ratings)
“The downgrade of the IDR to ‘B+’ reflects MHS’s weak net leverage profile through Fitch’s forward-looking scenario analysis given stated growth and spending objectives,” Fitch said. “While operating performance has stabilized over the past three years … and reflects cost efficiency strategies and pandemic relief funding, improved cash flow funded higher levels of capital spending in fiscals 2020 and 2021.”

Hoag hospital receives $106M, largest ever donation

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https://www.beckershospitalreview.com/finance/hoag-hospital-receives-106m-largest-ever-donation.html?utm_medium=email&utm_content=newsletter

Newport Beach, Calif.-based Hoag Memorial Hospital Presbyterian has received a $106 million donation from the Audrey Steele Burnand estate, The Orange County Reporter reported Sept. 14. 

It is the largest donation in the hospital’s history. The estate has donated $134 million to the hospital throughout the years. 

The donation will be used for innovation, growth and expansion of the hospital as well as research and improved patient care, according to the report. 

“The Steele family’s decades of generosity, continued by the Audrey Steele Burnand estate, have benefited the Orange County community in immeasurable ways,” Flynn Andrizzi, PhD, president of the Hoag Hospital Foundation, said in a statement shared with the publication. “Through this remarkable gift, they once again have demonstrated their compassion for everyone who needs outstanding medical care.”

Hoag broke off a 10-year partnership with Renton, Wash.-based Providence earlier this year to place more focus on the community it serves, according to the publication.

Massachusetts nurse pleads guilty in $100M fraud scheme

Posted on by • Posted in Aiding and Abetting, Compliance, Conspiracy, Dept of Justice (DOJ), District Court, False Statements, Fraud and Abuse, Guilty Plea, Home Health, Kickbacks, Medical Necessity, Medicare Fraud, Nurses, Rev Cycle Management, Unnecessary Care • Leave a comment
https://www.beckershospitalreview.com/legal-regulatory-issues/massachusetts-nurse-pleads-guilty-in-100m-fraud-scheme.html?utm_medium=email&utm_content=newsletter

A Massachusetts nurse has pleaded guilty in federal court in Boston in connection with a $100 million healthcare fraud scheme, the Justice Department announced Sept. 13. 

Winnie Waruru, a licensed practical nurse, pleaded guilty Sept. 8 to conspiracy to commit healthcare fraud, healthcare fraud – aiding and abetting, conspiracy to pay and receive kickbacks, making false statements and making a false statement in a healthcare matter. 

Ms. Waruru was employed by Chelmsford, Mass.-based Arbor Homecare Service. She was charged in February 2021 alongside Faith Newton, who was part owner and operator of the home healthcare company from 2013 to 2017. Ms. Newton has pleaded not guilty, according to the Justice Department. 

Prosecutors allege that the duo used Arbor to defraud MassHealth and Medicare of at least $100 million by committing fraud and paying kickbacks to get referrals. Specifically, prosecutors allege that Arbor billed payers for home health services that were never provided or weren’t medically necessary. Arbor billed MassHealth for Waruru’s skilled nursing visits, many of which she did not perform, according to the Justice Department. 

Ms. Waruru is slated to be sentenced in January.

Ohio hospital to lay off 978 employees

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St. Vincent Charity Medical Center in Cleveland will lay off 978 workers when it ends many services in November, according to a notice filed with state regulators. 

The hospital, part of Sisters of Charity Health System, is ending inpatient care and most other services in November. After the transition, the facility will offer outpatient behavioral health, urgent care and primary care. 

The health system attributed the changes to several factors, including the rise in demand for outpatient care, declining inpatient volume and shifts in the healthcare industry over the last 10 years that have made it challenging to continue operating St. Vincent Charity Medical Center as an acute care hospital. 

The changes will result in 978 employees being laid off on Nov. 15, according to the notice filed with state regulators. 

“This extremely difficult decision is being made with deep respect and gratitude for our caregivers, and we regret the direct impact this decision will have on those individuals,” reads the layoff notice from the hospital. “Unfortunately, the COVID pandemic, the changing health care landscape, and declining inpatient volumes have led to significant financial challenges that became impossible to overcome.” 

The layoffs will affect 446 full-time workers, 264 part-time employees and 268 workers who are called into work as needed, a spokesperson for Sisters of Charity Health System told Becker’s Hospital Review.