The evolving CFO role, in quotes

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As healthcare evolves, so too are the roles of hospital and health system CFOs.

The CFO role is becoming more strategic as organizations face additional financial pressures and navigate the shift to value-based care. CFOs today generally play a greater role in operations and are seen as business partners by CEOs.

Four panelists provided thoughts on this evolving role during a session at the Becker’s Hospital Review 6th Annual CEO + CFO Roundtable in Chicago. Here are quotes from the panelists.

Jim McNey, senior vice president and CFO of North Kansas City (Mo.) Hospital, addressed the development of Centrus Health, a physician-led clinically integrated network including City, Mo.-area physicians across NKCH, the University of Kansas Health System, Merriam, Mo.-based Shawnee Mission Health and Kansas City Metropolitan Physician Association. In these types of scenarios, he said the CFO almost acts like a “salesman.”

“You have to sell these ideas to people who may not be receptive. … You’ve got to go out. You’ve got to get educated. You’ve got to stay current on what’s going on. …You can’t ever quit learning.”

Britt Tabor, executive vice president and CFO/treasurer of Chattanooga, Tenn.-based Erlanger Health System, noted the move away from the traditional CFO role.

“What I’ve seen … is there’s [now] dramatic input of the CFO from a strategic and operation standpoint. I’m meeting with two or three physicians a week talking about the business model of the health system.

“As pressures have come, we’ve hired a lot of doctors. I do think physicians are getting the idea that we’ve got to balance the quality, the patient care and the business scene,” he added.

Angela Lalas, senior vice president of finance for Loma Linda (Calif.) University Health, talked about the skills necessary for today’s CFO.

“We’ve [previously] looked at finance professionals as number crunchers and more focused on historical. Now it’s more communication and interpersonal skills [are the] top needs for finance professionals to become impactful and effective.”

Brad Fetters, COO of Prism Healthcare Partners, a healthcare consulting firm, described the finance discipline as “becoming more sophisticated.”

“What I mean by that is the leadership used to be kind of the scorecard — they were in the room to make sure the numbers jived up — then somebody else was working with physicians and influencing. What you’re seeing now … in other industries … [is] when CEOs abruptly leave … they promote the CFO because they’ve gotten more strategic, there [are]softer skills around influencing and changing behaviors. That’s what you’ve got to do with this information so those successful CFOs are in the room kind of influencing everybody.”


Hospital CEOs could face new taxes 

The Republican tax overhaul bill also includes a small section that would levy a 20% excise tax on any wages of more $1 million for executives who work at tax-exempt organizations. Guess who’s not thrilled about that? Hospitals.

What they’re saying: The American Hospital Association said it was “concerned” about that provision because “there is already a rigorous process prescribed by the Internal Revenue Service for setting up executive compensation.”

Go deeper: As Axios’ Bob Herman has reported, hospital and health system CEOs command some of the highest salaries in the not-for-profit world.

How do you ‘hire’ (and manage) an interim executive?

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Abstract:  This article is about the optimum relationship between an interim executive and their client.  It has been a while since I wrote on Interim Executive Services.  In this article,  I  return to the primary topic of this blog.

What is the difference between interviewing and hiring an interim vs. an employee?

First of all, it is not in your best interest to ‘hire’ an interim.

If the interim is furnished though a firm, they are more than likely paid on a W-2 and you are not technically ‘hiring’ the interim, you are engaging or entering a contact with their firm.  The interim is ’employed’ by the firm and not you.  Employed is loosely used in this case because while the interim may be on a W-2 program with their firm, the only time they are paid is if they’re producing billable revenue. Sadly for the interim, they get to bear all of the disadvantages of being paid by W-2 while consulting without having the ability to reap any of the benefits of being an independent expert.

Now assume that you are smart enough and lucky enough to source the perfect independent or free lance interim directly, what then?

Congratulations, you are probably well on your way to having a far superior resource that will  be highly motivated to address your situation without the interference of a third party that in my experience, adds little if any value beyond sourcing the interim.  If you have experience with this, you know what I’m talking about.  When was the last time you saw anyone from the interim firm you engaged other your interim?

With a free agent, you will be contracting with the Interim or a company (LLC or S-4 Corporation) they own.  Legally, you are dealing with a sole proprietor in most cases regardless of whether their corporate entity is involved or not.  For this reason and depending upon the circumstances, you might want to get their personal guarantee of their firm’s performance.

I have a S-4 Corporation that I can use for contracting.  The problem for me is that if I bill though my corporation, I am obliged to pay the federal government 9% of my earnings in the form of federal unemployment tax or FUTA that I can never claim because as an independent consultant, I cannot be ‘laid off’ so I am ineligible to receive FUTA.  Don’t get me started.  I have been fortunate that my clients have agreed to engage me directly and individually.  A corporate structure when dealing with a sole provider affords disproportionate list to the provider.

What about insurance?  Increasingly, client firms are requesting or requiring professional liability insurance.  Setting aside the fact that I have never seen a claim against a professional liability policy for interim services, I have been successful in convincing my clients to name me under their Directors and Officer’s Insurance (D&O) coverage if I as an interim am going to be authorized to execute documents and take actions on behalf of my client.  To me, this makes more sense for the client because if I am required to obtain insurance that will most likely be less robust than the organization’s D&O coverage, that cost is going to be passed along and in effect, the client will be paying twice for the same coverage.  Not only that, in the event of a problem, you are more than likely going to be drawn into a subrogation fight.  If I have no authority and I am not going to be executing documents, i.e., I am engaged to do project work, then liability insurance should be a non-issue.

In another article, I talk about how to find interim executives.

If you have found the ‘perfect’ interim for your transition or challenge, good for you.  If the interim is experienced and sophisticated, you should not have any reservation about engaging them directly and putting them to work in your organization immediately.

Once the interim is aboard, do not lose sight and do not allow your organization to lose site of the purpose of the interim engagement which is usually to help an organization work through a transition usually while beginning the process of addressing major challenges or problems.  The scope of the work to be performed should be mutually understood and memorialized in the contract with the Interim Executive.  Subsequent departures from the agreed scope represent sub-optimization of the engagement at best and a useless waste of resources at worst.

An interim is not an employee and the more you treat them like an employee, the less effective they will be and the higher risk you will bear with respect to their status as an independent contractor.

A number of requirements must be met before your interim reaches reach the threshold of independent contractor status.  To name a few:

  • You cannot set the interim’s hours
  • You cannot dictate when and how the interim does their work
  • You cannot require the interim to use your facilities and equipment to do their job
  • You cannot subject the interim to your personnel policies and procedures like travel policies, etc.
  • You should not require the interim to participate in employee related activities like employee health, computer system training, etc., unless their specific responsibilities require patient contact or hands-on operation of hospital systems which should be very rarely.
  • You should never require interims to record time on your organization’s timekeeping system

The more you require your interims to engage in the actives of employees; things like requiring them to attend out of scope meetings, the higher your risk that the IRS may subsequently find that they were not independent contractors and subject your organization to payroll tax liability and overtime claims that you did not anticipate.

Time and again, I have been required by hospital personnel departments to go through all of the clearances and sometimes orientation of employees.  Then I get invited to every meeting in the organization.  All of this increases the client’s risk while wasting my time.  I have asked the person that executed my contract to screen and approve meeting requests to insure that I am able to stay on task and that the rest of the organization understands my roles and its limitations from their perspective.

I tell clients that regardless of the number of hours they pay for, they receive 100% of my mental capacity virtually 100% of the time.  I find it difficult if not impossible to mentally divorce myself from the needs and issues of my client whether I am ‘on the clock’ or not.  Because of this, flexibility of hours should not be an issue because when I am engaged, I am always working for the benefit of my client.  That said, I assure my client that regardless of the ‘normal’ schedule we agree to, I endeavor to make myself available on-site as needed.  This means spending weekends in the client’s city and/or traveling on behalf of the client for matters not related to Interim services commuting.

Take another look at my article about how to find an interim.  The effort you expend to locate a ‘free agent’ Interim Executive is worth the trouble.  My prediction is that you will thank yourself for taking charge of what should be expected to be one of the most important decisions you may ever make because of the potential of a well conceived Interim Engagement to be favorably transformative in your organization.

If you are a Board member or a CEO and you do not know where to start or how to go about finding an Independent Interim, get in touch with me and I will give you some pointers.

Contact me to discuss any questions or observations you might have about these articles, leadership, transitions or interim  services.  I might have an idea or two that might be valuable to you.  An observation from my experience is that we need better leadership at every level in organizations.  Some of my feedback is coming from people that are demonstrating interest in advancing their careers and I am writing content to address those inquiries.
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5 Things Every Wannabe CEO Needs to Know

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Hospitals and health system boards are still looking for strong leaders, but what’s changing is the kind of experience you need to elevate to the top job.

So you want to be the CEO of a hospital or a health system.

Here’s the first thing to know: Like it or not, the role of acute care is slowly being relegated.

It’s still important, and it’s still a high-reimbursement area, but specifically because of that, scores of people and companies are trying to figure out how to use it less.

As a result, even in organizations where acute care represents the lion’s share of revenue, the competencies of today’s successful CEO range far from the acute-centric skills many hospital and health system executives and boards once prized.

All of today’s CEO candidates have to understand the critical interactions between the inpatient and outpatient realms, and the fact that delivering value rests on managing those interactions, not from maximizing patient census and inpatient days.

“Running a health system is about trying to provide coordinated care in an environment that’s patient- and family-centric,” says Jim King, senior partner and chief quality officer with Witt/Kieffer, a healthcare executive search firm.

Given the need to reduce reliance on acute care services, leaders who want to be CEOs have to learn skills applicable to the rest of the patient’s healthcare journey.

Auditor: 15-bed Missouri hospital at heart of $90M billing fraud scheme

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Putnam County Memorial Hospital, a 15-bed hospital in Unionville, Mo., received $90 million in insurance payments in less than a year for lab services that were performed at other facilities across the country, according to The St. Louis Post-Dispatch, which cited a report released Wednesday by Missouri State Auditor Nicole Galloway.

According to Ms. Galloway’s report, Putnam County Memorial Hospital contracted with Hospital Laboratory Partners in September 2016 to operate a clinical laboratory on behalf of the hospital.

“Immediately upon signing the management contract with the hospital, the CEO and his associates began billing significant amounts of out-of-state lab activity through the hospital,” according to the auditor’s report.

Putnam County Hospital allegedly acted as a shell company by submitting claims for other labs and funneling the insurance payments through the hospital.

“Based on our review of hospital accounts, the vast majority of laboratory billings are for out-of-state lab activity for individuals who are not patients of hospital physicians,” states the auditor’s report.

Ms. Galloway has turned her findings over to the Missouri attorney general, the FBI and the Putnam County prosecuting attorney, according to KCUR.

On Thursday, Hospital Laboratory Partners said the auditor’s report mischaracterizes the payments. The company said Putnam County Hospital, a critical access hospital, is authorized to bill for off-site lab work.

“The assignment of non-patient lab specimens has been standard practice for rural and critical access hospitals for many years,” Hospital Laboratory Partners attorney Mark Thomas said in a statement to The Kansas City Star“The purpose of the rural/critical access exceptions is to give rural healthcare facilities a fighting chance to survive and serve their local communities.”


Bon Secours Richmond CEO orders managers, others to take paid leave to reduce expenses

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Bon Secours Richmond (Va.) Health System CEO Toni Ardabell, BSN, issued an order July 19 mandating select salaried workers at the health system take five paid days off to reduce the health system’s expenses by the end of its fiscal year Aug. 31, according to the Richmond Times-Dispatch.

A health system spokesperson said in a written statement to the Times-Dispatch Aug. 10 the order applies only to salaried management and professional personnel who accrued a large number of paid vacation days but had not used them during the first 10 and a half months of the fiscal year. The rule does not apply to employees who “have little or no accrued PTO … [or] those who have just returned from a leave of absence or those who may be getting ready to take one,” the spokesperson said.

Ms. Ardabell’s memorandum, obtained by the Times-Dispatch, called for “full compliance with these instructions,” provided the stipulation does not affect patient care or reduce patient volume. She also wrote management should not attempt to replace employees on leave with “other workers in a way that adds incremental expense.”

“Replacing a salaried employee with an hourly employee you have to pay doesn’t help,” Ms. Ardabell wrote. “However, if another salaried employee who is being paid anyway simply stretches to cover the work of two people for a few days, then we realize the savings.”

The spokesperson said the order does not reflect any financial distress at the health system. Bon Secours is “a financially strong and fiscally sound organization with consistently high bond ratings and financial performance,” she told the Times-Dispatch.