C is for Change for Hospital CFOs

 

The forces fueling the transformation of health care, such as partnerships, mergers and new models of care, are also driving less obvious but equally important changes to the role and responsibilities of the hospital chief financial officer (CFO).

• The shift to value-based care casts the CFO as a clinician who needs greater understanding about treatment options, outcomes and quality metrics
• The emergence of narrow networks and hospital-sponsored health plans have put the CFO in a position of addressing insurance-related issues
• The CFO must remain an organizational leader in identifying and managing risk, even though emerging risks are not yet fully understood
• Mergers and acquisitions have raised the financial stakes, and the pressure
• Consolidation, population health programs and other collaborations require integration, which in turn requires the CFO to be able to assess the cost-effectiveness of maintaining separate systems, consolidating them, or creating a hybrid infrastructure
• CFOs must factor breach liability exposure and cybersecurity investments into IT and risk management decisions
• Conflict-of-interest management and other compliance requirements mean CFOs have to stay current on regulations so they can properly manage risk
• The drive for patient-friendly billing requires new expertise in patient engagement and customer service
• At the same time, CFOs must continue to perform their primary role as stewards of hospital finances amid a changing and inconsistent reimbursement climate
• Considering these needs, it would also be helpful if the CFO were a magician

 

The cumulative result from these changes is that the CFO role is evolving from one primarily responsible for managing finances to one that shoulders significant responsibility for the organization’s strategic direction.

“In the past few years, CFO roles have expanded significantly and CFOs have been asked to take more leadership,” says Lori Dennis, who has worked closely with many hospital CFOs in her role as senior vice president of First American Healthcare Finance, which provides AHA Endorsed equipment financing and other financial services to health care organizations. “CFO has become far more of a leadership role than a finance role.”

Hospitals in Pursuit of Excellence (HPOE) anticipated this shift in 2014 when it released the report Building a Leadership Team for the Health Care Organization of the Future, which stated: “Traditionally viewed as a financial gatekeeper and scorekeeper, the hospital chief financial officer (CFO) is something altogether different today. CEOs are looking to CFOs to be true business partners who not only understand the finances but also can bring perspectives on risk, insurance and clinical issues to strategic decisions.”

These are challenging roles for CFOs — but with challenges comes opportunity. Here are some strategies that hospitals and CFOs have used to align the role with changing needs.

Expand the Strategic Focus
“The requirement for CFOs to extend their knowledge base to care management is greater than ever before,” says Donna Usiskin, chief strategy officer at VIIAD, which received the AHA Endorsement for its provider referral management solution. “To reduce risk and drive efficiency, quality and profitability, CFOs have to be aware of what is happening clinically.”

Developing that awareness and expertise requires CFOs to increase their collaboration with clinicians and chief medical officers (CMOs). “The need for CMO-CFO collaboration is just as evident in the financial realm of health care organizations. New payment models, such as bundled payment programs, full capitation, gainsharing and related demonstration projects, such as the Medicare Shared Savings Program (MSSP), require that financial leaders understand both the fiscal implications of implementing these models or participating in demonstration projects and the clinical implications,” the American Association for Physician Leadership and Healthcare Financial Management Association (HFMA) wrote in their 2015 joint report DESIGNING THE NEW HEALTH CARE SYSTEM: THE NEED FOR CMO AND CFO COLLABORATION. “Without such a balanced understanding, the journey toward higher value is unlikely to be smooth.”

Consolidate and Leverage Information
CFOs have more data available to them than ever before, especially for hospitals that have expanded by acquiring physician practices, imaging centers and other specialty providers. Whether data management is a burden or an asset depends on how well it is assimilated.

“It is critical to get a single source of your information so you can track patients across facilities in a network,” says Usiskin. “Consider a patient that was admitted to your facility A, was later admitted to facility B and went from there to skilled nursing facility C. Until you tie all that together, you won’t get a complete picture of what’s happening clinically and financially with the patient. Once you do, then you can best guide patients through this incredible network resource that you’ve built. Having a single source of information will also help get the most out of analytics and other information systems.”

Mitigate the Talent Gap
It is difficult for hospitals to find and develop financial professionals with the broad experience they desire. This is one reason CFO turnover has been at near-record levels for the past few years, according to several analyses. Consolidation has injected additional volatility into the talent landscape. More than 40 percent of hospitals saw their CFOs leave following a CEO change, which was the highest rate for any position, based on a report from health care staffing specialist B.E. Smith.

Hospitals that haven’t faced CFO turnover may still face a talent gap because of the new competencies the role requires. Forty-one percent of hospital senior executives surveyed said they lacked experience in transformational change and change management, and 37 percent said they lacked advanced financial expertise, according to the HPOE report. That report, and a separate one from B.E. Smith, recommended several remedies for preventing and closing these gaps. They include providing interdisciplinary cross training for current managers, offering diverse career paths and consistently supporting leadership development. Hiring into the organization from fields outside of health care was also cited, although HPOE cautioned the learning curve is especially steep for financial professionals because of health care’s unique and specific payment and compliance environments.

As it becomes harder for hospital CFOs to have all the knowledge and experience their jobs might require, one skill becomes more important: adaptability. The HPOE report highlighted the importance of being able to change:

“Against a backdrop of market consolidation and growing numbers of mergers, acquisitions and strategic partnerships, CFOs need to help the management team evaluate the upside potential and risks of new business models and opportunities.”

New rules are putting hospital CFOs in new roles. Their adaptability will be a key variable in how successful hospitals manage transformation.