CFOs are taking on more organizational responsibility as their role evolves, but where are their top concerns as they move forward?
CFOs are fighting battles in different areas of healthcare, but there are three areas that continuously top the list: private equity competition, payer strategy and the struggle holding departments financially accountable for outcomes. The HealthLeaders CFO Exchange illuminated how CFOs are dealing with these top three concerning topics and what strategies are most viable.
Private Equity Competition
Private equity has been a major concern in healthcare for some time now, and PE firms have now turned their attention to going after specialty care physician groups. These firms see lucrative opportunities and high margins in specialty care services and often enter the market to make a quick profit and then swiftly exit. For health systems, this can spell trouble.
PE practices are usually able to proceed with lower operational costs because of streamlined and focused management on the one specific area, something hospitals can struggle with when focused on larger operations.
Some CFOs agree that one of the best strategies to compete with PE firms in this area is partnering with technology companies that can add vital tech to help boost service lines. Adding automation that can help physicians with their day-to-day workload can be a big attraction for physician groups. Another tactic is loan removal/forgiveness, which can be a huge driver of physicians to a health system.
Another less popular strategy that CFOs also discussed is operating at a minor loss in some services, just enough to scare private equity away.
Holding Departments Accountable
The CFO role is evolving to include more strategic decision making around the entire organization. To do this, CFOs will need to reexamine where they currently stand in the hierarchy of their health system and how they can lead in areas they may not have thought they would have to.
During the Exchange, CFOs shared their struggles of holding each of their departments financially accountable. One key challenge here is trying to determine who exactly is responsible for outcomes within an organization, whether it’s managers or leaders. Clarifying this throughout the health system can help CFOs maintain organizational structure and trace financial challenges to the root issue.
Combatting Payers with Specialty Drugs
Lastly, CFOs are having issues with payers regarding specialty drugs and their soaring popularity. Specialty care drugs for weight loss and diabetes have seen a huge surge and health systems are feeling the pressure to cover them. CFOs need a strong adoption plan for these drugs and must strategize to beat payers to adoption where they can.
CFOS at the exchange discussed using ASP+ plans to help with initial costs, along with using a 340B plan to help with margins.
With challenges swooping in from every corner, CFOs will need to determine where is best to strategize and spend time on solutions to come to sustainable positive outcomes for their health system.
Service line performance and the role of local communities were challenges highlighted during HealthLeaders CFO Exchange.
The relationship between community engagement and financial sustainability were the focus of this year’s HealthLeaders CFO Exchange.
CFOs from leading health systems gathered to discuss how nurturing community connections can not only enhance patient care but also drive profitability through strategic service line development.
The Community-Centric Model
One of the key themes emerging from the discussions was the growing recognition of the community-centric model. CFOs are realizing that integrating healthcare services with community needs goes beyond just providing care—it involves actively participating in and investing in the local ecosystem. Hospitals are not just healthcare providers but vital community partners and their role extends to improving overall community health.
Just as the CFO role is evolving to envelop more strategic business decisions dependent on stable organizational relationships across all departments, health systems must recognize the evolution of community impact on their services, especially the bottom line.
Exchange members discussed situations when they took away an unprofitable service that didn’t see much use and how that decision often backfired. Sometimes CFOs saw a large portion of their patient volumes reduced across all other services due to the absence of that singular service.
The advice here? Don't be too hasty with service line decisions. Consider partnerships and other options before deciding to cut a service line. If a service is not highly profitable, consider having it at one center to drive patients to that location. Also, continually evaluate service lines so the profitability or losses are clear before it grows into a larger challenge.
CFOs encouraged each other to think about how each service interacts with other service lines, they are often not completely standalone services. They also advised against diving into full programs for additions to service offerings. Simply making additions to existing programs can become a draw.
Driving Productivity
The CFOs also addressed decisions around outsourcing functions. CFOs must understand the impact of the organizations in their community and why building those relationships is crucial. By outsourcing some functions that a health system performs well, it may help to alleviate some of the stress in managing that extra program.
But even with outsourcing, CFOs said, be sure to fight to keep top staff in place so there is less of a pain period, and they understand the basic levels of your health system.
The underlying question in this discussion was: how can CFOs drive productivity? The consensus was it’s not so much about shutting down services but examining how they can become more efficient. A key component to this is having community partners in place to ensure there is no lapse in care.
As the discussion wrapped up, it was clear that the relationship between community and profitability is both complex and promising. By focusing on community-centric models and strategic service line development, hospitals can achieve a dual goal: enhancing patient care while ensuring financial health.
The discussions underscored a future where healthcare systems are deeply embedded in their communities, with financial strategies aligned to support both public health and organizational sustainability.
The HealthLeaders Exchange is an exclusive, executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
To inquire about attending a HealthLeaders CFO Exchange event and becoming a member, email us at [email protected].
Mark Flakne learned a lot while at Optum. Now he's moving onto new projects as CFO of Included Health, a virtual care provider.
In a significant move within healthcare finance, Mark Flakne, formerly the chief financial officer of OptumHealth, has embarked on a new journey as the CFO of Included Health. Included Health, founded in 2020 from the merger of Doctor on Demand and Grand Rounds, provides a combination of virtual care, navigation, and communities-based healthcare.
Flakne, known for his strategic skills in driving revenue growth and financial stability, is geared up to apply his extensive expertise to Included Health’s rapidly expanding digital health offerings.
During his eleven years at OptumHealth, Flakne played a pivotal role in transforming the hospital's financial landscape. Prior to his role there Flakne said he had no prior healthcare experience and OptumHealth acted as the gateway to his understanding of the healthcare industry.
“That's actually where I really grew up in healthcare,” Flakne said. “I developed my passion around healthcare from being part of that for those eleven years, and it also is where I was able to really develop my love and understanding of value based care. So that really was a big part of it.”
Under his leadership, the company achieved a 28% increase in annual revenue growth taking it from $21 billion to more than $70 billion.
A Three-Pronged Approach
Flakne’s strategy to sustain revenue growth is broken down into three steps.
“The first and probably the most important is you need to have an experience that the member loves,” he said. “So if you do have a product, you know that people don't like, we all know what happens.“So for us, it's about having that experience that a member loves to use and be part of.”
The second part of this strategy is examining the question: “how can I reach more members?”
“Whether that be reaching them in more services and products in the ways that they're interacting with the healthcare system. But it's also reaching more members from other avenues. So think of the public sector or think of other market spaces, seniors, those sort of different groups of populations.”
Lastly, Flakne says, develop an appreciation and understanding of value-based care.
“I think it's about how you can participate in their arrangements to drive the right outcomes but also benefit from a financial perspective. And so it also goes to how you structure your financial arrangements.”
Expanding Care
Flakne expressed his interest in Included Health stemmed from the potential he saw in the company, and how many members it could reach with its innovative care model.
“There's such a great opportunity for us just to reach so many more members and also more ways that we can reach them,” he said. “There's more opportunity in how we interact with them, as well as new members that we're not even interacting with today. And so that's been really exciting to see that we're getting started, but we're already producing the results that we hope to produce.”
CFOs must understand the importance of strong relationships and how to exercise accountability within their organization.
The recent HealthLeaders CFO Exchange brought about CFOs’ biggest pain points, and accountability is one of them. How can CFOs ensure accountability in their organization? A clear structure and facilitating strong organizational relationships might be a start. Check out these five tips from HealthLeaders CFO Exchange members on how to steer accountability and culture within your organization.
CFOs have their priorities in certain areas of their organization.
The 2024 HealthLeaders CFO Exchange brought about several insightful discussions for CFOs from across the nation and showed where their main focuses lie.
From virtual care to physician collaboration, see where the event attendees are prioritizing their time (and money).
The HealthLeaders Exchange is an exclusive, executive community for sharing ideas, solutions, and insights.
Please join the community at our LinkedIn page. To inquire about attending a HealthLeaders Exchange event and becoming a member, email us at [email protected].
The HealthLeaders CFO Exchange brought on a fiery discussion on payers and physician shortages. How are CFOs coping?
From the growing complexities of managing hospital finances amid a turbulent landscape, never ending physician shortages in specialty care, and shifting payer strategies, there is no shortage of challenges for CFOs.
To talk strategy and find solutions to these challenges, dozens of finance leaders from across the country recently met in Virginia for our HealthLeaders CFO Exchange. During the event, attendees laid out all of their most pressing pain points on the table.
Physician Shortages
CFOs discussed one of the biggest challenges facing their health system’s clinical enterprise: gaps in specialty care. CFOs lamented over the struggles of recruiting for specialty roles in genetics, anesthesia, and the shortage of specialty care physicians. The challenge is it takes a long time to be trained in specialized care, and it’s time that health systems just can’t afford, more specialty care physicians are needed now.
“Our forecast is growing so fast we need 100 to 150 primary care physicians in the next five years, ” said Allen Butcher, CFO of St Joseph's / Candler Hospital in Georgia.
The discussion highlighted pain points such as CFOs not being able to replace retiring geneticists or anesthesiologists, and the shortage of treatment centers. One CFO even mentioned how their health system’s anesthesiology department was over budget by two million dollars.
CFOs advised each other to look at other groups that are certified to do anesthesia, for example, an intensivist can sometimes do the “low stakes” cases. They also suggested using locums to fill in the gaps for specialty care.
Another challenge for CFOs is the aging physician population.
Danielle Willis, CFO of LCMC Lakeview Hospital in Louisiana brought up that this issue is where care model changes are having an impact on physicians.
CFOs need to ask themselves: how do you make your physicians part of the organization? How can they be more involved in decision making and how can that affect retention and recruitment?
Payer Strategy
Another big topic at the conference was payer strategy—a multifaceted challenge with implications for health system revenue and operations that is ongoing. With the healthcare payment landscape continuously evolving, CFOs are grappling with shifts from fee-for-service to value-based care models, but payers are playing hardball, especially with denials.
These changes show the need for a realignment of financial strategies to ensure not only sustainability, but profitability.
Payer strategies, including changes in reimbursement rates and the increasing prevalence of value-based contracts, are requiring CFOs to adopt more sophisticated financial models. Value-based care necessitates comprehensive data analytics and performance metrics to track outcomes and adjust strategies accordingly, but the struggle to facilitate this strategy with payers is tough.
CFOs discussed the need for change to come from the legislative level so that payers are not dominating and squeezing the life out of the health systems. Consider monthly check-ins with payers to ensure both parties are aligned on their goals.
The discussion concluded with a strong emphasis on the importance of adaptability and proactive management in navigating the complex financial landscape of healthcare. As CFOs continue to tackle physician shortages and evolving payer strategies, the need for strategic foresight and innovative solutions will be crucial in sustaining hospital operations and ensuring quality patient care.
The HealthLeaders Exchange is an exclusive, executive community for sharing ideas, solutions, and insights.
Please join the community at our LinkedIn page. To inquire about attending a HealthLeaders Exchange event and becoming a member, email us at [email protected]
CFOs dove right into the tough conversations about the impact of accountability and care strategy at the HealthLeaders CFO Exchange.
In a time marked by rapid change and financial uncertainty, CFOs are gathered in Virginia at the HealthLeaders CFO Exchange to dissect and address the multifaceted challenges keeping them up at night.
A major theme that emerged during the discussions was the impact of accountability on hospital finances, organizational culture, and structure.
How CFOs are Navigating the Complexities of Accountability
CFOs voiced concerns over the complexities involved in aligning health system operations with systemwide financial accountability. One of the key challenges they identified is determining who is responsible for outcomes within an organization—whether it's managers or leaders. This lack of clarity can complicate decision-making and hinder the efficient allocation of resources.
Danielle Willis, CFO at LCMC Lakeview Hospital in Louisiana, highlighted a crucial perspective: “It’s less about metrics, more about setting expectations.” Her comment underscores the need for a shift away from rigid numerical targets toward a broader understanding of roles and responsibilities.
Moreover, CFOs stressed that mergers and acquisitions add another layer of complexity to accountability. These transactions can significantly affect job roles and necessitate a reevaluation of who is accountable for what within a newly merged organization.
The Role of Culture and Relationships
Beyond accountability, the discussions delved into the importance of organizational culture and the structure necessary to support financial goals.
CFOs emphasized that fostering strong relationships among leaders, vendors, payers, and the entire organization is essential for achieving successful outcomes, especially when adopting new technologies such as AI and automation.
The need for what some referred to as "role reversal" was also a topic of conversation. CFOs suggested that executive teams should strive to understand the day-to-day work at the ground level, which is crucial for comprehending how automation and other technological advancements can be effectively integrated.
Championing Change and Ensuring Alignment
Another significant point raised was the importance of identifying who is championing changes within the organization.
CFOs questioned whether CEOs and COOs are leading these shifts and whether they are promoting new ways of thinking and acting within their teams. Without strong leadership driving these changes, progress can stall, leaving health systems struggling to take the next step forward.
CFOs agreed that alignment across all facets of a health system is critical for moving forward. This alignment needs to encompass not just internal operations but also the overall strategy for patient care, from acute to ambulatory settings.
Acute Versus Ambulatory Care: A Strategic Discussion
A significant part of the discussion also focused on care strategy, particularly the differences between acute and ambulatory care.
CFOs noted that while these two sectors of care need to align, they should not simply mirror each other. “You want to own the patient journey, from acute to ambulatory,” one CFO remarked, emphasizing the importance of a seamless transition across care settings.
Kyle Wilcox, VP of Finance for MercyOne Medical Group, added, “The playbooks don’t overlap. They have to complement each other.” This highlights the necessity of crafting strategies that acknowledge the unique needs and operations of both acute and ambulatory care, while ensuring they work together to provide comprehensive patient care.
Simplicity in Strategy
As the discussions concluded, CFOs shared a final piece of advice: don’t overcomplicate strategies. In the face of complex challenges, it can be tempting to get bogged down in the minutiae. However, maintaining simplicity and focus is crucial for effective decision-making and implementation.
The HealthLeaders CFO Exchange underscored the importance of accountability, alignment, and organizational structure in overcoming the financial challenges facing healthcare. With a commitment to innovative strategies and fostering collaboration both within and outside of the health system, CFOs are well-positioned to navigate the obstacles ahead and continue advancing toward delivering exceptional patient care within an efficient, effective organizational framework.
The HealthLeaders Exchange is an exclusive, executive community for sharing ideas, solutions, and insights.
Please join the community at our LinkedIn page. To inquire about attending a HealthLeaders Exchange event and becoming a member, email us at [email protected].
See the numbers and strategies that fueled Tenet's 2024 Q2 success.
Tenet Healthcare had an impressive second quarter with over a one hundred percent net income increase. See what was behind the system’s success and where it shifted its strategies to align with profitability.
Two focused strategies helped Mayo achieve its 8.9% margin.
Mayo Clinic ended the second quarter with an operating income of $449 million, a 8.9% margin. This is a major improvement for the health system which sat at a $300 million operating income (5.9%) during the same time last year.
The Rochester, Minn. based system has seen its second quarter revenue increase by 12.1% each year, bringing it to $5 billion. Stable patient volumes and increased donor contributions drove the system’s growth, despite an increase in expenses.
The Breakdown
Mayo’s labor costs have increased by 7% year over year to $2.6 billion, which accounted for 56.9% of total second-quarter expenses. These labor costs are attributed to staff growth to serve higher patient volumes as well as a 4% annual salary increase for health staff. Supplies and service expenses also rose 13.3% to $1.6 billion.
The system also ended the second quarter with a net income of $613 million, an increase from $47 million in the second quarter of last year. These numbers come after factoring in non-operating items like philanthropy and investment returns.
"Our strong second-quarter results enable the organization to invest in its staff, enhance its physical and digital infrastructure, and advance its strategic goals to cure, connect and transform healthcare," the health system stated in its financial report.
As of June 30, 2024, Mayo reported its days of cash on hand were 361, up from 358 on Dec. 31 and 346 on June 30 last year.
It should be noted that the system’s financial results come off a recovery year in which it reported a “mission-sustaining” 6% operating margin. That year Mayo announced the largest capital investment in the system’s history, Bold. Forward. Unbound. in Rochester, which sets out to innovate with digital technologies and novel care concepts.
The CFO Scope
There are several strategies CFOs can take away from Mayo’s second quarter results, the first being to focus on volume growth and efficiency initiatives. Leaders should continuously prioritize these efforts along with managing patient length of stay, readmissions and the care continuum.
Keeping an eye out for growth opportunities is always a good idea, and CFOs should strategize where they can. Mayo made several expansion moves including more than doubling the size of its Phoenix campus, expanding its Florida hospital, and opening a new research facility in Rochester for technological development.
There’s one more lesson CFOs can take from Mayo’s results: investing in staff. Investing in staff can help work toward a positive organizational culture, mitigate burnout and aid in staff retention. Mayo ushered in about 14,000 staff members into new roles last year and saw a 4.9% increase from 2022. Overall Mayo spent $10.5 billion on staff and benefits in 2023, including $30 million in community programs.
CFOs should ensure they stay on top of the interconnectedness of their health system to be better able to pinpoint where certain challenges affect operations. Don’t be hesitant to collaborate with CMOs and Revenue Cycle and other departments to get the full picture and to ensure thoughtful, innovative strategy across the board.
Health systems everywhere have been dealing with ongoing rising costs and new solutions are needed. What are CFOs doing to stay ahead of the price tags?
The upcoming HealthLeaders CFO Exchange is gearing up to get into today's toughest CFO challenges.
Health systems everywhere have been dealing with ongoing rising costs and new solutions are needed. What are CFOs doing to stay ahead of the price tags?
One strategy CFOs can jump on is taking a closer look at non-clinical spend. Where are the costs adding up while flying under the radar? CFOs should look at the not-so-obvious expenses that can often seem irrelevant to big picture spending. From landscaping to signage, examine where your health system can cut back.
Private equity is coming under a bigger microscope as the Steward Health fiasco continues, and one particular area CFOs are concerned with is ambulatory care. In the last few years, private equity interest in the ambulatory care space has increased. Both Surgery Partners and Amsurg, two of the biggest ambulatory care chains, have private equity ownership. How will CFOs strategize competition in this area to protect their system’s finances?
Lastly, there are some challenges that may not seem CFO related, like physician burnout. CFOs must take a closer look at burnout in their organization to recoup lost dollars and build a sustainable, comfortable work ethic for their physicians. One study concluded that physician turnover due to burnout costs health systems an extra $260 million each year. CFOs will need to collaborate with CMOs to implement physician programs to mitigate burnout as much as possible.