Becker's ASC Review

36 HEALTHCARE NEWS 36 Inside the strategies of University Hospitals' incoming CFO By Andrew Cass B radley Bond will step into the role of University Hospitals CFO early next year, and he will do so during what he considers the most challenging healthcare environment he has seen in his more than 20 years with the Cleveland-based system. It is a challenge he said he is eager to tackle. "Being in a position to help lead the organization through this and prosper down the road is what I'm most excited about," he said. Mr. Bond will assume the role of CFO on Feb. 1. He currently serves as the system's vice president of treasury, community medical centers, UH medical practices and UH ventures finance. He will take over the position from Michael Szubski, who is retiring in January after more than 15 years as University Hospitals' CFO. Mr. Bond spoke with Becker's about his financial priorities and why the system is shifting away from brick-and-mortar acquisitions: Editor's note: Responses have been edited for length and clarity. Q: What are your financial priorities right now? Bradley Bond: It starts with what's good for the patient is good for the bottom line, too. So, leveraging technology. Right now we're investing a lot into Epic, and we went live across the system on Oct. 1. We want to leverage that technology to improve access, improve the patient experience, etc. Second, we want to look at our fixed assets so that we can maximize capacity utilization. We're looking at things like, "Do we have too many MRIs? We have too many physician offices; can we concentrate those physicians into fewer locations?" Things of that nature, where we can reduce our fixed costs, improve our capacity, utilization and therefore improve our return on assets. Third, I would say all of that, if done well, and obviously working on the expense side of things, improves our cash flow. We use operating EBITDA as a general indicator of cash flow, and that is our focus right now. All things come back to operating EBITDA. We need that in order to support the community and continue to reinvest in our mission. Q: University Hospitals acquired Lake Health in late 2020. How has that acquisition gone? BB: It's gone very well. They came onto our EMR Oct. 1 with Epic. Our competitor responded with a smaller facility of their own in that market. So that's good. Competition is good. Some of the physicians have turned over a bit and we're working to build on some business plans. We have some exciting things in the future for Lake (Health) right now. Q: Are there any other acquisitions, partnerships or joint ventures coming down the pipeline? BB: We have a partnership with Western Reserve Hospital down in our southern market that's a joint venture. That's one of our new ones. I will say, though, we're less interested in brick-and-mortar acquisitions and more interested in partnership and ways to lever. We have partnerships with some hospitals in Western Ohio for certain service lines that we can help improve the health of their communities. That partnership doesn't require an acquisition of a hospital or the spending of a lot of capital. Q: Why are you not as interested in brick-and-mortar acquisitions? BB: I would say that we are less interested because acquisitions tend to be capital heavy and given the pandemic and the impact on our cash flow, we want to continue to strengthen our balance sheet. Secondly, the market is mostly consolidated in Northeast Ohio now. There is not a whole lot of market share to gain through consolidation. Finally, you have to recognize a very large shift from the inpatient setting to the outpatient setting. Inpatient hospitals are being used less and less frequently. We're doing more and more on the outpatient side. All of those factors lead us — and many other systems are saying the same thing — toward joint ventures and partnerships and away from physical asset acquisition of inpatient beds. Q: Given the unpredictability of events like the pandemic, what are you doing to ensure financial resilience and sustainability? BB: One is a shift in our cost structure from fixed to variable. When you have a decline in volume, your variable costs decline with that, and that's a nice match to revenue. If you have a heavy fixed base cost structure, that causes problems because you know you have less revenue to cover your fixed costs. That's part of what I was saying about optimization of assets. Fewer fixed assets, treating the same patients — or more — and more efficiently and convenient for the patient is the plan. Also looking at all of our cost structure and looking at our parent organization, all those areas that are not front-line caregivers that are really fixed costs. Part one, how do we reduce them? And part two, turn some of that into variable costs, if possible? That will build resiliency. Finally, I would be remiss if I didn't mention keeping the balance sheet strong. Look at the capital markets. We're experiencing a lot of volatility there as well. We've enjoyed some good investment returns, but we need to protect the balance sheet. So we're looking at our investment strategy very carefully. n

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