Becker's Hospital Review

14 CFO / FINANCE Hospital CFOs choose optimism By Laura Dyrda H ospital CFOs are optimistic about the future despite clear challenges and continued high costs, according to a report from Strata Decision Technology. More than half of CFOs who completed the survey said they were optimistic about their organization's financial future, and 52% expect to see better operating margins this year than in 2023. Just 14% of respondents expect operating margins to decrease in 2024. Looking ahead, CFOs are prioritizing reducing costs and managing strategic and performance improvement initiatives as top priorities this year, and they're confident in their teams; 95% said their teams would be able to adjust strategies if there are sudden market and business changes, according to the report. Hospitals continue to deal with high labor and supply expenses, with total expenses jumping 22% last year over 2019. Despite many hospitals reducing contract labor dependance, 36% of CFOs said contract labor was their largest unforeseen cost last year. But many hospitals are also seeing patient and surgery volumes increase above pre-pandemic levels, and hospitals reported 2.2% increase in adjusted discharges last year over 2019. e transition to outpatient care is also significant. Outpatient volumes dipped during 2020 but have increased significantly since then, and were up 14% in 2023 over 2019. Outpatient revenue was up by 14% as well. "Revenue increase in 2023 – especially outpatient revenue growth – contributed to finance leaders' optimism about how their organizations will fare financially in 2024," the report noted. Looking ahead to the rest of the year, Strata listed CFO imperatives including: 1. Continuously monitoring margins. "By tracking performance relative to internal and external financial and operational benchmarks, organizations can measure their performance relative to peers, proactively identify opportunities for improvement, and implement strategies to improve margins," according to the report. 2. Focus on service lines. "By establishing crossfunctional teams to interpret service line analytics, organizations are better equipped to identify which service lines are doing well and which are not, and evaluate the potential clinical and financial impacts associated with specific service line initiatives," according to the report. 3. Take data into payer negotiations. "Market-specific claims data can help them better prepare for critical contract negotiations by understanding where they stand relative to peers, including how their negotiated rates compare to other organizations in the same service area, and the broader healthcare market," according to the report. n 'Get ahead and stay ahead': Sanford Health CFO on improving margins By Madeline Ashley A s hospital margins remain a mixed bag, Sioux Falls, S.D.- based Sanford Health CFO Scott Wooten encouraged other healthcare leaders to make hard decisions as early as possible to help improve their margins. "So many times, we don't do the hard things first and so we continue to have challenging times," Mr. Wooten told Becker's. "You have to get ahead and stay ahead and tackle the tough issues." The health system reported an operating income of $402.2 million (5.6% margin) in 2023, more than doubling the $192.3 million it posted in 2022. Sanford Health comprises 46 medical centers, 222 clinic locations, 44,000 employees, and 2,827 physicians. Labor shortages and rising healthcare cost pressures have hit the upper Midwest and rural healthcare areas hard, but Sanford worked hard to pull itself out of a post-pandemic situation. "Those financial downward pressures were certainly significant," he said. "We really went at it from a streamlining of work activity and went through our entire cost structure and we revamped the organization to be able to adjust to the new cost structure which is the new norm for healthcare." While more hospitals and health systems are dropping commercial Medicare Advantage contracts, the Sanford Health Plan has its own Medicare Advantage health plan that is focused on working out the unpopular kinks. "From a Sanford perspective, we're bullish on MA," Mr. Wooten said. "We are creating an integrated model in the care delivery site with our own MA plan to address many of those issues that we're simply not able to address with the other MA insurers." Regardless of its unfavorability, the national number of aging Americans points to Medicare Advantage not going away, Mr. Wooten said. "It has a high growth curve in the future, regardless of the supply side's push back." The largest rural health system in the U.S., Sanford is also laser focused on expanding healthcare access in rural areas and is investing heavily in digital tools, artificial intelligence and virtual care. "We just did a landmark $350 million virtual care initiative," Mr. Wooten said. "We are going to be dramatically expanding access to care through virtual care as well, both in primary and in all specialty areas." Along with virtual care initiatives, Mr. Wooten stressed the importance of investing in more relationship-based healthcare. "Helping individuals manage their health, their health risks and being whole, that I think is the critical aspect of healthcare," he said. n

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