Becker's Hospital Review

10 CFO / FINANCE The biggest issue for CFOs in 2024 By Madeline Ashley F rom operating margins still causing challenges for many health systems to consistent worries about healthcare workforce shortages, the current economy has trumped cost reduction concerns for CFOs in 2024, according to a new Deloitte annual survey. Deloitte's annual survey of healthcare financial leaders has been conducted since 2020 by the Deloitte Center for Health Solutions. It features responses from more than 60 health plan and health system CFOs. Here are eight findings from the survey: 1. Cybersecurity was the second biggest organizational priority and concern for financial leaders in 2024. e impact of the upcoming U.S. election was No. 3, with consumer engagement and trust at No. 4 and supply chain disruption at No. 5. 2. Cost reduction was the top priority and concern for financial leaders in 2022 and the third largest priority in 2023. It fell to No. 17 in 2024. 3. Around 25% of surveyed CFOs shared that over the last three years, their operating margins fell below goal. Seventy-eight percent of finance leaders said operating margin improvement is among their top three organizational priorities. 4. "To help achieve their organizations' financial goals, finance leaders should implement new levers, technologies, or methods— and they should act quickly," the survey said. "If they fail to reach their margin goals, they might need to reduce their services and offerings, merge with or be acquired by another organization, or cut operational expenses to the point that it affects quality, which might conflict with their mission." 5. Advanced cybersecurity technologies have seen investment from 84% of the CFOs surveyed, with 60% prioritizing core technology investments, like customer relationship management solutions. 6. Nearly 2 in 3 of the surveyed financial leaders shared plans for venture investments in health or non-health startups in the next two years. 7. CFOs said the primary lever for cost reduction is optimizing the workforce. A strategic use of innovative practices and technology can aid leadership in improving efficiency and fostering a healthcare workforce sense of purpose, the survey said. 8. Only 24% percent of health system CFOs and 20% health plan CFOs said they are focused on partnerships and alliances. And despite the apparent popularity of mergers and acquisitions, 49% of CFOs said their organizations faced regulatory hurdles and 41% said market uncertainty is a concern for them. An increase in regulator scrutiny has also made it more challenging for dealmaking over the last year, CFOs said. n Hospital margins dip to 3.8% average, gap between high and low performers widens By Laura Dyrda A verage hospital margins year to date remained steadfast in May at 3.8%, according to Kaufman Hall's "National Hospital Flash Report," released July 9. "Hospital financial performance remained relatively unchanged during the month of May, and the rate of change slowed for margins and other key performance indicators, which reflects stabilization," wrote Erik Swanson, senior vice president at Kaufman Hall. The stabilization is a positive sign for hospitals after ending the year with average margins at 1.9%. The average hospital margin shot up in January to 4.6% and then decreased slightly in February and March. From April to May, the monthly average operating margin index dipped from 4.2% to 3.7%. Operating margins increased 23% year to date over the same period last year. Average net operating revenue per calendar day increased 7% year over year for the month with inpatient and outpatient revenue both jumping 8%. Operating EBITDA margin was up 3% year over year in May and 15% year to date. Expenses per calendar day increased 6% year over year in May, while labor expenses per calendar day were up 7% and supply expenses jumped 9%. Kaufman Hall also noted the gap between high and lower performing hospitals continues to widen, with the high performing hospitals more often making longer term strategic investments, according to the report. "The widening gap between higher-performing and lower-performing hospitals illustrates the need for longer- term strategic investments. Short-term cuts and crisis management will not make for sustainable change," said Mr. Swanson. "Hospitals should seize this relative moment of calm to focus on enterprise strategic planning in order to achieve long-term success." For success in the future, the report authors recommended hospitals differentiate from their competitors and define their future direction. They also noted analyzing all aspects of current operations and using data to rework the operating model will help hospitals thrive. n

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