Becker's Hospital Review

24 Question: How has the role of health sys- tem CFO changed in the last five years? What have you done to adapt to meet the new challenges? Note: Answers have been edited for length and clarity. Mr. Gordon Crabtree: The CFO role has changed for both external and internal business and clini- cal activities. Internally, there has been an ex- panded need for the entire healthcare team to understand at the patient level, the physician level and the disease level the costs and economics that drive value and quality. This requires a number of changes, such as including non-financial em- ployees in business strategy and decision making. The CFO must also help develop strategic align- ment between the physicians and must push for efficient care delivery at a level that ensures finan- cial stability of the clinical enterprise. New revenue payment models, together with slower revenue growth rates, require an enhanced business rela- tionship between the CFO and physicians. In addition, as payer rates decline and as payers push to develop simplified payment models, the CFO must be more involved in negotiations be- tween payers and the health system. Modeling of the new payment methodologies by the health system contracting team is key to ensuring risk sensitive levels of revenues are received that will cover all aspects of care and its many complexities and costs. Ms. JoAnn Kunkel: I believe the role of the CFO has become an invaluable strategic position, par- ticularly in the last five years. With population health, development of narrow networks, leading with quality, etc., the traditional CFO role does not exist anymore. Vital to the role of today's system CFO is the abil- ity to lead as well as participate with the entire executive team in understanding what is on the horizon, what the changing opportunities are and in forming strategic initiatives for future success. Mr. Kevin Brennan: The CFO position continues to require a greater emphasis on strategic plan- ning, as well as increased knowledge related to merger and acquisition transactions and skills in population health management. In adapting to the new challenges faced by CFOs, one must focus on best practices, standardiza- tion and balanced investments for both short and long-term objectives. Q: What is the most important thing a health system CFO can do today? GC: The most important thing a CFO can do to- day is develop an understanding among health system senior leaders regarding future implica- tions from the decisions they are making every day. The CFO must ensure impact analysis for de- cision making includes both long-term and short- term implications. JK: The most important thing a health system CFO can do today is to be a partner to the op- erations executives. Strictly looking at the num- bers can be very limiting without a complete un- derstanding of the underlying opportunity and strategy. When partnering with the operations team on strategy, it is important to be transpar- ent with the data and financial information and educate them on the impact. But you quickly need to move past the numbers and look toward the strategy itself and its impact on the organizational success factors. KB: One of the most important things a CFO can do is to build and maintain a strong balance sheet, while focusing on devoting core competencies to succeed in a pay-for-value environment. Q: From a financial standpoint, what do you believe will be the biggest challenge health systems will face in coming years? What should they do to overcome this challenge? GC: I believe the biggest challenge will be the squeeze of health system revenues as key federal and state healthcare program budgets are declin- ing on a per person basis. Fewer future taxpayers will exist to pay for the growing government par- ticipants in the healthcare programs of Medicaid and Medicare. The government will likely drop the overall per person calculations that drive the patient rates healthcare systems are paid. Com- mercial payers often mimic the government trends. Therefore, we will likely see declining in- flationary and relative revenue growth rates from commercial payers too. To overcome the challenges, hospitals and health systems should move more low-risk pro- cedures and care to lower cost settings, create joint ventures and partnerships between other care delivery systems, increase cash reserves, develop unique margin sharing partnerships with payers, establish a provider-owned insur- ance plan, adopt lean and other process im- provement initiatives. JK: Financially, as healthcare moves into a more risk-based payment model, one of the biggest challenges will be having the ability to move at the right time and at the right pace. Overlapping risk-based reimbursement with traditional fee- for-service creates an environment where you have to develop different sets of metrics, analysis and models and you have to have the ability to move between them at an undefined pace. Engag- ing and educating operations in understanding risk-based models is critical to success. KB: Some of the biggest challenges in the hospi- tal and health system environment today relate to government and exchange payment rates, which require renewed focus on productivity and cost efficiency. A CFO should focus on repositioning their capac- ity to be effective and efficient in an environment increasingly focused on ambulatory solutions for their communities. n "I believe the biggest challenge will be the squeeze of health system revenues as key federal and state healthcare program budgets are declining on a per person basis." — Gordon Crabtree, CFO of University of Utah Hospitals and Clinics "With population health, development of narrow networks, leading with quality, etc., the traditional CFO role does not exist anymore." — JoAnn Kunkel, Corporate CFO of Sanford Health

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