Issue link: https://beckershealthcare.uberflip.com/i/411828
The Ultimate CFO Dashboard: Metrics to Watch to Succeed in a Shifting Healthcare Industry 34 Financial Management O n a regular basis, Kevin Brennan — executive vice president of fi- nance and CFO of Danville, Pa.- based Geisinger Health System — monitors his system's margin, EBITDA, capital structure, liquidity, average age of plant and credit ratings, along with metrics re- lated to operations, community benefit and strat- egy. "Certainly, as a financial officer, the financial matters are uppermost in my mind," he says. However, Mr. Brennan also monitors quality met- rics, such as health outcomes linked to reimburse- ment. "Quality is really something that doesn't determine the majority of our current payment stream…but more and more of our dollars are shifting to the outcome-based, whether it's Medi- care value-based purchasing or whether it's our own health plan," he says. The arenas of quality and cost are becoming in- creasingly linked as the healthcare industry tran- sitions from paying providers based on volume to linking reimbursement levels to value. For instance, during the first year of the Medicare Hospital Readmissions Reduction Program — which was established by the Patient Protection and Affordable Care Act and took effect in fiscal year 2013 — CMS cut Medicare reimbursement by up to 1 percent for 2,213 hospitals with high readmission rates for heart attack, heart failure and pneumonia. The second round of penalties started Oct. 1, 2013, and CMS cut reimbursements for 2,225 hospitals in 49 states by up to 2 percent. In fiscal year 2015, hospitals could see cuts as big as 3 percent, and chronic obstructive pulmonary disorder and total hip and knee replacement will become part of the program. As Medicare and private payers continue to link pay to performance through readmission penal- ties, bundled payment programs and accountable care organizations, the set of metrics CFOs focus on is expanding as well to encompass not only core financial numbers but also quality indicators. "If the hospital is becoming an ACO, it's going to be equally important to meet quality improve- ment quality metrics as it is to meet cost contain- ment metrics," says Lisa Schneider, CFA, manag- ing director of nonprofits and healthcare systems at Russell Investments, a global asset management firm. "Outcomes are going to be very important." The most important metrics Many hospital and health system CFOs monitor numerous metrics regularly to assess their organi- zations' performance, and the most important in-