It’s been another challenging year for healthcare, but these CFOs have created unique ways to maintain their organizations’ bottom line.
Hospitals and health systems have had a rough go of it through 2022, as persistent challenges such as inflation, rising expenses, labor shortages, and consequences of the pandemic all impact their bottom line.
Hospital margins have been pressured for most of the year, with recent Kaufman Hall data showing negative margins for the ninth consecutive month, leading analysts to conclude that these organizations will finish the year in the red.
“Without a positive margin, there is no mission,” Matthew Bates, managing director and Physician Enterprise service line lead with Kaufman Hall recently told HealthLeaders in an email statement. “Health systems must think carefully and strategically about what areas of care they invest in for the future.”
Over the course of 2022, HealthLeaders has connected with several hospital and health system CFOs to gain thoughtful insight and strategy into how they are solving the most vexing financial challenges impacting healthcare providers. The following is a collection of CFO responses from various articles published by HealthLeaders in 2022.
HealthLeaders: How can hospitals and healthcare systems cut costs without sacrificing their workforce?
JoAnn Kunkel, CFO, LCMC Health: It’s about being more efficient and having people work to the top of their ability. It’s about being able to focus on what’s important and making sure that you’re automating what you can and supplementing with resources to help people work at the top of their skill sets. We must look at things like that as we move forward and plan for the future. You must have the right number of people to be effective and efficient, but also be as nimble and lean as you can.
HL: What are the biggest challenges hospital CFOs are facing right now? And how can we solve them?
Michael Sunday Jr., CFO, Pardee UNC Health Care: Today, hospitals are facing multiple issues in the healthcare industry, including the rising cost of labor, a labor shortage, rising costs of supplies due to inflation, pandemic spikes, and reductions to Medicare and Medicaid reimbursements. To take on these challenges, we are first looking at ways to not rely on contract labor. That could mean creating a hospital contract labor pool to reduce the impact of contract labor. Other steps would include hiring in-house recruiters to help bring qualified employees into the organization and finding ways to reduce costs, including the reduction of waste and energy consumption. Charge capture is also important to ensure all documentation is being captured on the front end to reduce the likelihood of denials from insurance companies.
Javier Vallejo, CFO, Prism Health North Texas: The pipeline is short. You read about the great resignation and a lot of it’s been in the healthcare space. There’s been a lot of good leaders who have retired probably a little earlier than planned. I think it’s about the next generation having all the skills and having the know how to pull those pieces together. It’s about being able to give avenues so that the healthcare system does not have a breach, and good financial management, good doctors, and good nurses. One of the main struggles right now in the entire healthcare system space is just a lack of bench strength, a lack of succession planning. We need to be grooming the next generation of leaders.
Sherron Rogers, CFO, Johns Hopkins All Children’s Hospital: Healthcare is changing rapidly, and we are challenged to keep up with the pace of change. It’s important to continue to provide the most meaningful services to our patients, to the community, and to expand the services that we provide. Like everyone else, we’re facing challenges in continuing to recruit and retain the workforce. We have a wonderful organization that is mission-driven and is a place where people want to work. But that’s not the end of the story. People need to feel their work is valued and they can do that in our organization. And we need to continue to make sure we’re providing those meaningful experiences for our members because they are the ones giving to our patients. We are hiring in all areas of the health system, but like others, we’re trying to make sure we’re recruiting in nursing and respiratory therapy, specifically.
HL: What are some of the innovative ideas you are bringing to the table?
Javier Vallejo, CFO, Prism Health North Texas: I’m focusing on quality and value and trying to align the financial aspects of healthcare with the delivery of care. Healthcare, in general, is known as a loss leader—you can’t make any money at healthcare. Time and time again, if you look at the business cycles, the facilities that are doing something right, the facilities that are working towards the future, they are finding ways to bridge that gap and bring those two concepts together.
HL: What is your goal for not only the financial well-being of the organization but also to continue providing high-quality care to patients?
John Pohlman, CFO, SVP Finance, Mount Sinai South Nassau: Looking at an income statement every year, my goal is usually a 3% operating margin. We have top-line revenue of about $700 million. So, a 3% operating margin would be a surplus of around $20 million. With that surplus of $20 million, we can reinvest back into the organization. There are multiple buckets or silos that I think of when I talk about reinvestment. One is around capital and technology. We want to make sure that we’re replacing our radiology equipment, MRI, CT scanners, and all the equipment in the operating rooms that support our surgeons and allow them to take care of patients. We want to make sure that we have the latest technology because that’s going to provide the highest quality of care to our patients.
That’s one reason why we need that operating surplus. The other reason is we want to reinvest in our staff and our employees. We want to continue to give wage increases and make market adjustments when necessary. Investing on the capital side and on the labor side certainly drives higher quality and patient satisfaction. That’s always my goal from a financial perspective. We need to operate on the surplus side so we can continue to reinvest in the organization to support the communities that we serve and provide them with that high-quality care.
Amanda Schiavo is the Finance Editor for HealthLeaders.