Building the Right Financial Squad: Q&A With Former Mayo Clinic CFO David Ebel
When David Ebel joined the financial executive staff of Rochester, Minn.-based Mayo Clinic in the late 1980s, he had zero experience in healthcare but plenty of experience in the corporate finance world at accounting firm Arthur Andersen and then Dayton Hudson Corp., which is now known as discount retail giant Target.
So how did he fare? He built and led the finance organization that supported Mayo Clinic as its revenue grew from $800 million to $4.4 billion (the physicians and other healthcare providers were the foundation, he says), and he continued the financial success that has made the Mayo Clinic one of the most renowned institutions in healthcare.
Mr. Ebel has more than 35 years of experience in finance, more than 20 years of which were at hospitals and health systems. He also served at Stanford Hospital & Clinics in Palo Alto, Calif., and Billings (Mont.) Clinic in interim roles. Currently, Mr. Ebel serves as director and senior CFO Consultant for Warbird Consulting Partners. Here, he explains his experiences in reporting financial metrics with his teams, how CFOs should be involved in transactions and why a long night of meeting preparation can be a CFO's best friend.
Question: Can you explain your prior healthcare experience a little more? I know you've been with Mayo and Stanford, both very reputable health systems. What was it like working at systems that are so large and, consequently, prominently in the limelight both clinically and financially?
David Ebel: I came to Mayo from Dayton Hudson Corp., so I was learning healthcare when I got there. I spent almost 20 years at Mayo and retired from there in 2006. Since then, I had three interim leadership responsibilities, including a 12-month one at Stanford.
Size is a very important aspect of what it was like working in those two institutions. It meant there were a lot of other good people in finance there, and there was a lot of good leadership that I reported to. They were all really strong people. That affects a lot of what you have to worry about — and what you don't have to worry about.
I didn't have any monopoly in identifying good people. My job was to get good people on board, grow them and rely on them. You give them responsibilities, and then you can also focus on other things — communication, institutional and financial strategy, and the problems or the fires when something happens or could happen. You want to delegate, but you also need to know when the buck stops on your desk.
Q: What are some of the most important financial metrics CFOs should focus on? And what were your target goals?
DE: On a daily basis, there was really nothing that I tracked personally. I had good people around me. They knew what was important and understood what was critical in their areas. It takes some cultivation. I used to worry about the call that said something is going on here that you should know about — for instance, Medicare and Medicaid reimbursement, or maybe you're going to see receivables go up and days cash on hand go down. But that was very much the exception type of reporting.
I was at Billings Clinic in Montana during the financial crisis. We had some real bond covenant compliance issues. We had two covenant requirements that we were concerned about: days cash on hand and maximum annual debt service coverage. Once a week, I would sit down with everyone that was involved with cash coming in and cash going out. We developed a schedule: Where was cash coming from, when was it coming, where was it coming it out? Why is it up or down? This was an example of awareness and making sure everyone knew this was really important. This was just really getting to know on a micro level what was going to affect our year-end cash position, but it was an exception situation.
Q: You came onto Mayo's executive team at a busy time, as it eventually merged with other hospitals in the area. How involved should a CFO be in consolidation efforts, especially in today's highly active healthcare merger and acquisition market?
DE: The CFO needs to be very involved, both in terms of planning and strategy. Who are we? Who do we want to merge with? Obviously, they also need to ensure due diligence. Ask the questions that need to be asked so you know you're not buying a toxic waste site. For example, [while at Mayo] we merged with and acquired a number of smaller practices and community hospitals in the upper Midwest. We, as an institution, decided this was something we needed to do. Practices that were important as a source of referrals and wanted help — that was happening a lot.
My position evolved over the time while at Mayo. Mayo Clinic and the two Rochester hospitals just merged, so there were three finance organizations. We also just opened our Jacksonville and Scottsdale clinics. Over time, we consolidated the three Rochester organizations into one. After we got the consolidation moving, there was a financial analysis and planning team, an accounting and reporting team, a revenue recognition team, and a coding, collections and billing team. These men and women were pros in the areas they were in charge of, and they knew what was important.
In big, complex organizations like hospitals and health systems, it's a matter of knowing, but a lot of it is having people who will tell you when there is a problem. It's very much exception management, and then you look at where problems are.
Q: What must hospital and health system CFOs make sure they do before they go home for the night? What were some of the longest days you had?
DE: We live the life of meetings. When I would leave at night, I needed to be sure I was ready the next day's meetings or that I had everything that I needed to get ready for those meetings. Having the agenda packet, knowing the issues, knowing what I had to talk about, being well-prepped — am I ready, or can I get ready, for tomorrow's meetings?
You ask about longest days — lots of times, the longest days were days before board meetings if the board was going to be considering some big financial things. I'd often be up late at night making sure I knew the material so I'd be ready to talk. That communication and making sure things are presented in the right way in the right light to our board was a critical responsibility of mine.
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