From leveraging data analytics and developing strategic financial plans to fostering accountability among department leaders and prioritizing quality over short-term gains, Becker’s connected with six hospital and health system CFOs this year to discuss ways to drive margins upward.
Note: Responses have been lightly edited for length and clarity.
Question: What advice do you have for hospital and health system financial leaders looking to get their margins up?
Rob Chestnut. CFO of LMH Health (Lawrence, Kan.): I don’t think there’s any magic formula. Get your analytics down, figure out what you feel comfortable with and then watch as things start to create problems for you and address them accordingly.
Todd Conklin. Executive Vice President and CFO of Care New England (Providence, R.I.): Constant operational improvement work, both on the clinical operations as well as business-related services, has been very important for Care New England. Operating with lean overhead has been very important. Understanding and driving positive operating margins with an understanding at the service line and business unit level is key.
Anthony DeFurio: Executive Vice President and CFO of Houston Methodist: [Financial leaders should be] disciplined about the capital allocation process when facing competing needs for growth capital, partnerships and acquisitions, and innovation will be the key to achieving sustainable margins over time.
Developing a strategic financial plan that is a critical component of the overall strategic plan and vision of the organization is essential. Margin compression has made this discipline more critical than ever.
Andrew DeVoe. CFO of Tufts Medicine (Burlington, Mass.): I often refer to contract labor, the travelers, as a cancer to the organization. The sooner you can eliminate contract labor, the better you’re going to improve quality, reduce cost and improve morale. That’s probably the single biggest thing that you can do.
You also need to make sure that you’re minimizing the amount of overhead that you’re burdening the entities [with]. You need to be as efficient as possible in delivering supply chain, revenue cycle and IT. When you put a system together, one of the primary benefits of that is you gain some scale. If you’re not achieving that scale, you’re probably defeating the goals of coming together as a system.
Bob Glenning. President of the Financial and Digital Technology Services Division and CFO of Hackensack Meridian Health (Edison, N.J.): Every health system faces unique challenges, and there’s no single solution that fits all. I believe in taking a long-term approach to managing finances, focusing on achieving a set operating margin to allow for continued capital upgrades and innovation. This means finding ways to disrupt ourselves, seeking out partnerships that bring value, and asking critical questions about our core values and negotiation points.
Jan Grigsby. CFO of Southeast Georgia Health System (Brunswick, Ga.): Quality drives the bottom line and not the other way around. It drives the bottom line for real and long-lasting margin growth. There’s tricks of the trade that will get some short-term satisfaction and some short-term positive margins, but if you’re not fixated on quality and being a highly reliable organization, then no mission, no margin.
