Becoming One of the Most Financially Stable Standalone Hospitals: Q&A With Virginia Hospital Center CFO Robin Norman

The Washington, D.C.-northern Virginia region is one of the most competitive in the country for healthcare providers.

Large networks like Inova Health System in Falls Church, Va., MedStar Health in Columbia, Md., Johns Hopkins Medicine in Baltimore and Sentara Healthcare in Norfolk, Va., either dominate or are growing in the area. However, among the trees sits Virginia Hospital Center, a 342-bed, independent hospital in Arlington.

Robin Norman, CFO of Virginia Hospital Center, has been with the organization since 1979. It was her second professional job following her graduation from the University of Maryland in College Park. In the 35 years since, Ms. Norman worked her way up the chain and helped turn the hospital into one of the most financially stable, nonprofit, standalone hospitals in the U.S.

Last month, Fitch Ratings upgraded Virginia Hospital Center's credit rating to "AA-" from "A+" due to its strong operating profile and financial leadership. The organization posted an operating margin of 6.3 percent in 2013 — which seems unfathomable for an independent hospital amidst healthcare reform — and it also ended the year with 704 days of cash on hand. The upgrade came a little more than a year after Moody's Investors Service upgraded Virginia Hospital Center's rating to "A1" from "A2" for many of the same reasons.

Ms. Norman and the entire executive team have worked hard to keep the hospital in a stable position despite the challenging reimbursement environment. Here, she discusses how Virginia Hospital Center has become a financial mainstay, how her career has evolved at the hospital and why healthcare finance leaders can't be afraid to make mistakes.

(Editor's note: Interview has been edited for length and clarity.)

Question: Recently, Fitch Ratings upgraded your hospital's credit rating to "AA-" from "A+" due to the organization's strong financial profile. As a standalone hospital, how have you and others on your team been able to maintain the solid operating margins, strong cash base and overall fiscal stability?

Robin Norman: It's been a lot of blocking and tackling over a lot of years. Some of the things that have propelled us over the time include our growth pattern. We've done that by really focusing on the value equation of low costs and high-quality service. If we get recognized for that, it attracts more patients. By doing that, we have become more efficient and have put more patients through the facility. It's also a broader focus on quality, patient safety and certainly patient satisfaction and engagement. We sort of have to be the "other guy" because we're not the "big guy."

There it isn't a magic bullet here. Financially, we've had years of good financial stewardship. Leading back to the early 1980s, our board started putting money aside out of operations to build a base. That continues through today, and that's helped out our balance sheet a lot.

VirginiaHospitalCenterQ: You mentioned being the "other guy." In the Arlington region, there are many systems grasping for market share. Can you talk about the competitiveness in your area?

RN: We are surrounded by larger systems. Inova Health System has the large chunk of the market share. Other big systems that surround us in D.C. and Maryland include MedStar Health. Johns Hopkins has made a push into our market — not as much on our side of the river in Virginia, but Sibley Memorial Hospital is very close to us. They've become a player.

All the other hospitals are not as big of competitors. Reston (Va.) Hospital Center is part of HCA, Sentara Northern Virginia Medical Center in Prince William County, Novant Health has one hospital there. They all have some affiliation with someone other than us. Mary Washington Healthcare in Fredericksburg, Va., is a standalone, the only one really left. But as the crow flies, even Reston is 17 miles away. Seventeen miles might as well be an eternity here, other than at 3 a.m. [laughs]. But Inova is the main competitor.

Q: What are some of the biggest challenges Virginia Hospital Center is looking at right now?

RN: I think like many hospitals, we're looking at what kind of coverage changes will occur as the ACA continues to mature. We're looking at, for example, high-deductible health plans. Our market is honestly affluent and well-insured in general, so some of these trends that are happening fast elsewhere are not happening as fast here. But we're still watching that trend of more demand for transparency. And as high-deductible health plans become a bigger focus, there needs to be more upfront collecting.

The number one thing on probably everybody's radar screen is reductions to Medicare payments, which we've seen year after year. This is particularly important with Medicaid not being expanded in the state of Virginia. [Legislators] are still fighting and trying, but it hasn't happened yet. We haven't had that upside yet with the ACA, but there's been the downside of [Medicare] reductions. As that continues, it will be challenging to maintain the kinds of margins we've had.

Q: How do you foresee some of the Patient Protection and Affordable Care Act provisions, like the exchanges, affecting your hospital in the long term? And could you explain more about that lack of a Medicaid expansion in your state?

RN: To the point on Medicaid, I'm pessimistic, I guess, that they'll expand. Some rational alternatives have been placed on the table that would effectively be an expansion. But there is a group that doesn't want to take the "freebie" of Medicaid with that fear the government is going to pull back, and the state will be left holding the bag. I'm not sure the impasse is going to break.

Other aspects [of the PPACA]: value-based purchasing. That's something we focused on from the very beginning. We didn't take the attitude that there are too many numbers and too many things to follow — we took a much more direct approach, and said this is an opportunity. Whether you agree with it or not, it's a consistent way to measure quality across institutions, so we said let's see where we stack up and be better. That side of it has been a plus. We've been on the plus-side for the two years that have been measured so far, and we will continue to focus on that.

With the exchanges, as I mentioned earlier, we're an affluent area that is well-insured. When I get this question, I'll tease that the seven people that signed up in our market probably won't have a big impact. But really, there hasn't been good data out. We are attempting to track it, but I don't think it's had a big impact on us, at least yet.

RobinNormanQ: You've basically been with Virginia Hospital Center your entire professional career, starting as an accounting manager in 1979 and working your way up the ranks. Can you explain what the journey has been like?

RN: Sure, I'd love to. When I first came here, it was my second professional job out of college. I kind of saw it as the next accounting job. I was a manager at my previous employer, which was not in healthcare and not doing well financially, so I was looking for the next thing. I didn't think I was coming in here and going to be a CFO. For one, the opportunity came up at a good time for me. I had just finished my MBA and got the opportunity to move up to controller. I got approached a few times for a CFO position outside the organization, and the one I was most serious about [taking] was the time I was getting married. I decided I'm not going to make this change at the time.

More importantly, I fell in love with healthcare. I can be a CFO or financial professional in many different areas and make more money. But knowing that I'm taking the skill set I have — which definitely doesn't include hands-on care; surgery would not be my thing — and helping this organization become strong, I'm able to contribute in a very meaningful way to the health of our community. I probably could've stayed in the business and gone to other hospitals, but Virginia Hospital Center has always been a little different.

In the good ol' days of cost reimbursement, we took cost control very seriously and budgeted very seriously. We were not looking for open-ended spending. We had good financial stewardship, so that made it a good environment, career-wise.

Our whole strategy is to be the best in our area, and our core competencies of inpatient and outpatient hospital-based care have just continued to blossom. It is fun to work here and be part of a high-achieving team. That's what kept me at this level.

Q: What advice do you have for other healthcare CFOs who may be starting their roles right now?

RN: Don't be afraid to make mistakes. Inaction is probably worse than no action. It's real easy to get analysis paralysis in our business. Yeah, you're probably going to step in [a mistake] once or twice. If you haven't, you're probably not doing your job. But you learn from it, grow from it and move on.

Q: Can you give an example of a mistake you've made?

RN: We were one of the many hospitals that were involved in interest rate swaps, and it wound up biting us in the rear during the financial meltdown. It cost us some money because we were trying to get cute and fancy in our debt structure when we didn't need to be. I'm not sorry that we tried it. It was on a path that saved us money — until it wasn't.

More Articles on Hospital and Health System CFOs:
From Pizzas to Patients: Q&A With Mike Brown, CFO of Children's Hospital & Medical Center
The State of Healthcare Finance: 9 Major Survey Findings From Hospital CFOs
Transforming to Achieve the Triple Aim: Q&A With Jill Batty, CFO of Cambridge Health Alliance

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