As healthcare executives continue to navigate a market that seems to be in perpetual flux, leading organizations are increasingly tossing traditional, stagnant approaches to budgeting to the side in favor of nimbler techniques.
In 2017 Walnut Creek, Calif.-based John Muir Health launched a new approach to budgeting supported by Strata Decision Technology's cloud-based financial planning solution. According to John Muir Health's CFO Chris Pass, the solution is helping support his organization's efforts to address one of healthcare's greatest challenges — affordability.
"Frankly, healthcare is just too darn expensive," said Mr. Pass, adding that America's hospitals and health systems must prioritize efforts that make care more affordable to attract patients who are increasingly shopping around for the best value and to help deter further regulatory disruptions. Health systems can protect their own fiscal sustainability and improve cost transparency for patients by being excellent stewards of their own dollars and by deploying financial plans that are adaptable to shifting industry challenges. To support these efforts, new approaches to budgeting are being embraced by both financial and operational leaders at health systems around the nation.
Mr. Pass, who stepped into the CFO role at John Muir Health in 2015, recently spoke with Becker's about the implementation of his organization's new approach to financial planning, the challenges involved in the program's launch and the benefits realized.
Note: This content has been edited for length and clarity.
Question: A few years ago, you decided to move away from a traditional budgeting process. What was the driver for that decision?
Chris Pass: We needed to move faster as an organization. By the time a traditional annual budget is published, it's probably already wrong in some sense. We implemented a more dynamic, agile financial plan and it's enabled us to be more adaptable and readily adjust targets moving forward.
It was very difficult for the finance committee of our board of directors initially to do this. They were concerned we weren't going to have specific targets if we abandoned the traditional budgeting approach, so we still establish an annual target designed to support a long-range plan. We're just trying to be savvier by accounting for the changes in the business that occur throughout the year and adjusting as we go. We still have fixed targets, but those may pivot. We've really tried to make the goals attainable rather than just offer up a big number that might be difficult to get to.
Q: What other stakeholders at the organization did you partner with to drive the process change?
CP: It's kind of a funny story. I'm one of the newer executives on the senior leadership team — I've been here 10 years, but I'm relatively new to my role as CFO. When I came in, I started to work on changes to our approach to budgeting with the help of our financial planning team and the folks from Strata Decision Technology. The step we were all somewhat nervous about was getting operational buy-in — we had two senior leaders we really needed to support this new approach.
I was scheduled to have a conversation with them after they returned from a healthcare conference. I myself was at a separate leadership conference and got a text in a group chat from one of the senior leaders that said, 'Chris, we just sat through this presentation around budgeting,' and then both leaders proceeded to effectively describe to me the idea I wanted to present to them.
I'd been nervous to present the idea because I thought they were going to look at me like I'd lost my mind, but instead they were already excited about it. They ultimately knew we had to change our approach.
Q: What benefits have you seen because of the change?
CP: The single largest benefit is the amount of time saved. Many individuals across our entire organization have saved time because they don't have to go through three to five months of planning to prepare a budget. Also, the beginning of the year was a little slower for us than last year. With the new process, we've really been able to dig into some of those numbers and identify possible causes. The new approach has allowed us to correct and pivot, so we get closer to the goals we're shooting for.
Q: What advice would you give to other organizations thinking about making a similar change?
CP: It's about change management — you need to deliver constant education to managers and staff. You've got to find a couple of champions who can really get behind the cause. We've tried to find budgeting commonalities to drive buy-in among managers and staff by saying, 'Look, this is more like budgeting when you're at home, you know your paycheck, you know your upcoming expenses, but surprises still happen and that's no different than what happens in our business.' We try to make it clear that this new process gives us the opportunity to more effectively address surprises.
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