Johns Hopkins Hospital CFO Daniel Smith on the value of EMRs

Daniel Smith brings fiscal expertise to his roles as vice president of finance and CFO of the Johns Hopkins Hospital and senior vice president of finance for the Johns Hopkins Health System.

He officially joined Baltimore-based Johns Hopkins 36 years ago, as a member of the management team that helped transition struggling Baltimore City Hospitals into what is now Johns Hopkins Bayview Medical Center.

He went on to serve as senior director of finance at Johns Hopkins Bayview, and then later, as the health system’s senior director of finance for budget and financial analysis.

Mr. Smith also held various leadership roles at the Johns Hopkins Home Care Group, including CEO and CFO.

He took on his current positions in July 2016.

Here, Mr. Smith shares one of his proudest achievements as Johns Hopkins Hospital CFO, discusses the system's financial strategy and offers advice for other hospital finance chiefs.

Note: The following responses were lightly edited for length and clarity.

Question: Since joining Johns Hopkins, what has been one of your proudest moments as CFO?

Daniel Smith: My proudest moment to date was one of my first. I came into the role with a new CEO, new COO and a new CNO at the Johns Hopkins Hospital. We quickly discovered a significant budget gap, in addition to a planned performance improvement plan in excess of $80 million. This was quite a daunting task for our new C-suite team. We had a history of working together but were all new to our positions. Ultimately, we were successful in achieving our budget by implementing a majority of the cost-reduction plans or coming up with alternative solutions. It was rewarding to work together as a [new] team to achieve our goals, even though we initially had a tough road ahead of us.  

Q: What is the greatest challenge hospital and health system CFOs face today?

DS: I think one of the toughest challenges we have in the finance world is to develop a return on investment on many initiatives that provide the same or similar clinical outcomes. All organizations are striving to improve the health and well-being of our communities, and so often our initiatives lend themselves to that improvement. But there are so many initiatives for which it’s difficult to say, “This initiative has yielded this outcome.” So, working with the organization, you may be making investments that you can’t explicitly put an ROI on, but you know it’s the right thing to do for the patients, and you know that by making this investment you’ll reduce the cost of care. Measuring the greater outcome — are we improving the health of our community? — is a significant challenge.

Q: What major changes in healthcare have you seen in recent years that you would have never expected when you started in the industry?

DS: To me the most significant change has been the evolution to systemwide electronic medical records and the ability to follow patients across the continuum of care regardless of where they initially sought that care. So, in a system like Johns Hopkins — where that patient could be seen at a primary care physician group, an ambulatory surgical center, or a different hospital — the fact that you can now follow that patient without having to request paper medical records is a major change. It was not that long ago that each one of our hospitals and each one of our primary care groups had their own medical records system. So, I think that’s one of the greatest things that has changed for the good. Today, we are able to follow that patient electronically without piles and piles of paper.

Several years ago, I became caregiver for my parents, both with multiple comorbidities, as they tried to migrate through the Johns Hopkins system. As the care coordinator, it became very difficult for me because, whether they were seeing an oncologist or a cardiothoracic surgeon, it was very difficult to make sure the new physician understood and knew their history. In my opinion, the value an EMR now brings to patient care has been a game-changer.

Q: What philosophies, events or people influence your leadership style?  

DS: The biggest philosophy influencing my leadership style would be the understanding that the CFO today is part of the strategic leadership of the organization. The traditional CFO role from 20 or 30 years ago may have been very different. In the 21st century, you can’t just sit back and keep the books, produce financial statements and secure debt. You have to be fully integrated with the leadership team and help drive the organization in understanding the financial implications of the strategic direction of the organization. So really being part of the organization and understanding operations is integral to the success of a CFO.

Q: Johns Hopkins system receives nearly 3 million patients and more than 360,000 emergency room visits annually; how does the system's size affect your financial strategy?

DS: First and foremost, we must ensure that we are achieving efficiencies and economies of scale and not duplicating services, even within one large, single entity like Johns Hopkins Hospital, let alone across the entire health system. We must centralize shared services where those services can be done effectively and efficiently with cost savings, while maintaining the quality of the service provided. By doing this, we gain economies of scale across administrative structures to garner the benefit of lower costs. It is neither practical nor efficient to duplicate services in every entity and every division in today’s reimbursement world.  

Q: What are your top cost-containment strategies?

DS: Over the last several years, each of our annual budgets has required performance improvement strategies, and each year probably the No. 1 single opportunity for improvement has been supply chain, through the integration of the group purchasing organization and our purchasing team. It’s important to make sure you’re gaining the pricing that's appropriate for the size of this organization. This includes creating a multiyear capital plan to know what you have coming down the pike so you can negotiate the best price, not only for what you’re buying today but what you’re likely buying over the next two or three years.

Imaging is a classic example. If every hospital is negotiating separately with a vendor to buy their next MRI or CT scanner, you will not  receive the same benefit as when you instead employ a three-year strategy of: “I know this hospital’s buying one this year, this hospital’s buying one next year, and two years from now our freestanding radiology group is going to be buying three, so let’s negotiate the purchase price for all five now.”

The other two top cost-containment strategies would be utilization reduction (ordering wisely and reducing excess ancillary utilization) and use of clinical pathways to reduce length of stay to create capacity, as opposed to adding capital expenditures to expand capacity.

These three areas are probably where we gain the most dollars for the effort, as well as working with every department with their individual opportunities that they’ve identified.

Q: If you could pass along one nugget of advice to another hospital CFO, what would it be? 

DS: Accountability. You have to hold each other accountable for goals and outcomes and help the organization monitor those outcomes so we can hold ourselves accountable. If you fail, don’t place blame. Figure out what went wrong. Work together to fix it and then monitor it again. But we have to start with accountability, and if we’ve moved forward with an initiative, monitor those outcomes and make sure we achieve what we set out to do.

 

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