With rapid consolidation in the healthcare arena, hospital and health system executives rely on strategic budgeting and lessons learned from other industries to make the right moves for survival and growth.
Four panelists weighed on budgeting for operations and capital in a changing world at Becker's Hospital Review Annual CEO + CFO Roundtable in Chicago, Nov. 12-14.
The panelists included:
● Dennis Murphy, the president and CEO of Indianapolis-based Indiana University Health
● Frank DelGaudio, the CEO of Cedar Grove, N.J.-based Essex County Hospital Center
● George Lyman, the senior vice president and market executive for Central Region: Healthcare, Education and Not for Profit for Bank of America Merrill Lynch.
The panel was moderated by Frank Stevens, the vice president of financial and capital planning for Strata Decision Technology.
"One of my first takeaways when I joined the business last year is that healthcare going through the same rapid consolidation we saw in banking 10 to 15 years ago, and for many of the same reasons," said Mr. Lyman. "Margins are getting smaller, the industries are highly regulated and the rules are changing. But through it all, our role is to help our clients mitigate risk and grow responsibly."
Based on the panel discussion, here are four key takeaways:
1. Develop goals and practice accountability. Strategic goal setting and accountability is important for all aspects of the organization, including the financial, clinical and marketing departments. "We look at our individual operating leaders, and we try to hold the right people accountable for what they can be accountable for, and not accountable for things they can't control," Mr. Murphy said. For example, he meets with the marketing and regional vice presidents to consult on the progress made toward their goals.
2. Set financial milestones. "Planning and budgeting is the integration of a triangle that includes our strategic planning, our operations activities and our financial performance," Mr. Murphy said. "We have a set of financial milestones we're working on to hit all the time; you have to adapt in order to achieve those goals."
3. Be specific in execution. "The big challenge in what we do to streamline our costs is that we're very careful with our budget. We write enormously specific bid specifications, and we have a radiology vendor that comes through for services for our patients. We were paying $50 per image, and we bid those services out. I was able to count every one that we did, and we cut that cost in half to $25 per image," Mr. DelGaudio said.
4. Be transparent with your goals and progress. "Our organization has many budgeting goals we have to meet, and it's up to me to help us get there," Mr. Lyman said. "Every team is a little different and every year is a little different, and one of the things I find to be important is for everyone to know what the overall objective is, and it's important for us to be as transparent as possible."