Fort Myers, Fla.-based Lee Health has roughly doubled in size over the past six years. Now, as the health system charts a path from $4 billion to $6 billion, CFO John Mallia is focused on a different challenge: Making sure expenses and administrative overhead don’t grow at the same pace.
“Growth can cover up a lot of sins, too,” Mr. Mallia said. “You have to make sure you’re taking care of the house and operating as efficiently as possible, not just getting incremental growth.”
The strategy is taking shape as Lee Health capitalizes on its conversion from a public health system to a private nonprofit, opening new opportunities for partnerships, geographic expansion and investments in care delivery.
During a Nov. 4 keynote panel at Becker’s CEO+CFO Roundtable, Mr. Mallia outlined how the system is balancing rapid growth with financial discipline, using AI and automation to reshape its cost structure and taking a more deliberate approach to capital investment.
The goal is to build an organization capable of serving substantially more patients without a proportional increase in its operating expenses.
Growth with guardrails
Lee Health operates in a unique market. Southwest Florida is experiencing rapid population growth while its residents are also aging, creating simultaneous demand for expanded outpatient services and additional inpatient capacity.
Unlike markets where hospital utilization is declining, Lee Health expects to need more inpatient beds in the years ahead.
But building that capacity has become increasingly expensive.
“Inpatient beds cost about $3.5 million a pop now,” Mr. Mallia said. “When I first started in this business, they were about $1 million.”
That cost pressure is forcing Lee Health to think more strategically about where and how it expands.
“But in any case, we need to make sure we’re providing access to meet the greater need of the market we serve.”
A central part of that strategy is investing in ambulatory care to support inpatient growth while ensuring patients receive services in the most appropriate setting.
At the same time, Mr. Mallia said the organization must address operational inefficiencies before layering additional growth onto its existing infrastructure.
Lee Health’s strategic planning framework, reflects that approach. Its three priorities are strengthening operations, expanding and evolving.
Strengthening the core means improving fundamental operating measures, including reducing lengths of stay, maximizing operating room utilization and addressing the gap between expense inflation and revenue growth.
Expanding the Lee Health footprint requires thoughtful decisions about when to invest in additional infrastructure, ensuring the organization does not add capacity too early or fall behind demand.
“We don’t want to be too early, because we’ll be wasting costs, or too late, because then we risk execution on all of our initiatives,” Mr. Mallia said.
For the CFO, those decisions increasingly require a deeper understanding of clinical operations.
Mr. Mallia said he has spent time putting on scrubs and observing care delivery firsthand to understand operational friction, emerging procedures and the financial implications of new clinical technologies.
“Understanding the clinical dynamics, what they might lead to and the downstream implications: All of that is essential for a CFO to be educated on,” he said.
New freedom to expand
Lee Health’s growth strategy is also benefiting from a fundamental change in its operating structure.
The system converted from a public entity to a private nonprofit in late 2024, giving it greater flexibility to expand beyond Lee County and pursue partnerships that previously faced statutory and operational constraints.
Lee Health made the conversion from a position of financial strength, projecting that the transition could generate an additional $1 billion in net patient revenue over 10 years with the opportunity to reinvest that into the community.
The move was designed to preserve local governance while giving the organization more flexibility to compete and invest across Southwest Florida.
Mr. Mallia said Lee Health’s former public structure limited its ability to pursue opportunities outside Lee County, even as population growth increasingly extended beyond those boundaries.
“Coming out of the pandemic, it became pretty apparent to Lee Health that the growth was going outside Lee County,” he said. “As a public hospital, we were mandated to stay within the boundaries of Lee County.”
The conversion was far from a simple administrative change.
Lee Health had to overhaul parts of its financial infrastructure, shift accounting standards and update national provider identifiers, while navigating reimbursement disruptions and delayed payments. The transition also followed a difficult period for the system, including the COVID-19 pandemic and Hurricane Ian in 2022, which forced evacuations and disrupted operations.
Despite those challenges, Mr. Mallia said the new structure has opened doors that would otherwise have remained closed.
“It enables us to establish partnerships we otherwise couldn’t, to sustain the financial health of the system into the future,” he said.
The changes are already supporting expansion.
Lee Health has acquired Prime MD Naples, expanded physician and outpatient services in Cape Coral and pursued additional clinical partnerships across the region.
The system also opened a 60-bed rehabilitation hospital through a partnership with Encompass Health and is investing $150 million in a Fort Myers rehabilitation expansion that will add 92 inpatient beds.
For Mr. Mallia, the increased flexibility creates opportunities to expand more strategically, rather than relying exclusively on hospital construction or internally developed services.
Scaling without the overhead
Perhaps the most important part of Lee Health’s long-term financial strategy is ensuring that its administrative infrastructure does not expand in lockstep with revenue.
As the organization plans for a future at $6 billion in operating scale, Mr. Mallia said shared services will need to operate differently.
“As we project out from a $4 billion operation now to $6 billion, we know our shared services operation isn’t going to grow step for step as a percent of net revenue, so some portion of it has to be tech-enabled,” he said.
AI and automation are central to that effort, particularly as Lee Health looks for ways to handle increasing volumes of administrative work without proportionally increasing staffing. The challenge is translating technological improvements into measurable financial returns.
Mr. Mallia cautioned that many health systems have embraced automation without fully addressing what happens after a previously manual task has been eliminated.
“If something is being automated, what are we doing with the resources that were previously doing that work?” he said. “I think in a lot of cases, that’s where we’ve fallen short, at least on the administrative side.”
For Lee Health, the answer increasingly involves redeploying employees to other areas of need as the system grows.
One example is the organization’s work with Hippocratic AI on call center operations.
Lee Health has used AI-powered phone agents to automate portions of colonoscopy prescreening and patient preparation, allowing patients to ask questions and receive guidance without relying entirely on human staff.
Mr. Mallia said the technology has been particularly well received by the system’s older patient population.
“Our senior population really appreciates that, so that’s been a big win for us,” he said.
But the operational benefit is only part of the equation.
“Because we’re growing, we’re able to redeploy those folks into other call center operations,” he said.
The approach illustrates how Lee Health is seeking to improve productivity while directing existing employees toward work that supports its expanding patient base.
Mr. Mallia said the system generally looks first to Epic for new technology capabilities, while remaining open to other vendors when a solution can deliver value more quickly.
Ambient listening technology has been another promising early AI application, but he emphasized that finance leaders must evaluate the full return on investment rather than assume every automation initiative will generate savings.
That requires planning not just for the technology itself, but for how staffing, workflows and operating models will change once the technology is deployed.
The broader strategy reflects a shift in how Mr. Mallia views the CFO role.
Rather than concentrating primarily on financial reporting and transactions, he said finance executives must work closely with clinical, operational and strategy leaders to understand how healthcare delivery is changing and what their organizations will need to support it.
For Lee Health, that means planning now for a substantially larger enterprise while resisting the temptation to simply add more employees and infrastructure as revenue increases.
“Instead of growing FTEs, we’re going to reorganize to take advantage of available technology,” Mr. Mallia said. “But we have to start planning that now.”
