The $2.5B+ capital project UC San Diego Health CFO Lori Donaldson is most excited about

Lori Donaldson serves as CFO of University of California San Diego Health, overseeing a budget of more than $3 billion and paving the financial strategy for the academic health system.

Ms. Donaldson was appointed finance chief of UC San Diego Health in July 2010, after serving as the academic health system's controller for 13 years. She first joined the organization in 1990.

Under Ms. Donaldson's leadership, UC San Diego Health has consistently posted operating margins in excess of the industry average. 

Here, Ms. Donaldson shares her top priorities for the year ahead, discusses the most pressing problem CFOs are facing and offers her top piece of advice for other health system finance chiefs.

Editor's note: Responses were edited lightly for length, clarity and style. 

Question: What is the most pressing issue facing hospital CFOs amid the latest COVID-19 surge?

Lori Donaldson: The impact COVID-19 has had on our patients and their lives is like nothing I have seen in my 30-year healthcare career. The most pressing issue facing me today at UC San Diego Health is to ensure there is always adequate qualified staff to provide high-quality care to our patients across the region. In addition to patients with COVID-19 being acutely ill, many people across the country are postponing management of their medical needs such as cancer screenings and yearly exams. Overall, we are seeing a higher volume of patients who are also experiencing more illness. Since the beginning of this latest surge, our inpatient census is 5 percent higher and average daily emergency room visits are 6 percent higher than pre-COVID levels. Across the organization, this increase has put immense pressure on our staff and providers who have already been working long hours for extended periods of time. In addition to the strains on our clinical staff, our supply chain, environmental services, dietary, facilities and security teams have also worked continuously to prevent supply shortages, safely manage operating and patient rooms, and ensure the safety of everyone entering our facilities. 

Q: As CFO of UC San Diego Health, what are your two top financial priorities for 2022?

LD: COVID-19 made it clear to many CFOs how quickly the financial performance of a healthcare system can be immediately impacted when public health orders required the shutdown of many clinical services. Our most important financial priority is to ensure adequate cash reserves to sustain the delivery of care during the pandemic and to continue to support the tripartite mission of the only academic health system in the San Diego region. Like most health systems, UC San Diego Health lost revenues and incurred expenses that were not fully recovered through federal or other external funding sources. This resulted in the delay of several capital projects that will address our capacity limitations through expansion of our ambulatory locations throughout the region to better serve our patients. In addition, continued improved financial performance is necessary to build cash reserves to support debt capacity for our Hillcrest redevelopment and other strategic investments.

Our second top financial priority is to redesign our funds flow among the three missions of UC San Diego Health. Changes to the Medicare Physician Fee Schedule and the effects of COVID-19 have impacted the benchmarks we use for physician productivity and compensation. New value-based payment programs are also driving the need to reevaluate the principles and mechanics of our funds flow model. In May 2021, we launched a multidisciplinary initiative we refer to as "strategic alignment" to evaluate and make recommendations to modify our funds flow to ensure the future model is simpler and transparent, supports margin growth, aligns with our strategic priorities and supports all three missions of the university.

Q: What capital projects does UC San Diego Health have in the works that excite you the most?

LD: UC San Diego Health operates two major campuses in San Diego, in Hillcrest and La Jolla, as well as ambulatory locations across the county. Encompassing approximately 60 acres, the UC San Diego Hillcrest Campus is located 13 miles south of the university’s La Jolla campus and is a critical regional resource, providing care for all patients, including those who are under-insured or uninsured. In November 2019, UC San Diego received approval of the Hillcrest Long Range Development plan by the UC Board of Regents. This multiphased plan is a collaboration between the UC San Diego campus and the health system to redesign, rebuild and revitalize the Hillcrest campus. This multiyear redevelopment is planned to replace the more than 50-year-old Hillcrest inpatient hospital, rebuild parking and other infrastructure, bring much needed housing for staff and the community and significantly expand ambulatory clinical facilities. 

The first phase of this project was approved by the UC Board of Regents in September 2021 and includes an outpatient pavilion and parking structure. As the existing hospital must continue to operate throughout construction, building a new hospital requires a complete redevelopment of the campus through a thoughtfully sequenced plan. The majority of the existing buildings, both temporary and permanent, will be demolished. New development is anticipated over approximately 15 years in five major phases, and will be implemented in a manner that reduces construction impacts to the surrounding community while also ensuring that the existing critical campus functions remain operational. 

I am very excited about this project, as it will provide significant space for multispecialty cancer clinics, infusion and radiation oncology, allowing UC San Diego Health’s National Cancer Institute-designated cancer center to expand in scale of services and new modalities of treatment. The facility will also provide multispecialty clinics, an ambulatory surgery center, advanced imaging and laboratory services. The total Phase 1 project budget of $550.3 million would be funded from previously issued bonds, external financing, campus funds, operating leases and hospital reserves. An estimated $2.5 billion to $3 billion will be invested in the entire Hillcrest Campus redevelopment project.

Q: Beyond financial knowledge, what skills are essential for health system CFOs to thrive in today’s health care landscape?

LD: Health system CFOs must have a full understanding of clinical operations, be strategic thinkers and excellent communicators. The CFO's role goes well beyond fiduciary responsibility. Today’s health system CFO must have the ability to identify growth opportunities and be willing to take business risks in order to adapt to new care models and competition from nontraditional market players. In my role as CFO, I frequently present complex financial information to a variety of internal and external stakeholders. A CFO must be resourceful and have the ability to inspire trust, as the decisions CFOs make or recommend must be viewed as being in the best interest of the health system, its patients and the community we serve.

Q: What advice would you offer to another healthcare CFO and why?

LD: I am extremely fortunate to have worked for UC San Diego Health for 30 years, of which the past 11 have been in the CFO role. Throughout my career, the scope of the CFO role has expanded significantly. Today's CFOs are responsible for leading an interdisciplinary team that covers essential business functions that are very different in nature as well as being a strategic partner to the CEO. Revenue cycle, supply chain, accounting, budgeting, contracting and business analytics are all very different, complex functions that require deep expertise in both the relevant subject matter and the regulations that are unique to healthcare. In order to succeed as a healthcare CFO, you need to build a strong team of experts who have the depth of knowledge to successfully manage these functions and be nimble strategic thinkers who can adapt to the constantly changing academic healthcare environment. Building such a team requires strong collaboration with Human Resources to recruit talent; however, that is not enough. Health finance professionals are eager to learn and add value to their organization so the CFO must ensure the team has access to tools, training, coaching and mentorship to enable professional growth. The CFO must also provide a working environment that promotes trust and values individual contribution.

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