What Are the Biggest Issues Impacting Hospital CFOs Today? 10 Industry Experts Explain

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At last month's Healthcare Financial Management Association's National Institute in Orlando, Fla., financial leaders and healthcare industry analysts from across the country converged to discuss the major challenges and opportunities in today's healthcare system.

Here, 10 experts within the healthcare financial industry shared their thoughts at HFMA's ANI on what issues are impacting healthcare CFOs most right now and why those issues have become so prevalent.

Question: What are the biggest issues that hospital and health system CFOs are experiencing today, and how are those issues affecting their day-to-day routines and long-term planning?

June Felix. Managing Director of Global Enterprise Payments at Citigroup. I've been lucky enough to interview a number of CEOs and CFOs about what their big pain points are, and one of the most pressing new concerns is around patient payments. They are seeing a big explosion in terms of responsibility moving to the patient because of consumer-directed health plans. Patients really shoulder more of the burden associated with healthcare, and executives are really concerned about how they are going to handle that.

We think technology has a big role in that…and will go after that problem from a patient-centric perspective. It's really about putting the patient in the middle and thinking about what do they need in order to have something simple, convenient and understandable that allows them a full set of payment options. The big benefits we've seen from this [technology] is, number one, patient satisfaction: better patient experience, less confusion, less frustration, de-cluttering their life from all the EOBs and bills. If it's all electronic, it's all in one place. Number two, they are excited about the faster payments. If it's convenient, people aren't going to wait for the rainy Sunday in order to sit down and reconcile all their paperwork before they take out their checkbook and pay. And the last thing is reducing costs. If you think about how challenging it is for hospitals and doctors, they have to send out multiple bills in order to get paid. And now with technology, there are ways that it can be presented to people on a proactive basis.

Phil Gaughan. Senior Director of Operational Improvement at Truven Health Analytics. The story is very clear. Everybody is very concerned about reimbursement levels. That's sort of the key right now. Hospitals lose money on Medicaid, and Medicare is very challenging to break even. It leaves them very little maneuvering room to cover their expenses. All the CFOs that I know from the HFMA Kansas Sunflower Chapter, which I'm an old member of, continue to tell me that their primary concern is on the reimbursement side and how they are going to stay solvent.

The most challenging task is always accepting change. If there's anything that's going to crystallize the thinking of healthcare executives, whether on the clinical or financial side, it is the reality of healthcare reform. If anything is going to break down fiefdoms and make sure that clinical leadership and financial leadership and all of people in an organization who know how to improve overall performance, this is absolutely the time they'll have to break down those barriers in order to be successful.

Todd Halpin. Managing Director of PNC Healthcare's Revenue Cycle Management Advisory Services. I'll start with revenue cycle management. I think something that a lot of CFOs and financial folks within healthcare orgs take for granted is that within the revenue cycle, they've already done a lot of the things that they need to have done to make sure they are capturing all their revenues. They are being paid appropriately, and revenue cycle might perhaps be old hat. I would say to that that revenue cycle is probably more important now and more critical to manage very tightly than it's ever been due to healthcare reform and the Affordable Care Act coming upon us. There is going to be a lot of challenges and a lot of payment disruption and reduction that takes place. If CFOs are not already doing this, they should be reviewing and taking careful looks at their revenue cycle daily, weekly, monthly and certainly on an annual basis to make sure there is no revenue leakage.

Jean Hippert. Senior Managing Director at PNC Healthcare. One of the things we see a lot at the CFO level is the need to bring the organization together around a core set of imperatives. Some of those are legislative and regulatory with the implementation of the ACA. There are a lot of things that are happening in 2013 that are going to demand the attention of the CFO, the revenue cycle group and pretty much all the stakeholders in an organization.

Another thing that's a challenge for folks is that they are trying to deal with many different requirements at a point in time where people are very taxed within their organizations to address all of these very important issues. Conversion to ICD-10 would be a good example. Along with that is the need to look at the organization holistically and try to be able to pull the different silos in the organization together around the commitment of the imperatives and all the data that is out there.

Steven Huddleston. Senior Executive Vice President of Business Development at Parallon Business Solutions. With the focus on value-based care, number one, hospitals have to get very strategic in having good information at their fingertips. What I'm talking about is a lot of times, we find the data or analytics aren't there for hospital CFOs and executives to make real-time decisions about their costs, clinical outcomes, what services are profitable versus what services aren't profitable, whether to acquire or partner physician practices. Hospital executives, in a value-based care environment, have to be very strategic about decision making, and they have to understand their data and be able to take that data and translate it into useful information. They need that information to make good capital investment decisions and good decisions about where to spend their cash.

Michael O'Boyle. President and CEO of Parallon Business Solutions. It's hard to say what the biggest issues are. I think the reason why today is different than the past is an aggregation of issues is hitting these folks all at one time. In the past, we would see reimbursement changes, regulatory changes, service delivery changes, technology changes — but they would kind of come sequentially. At a given moment in time, we might have this economic burden or problem, and the next one would come along.

Now, it's an amalgam. If you look at what all these hospitals are facing, it's health reform, it's clinical integration, it's what to do with all the physicians that are now employed, it's what to do with all the commercial enterprises who want changes in network structures, it's how they manage payment for value. CFOs have all these issues converging, and [they] don't have the technologies and analytical skills necessary. And [they] certainly don't have all capabilities in house to manage all those issues. So how do they put that package together? At Parallon, we go across the continuum to help.

Terry Porter, RN. National Director of Clinical and Operational Improvement at Truven Health Analytics. In using data analytics, [CFOs] can set up thresholds and benchmarks and can use those going forward to monitor finances, productivity and general day-to-day.

You also see the CFO step up more to the plate in roles of quality improvement. They want to be in more of a relationship with CNOs and quality teams as leaders. They are now trying to grow this to where they bring the [quality] information back to their executive team to make decisions on, "What are our quality improvement efforts?" There is a vast number of opportunities in organizations to see if [data] can bring value, decrease cost and, over time, is this going to help me with payment received?

Mike Raymer. Senior Vice President of Solutions Management at M*Modal. Certainly, hospital CFOs and CEOs are faced with a myriad of issues right now. They have meaningful use, which has created an opportunity for stimulus funding for them. They have the migration from ICD-9 to ICD-10. They have the whole issue of value-based reimbursement and accountable care, which we're still all sorting through and trying to understand the impact of that. Of the three of those, I think ICD-10 has the potential to have the largest impact and most likely negative on healthcare systems if they don't carefully prepare for it.

In our view, we believe ICD-10 is really not a coding problem, but rather a documentation problem. Ultimately, the documentation must be in place for clinicians or physicians in order to justify the coding that's established in the back office. The challenge with ICD-10 is that they've split out the codes down to levels of severity that if you're not careful and you simply code to the lowest level of complexity, you may miss out on reimbursement. And that's important because it's [missed] reimbursement for what you actually performed.

Tim Ruggles. Vice President, Managing Director and Healthcare Practice Leader at Fidelity Investments. I think there are a number of issues, especially in the benefits space. One of them is for those who have pension plans and looking at transitioning from a traditional pension plan or cash balance plan to a defined contribution plan — whether it's a 403(b) or 401(k) plan. The rationale is there's a lot of cost uncertainty, as well as cost variability, with a pension plan, both on the investment side and funding side. CFOs are really starting to take a hard look at transitioning from pension plans to defined contribution plans.

Certainly, mergers and acquisitions are also top of mind for CFOs. Not only on what the deal constitutes from a strategic perspective, but also the cost of benefits and what bringing on a new organization does to the benefit structure. Especially with standalone hospitals, many come from a traditional 403(b) defined contribution structure. Many have annuities and things of that nature and a very different defined contribution structure than the parent company. So, one of the challenges for organizations, specifically CFOs, is trying to bring those organizations into their own benefits structure. One of the things CFOs are starting to talk about is, "Is our benefit structure the right structure to have as we make acquisitions? Do we need a global benefits structure strategy that we don't change by acquisition?"

Mark Tambussi. Senior Vice President of Equipment Finance at PNC Healthcare. At the end of the day, what we're talking about is access to capital. To do all of this stuff and take advantage of what's taking place in healthcare reform and the ACA, you're going to need to constantly reinvest. You have an aging population that's coming into a system that may or may not have been treated by traditional methods. So any hospital has a new set of challenges, and they're going to need to reinvest and maintain their cash positions very strongly in order to be able to weather through the next decade.

More Articles on Hospital Financial Issues:
The Evolving Role of the CFO: Q&A With HFMA CEO Joe Fifer
4 Objectives Hospitals Must Pursue to Shift Successfully to Value-Based Care
6 Value-Based Credit Rating Metrics Hospital CFOs Need to Know

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