Guest post by Tom Quinn, senior partner with the executive search firm Witt/Kieffer.
It is hard to imagine any administrative role in healthcare changing more over the past few years than that of the chief financial officer. Industry consolidation, to a great degree, is driving a change toward centralized operations.
Forward-looking CFOs at all levels--site, divisional and system--are tracking the impact of ongoing and anticipated consolidation upon their professional lives. Just as importantly, they are taking steps to thrive in this dynamic new world.
Several healthcare CFOs recently shared their frontline views with me. This article explores how the CFO role differs today from the past; in Part II to come, I will look at how CFOs can flourish in their careers amid such dynamic changes.
Some key takeaways from the CFOs I spoke with include:
- CFOs believe that the current pace of consolidation and healthcare system growth will continue for the foreseeable future.
- The consolidation trend has led to traditional administrative roles becoming "systematized," eliminated, or restructured to maximize efficiencies and economies of scale.
- There is still a great need for site-level financial leadership
The traditional CFO role was and still is fairly straightforward. At an independent hospital, for example, the CFO is responsible for all financial operations. As systems absorb more healthcare providers and grow in size and scope, however, they must develop more sophisticated and centralized finance departments. This means traditional CFO functions such as accounting, managed care contracting, revenue cycle, and cash and treasury management are transitioning to the system level and are no longer in the purview of the individual hospital CFO. Each of these functions typically has a vice president who leads these areas for the health system and reports directly to the corporate controller or system CFO.
With greater complexity comes a need for collective responsibility. “A finance leader… needs to understand the nuances of each division,” says Adam Anolik, CFO for Strong Memorial and Highland hospitals of Rochester, New York, part of the University of Rochester Medical Center (URMC). (Anolik is also associate vice president for URMC.)
Joint budget meetings give service leaders a better appreciation for fund flows so that they can think proactively about how their areas affect the entire URMC system. “This process provides financial managers with the opportunity to work collaboratively with the chiefs and chairs of service,” Anolik explains.
Rochester is not immune to the consolidation phenomenon, and CFOs are being tapped for their expertise when those talks begin. “The pace of affiliation discussion has accelerated with a lot of stand-alone hospitals looking to [CFOs] for help,” Anolik says. “Division CFOs like me are part of the due diligence team.”
David Kirshner, CFO at URMC, shares a dual perspective, with experience as a system and as a site CFO. He sees many instances when the site and system CFO roles overlap. “The roles can blend,” he says. “System CFOs need to focus on where the health system needs to go to be successful in the future. However, managing the revenue cycle, balance sheet and performance management will always be important parts of the system job.”
Kirshner says site and divisional CFOs focus more on budgets, controlling expenses, variance management, revenue enhancement, risk management and supporting service/program assessments. “They tend to be more technical than strategic, which is important, but they still need a good understanding of strategy and involvement in the strategic direction of the organization,” he says.
Tom Gibney, CFO of St. Luke’s Cornwall Hospital of Newburgh, New York, has been a site CFO in a large system and is currently the CFO for a two-facility system. What has changed for him? “I have to know what is going on in the front and back end of the revenue cycle in a way now that I never had to in a large system. At a large system, cash gets swept into a corporate account and corporate determines how much cash to keep on hand and how much to invest--that is my job now,” Gibney replies.
“I wear a lot of hats now, whereas in a system, you tend to be more specialized,” he adds.
The site or divisional CFO can be a harder job than the system CFO, says Bob Glenning, CFO at Hackensack University Medical Center in Hackensack, New Jersey. The divisional role, he points out, can get pulled in many directions. “As a divisional CFO with dual reporting structures, you can’t go back to the local leadership and say ‘corporate doesn’t get it,’” he says. “I have seen people challenge a corporate decision and they never win. The decisions made at the corporate level are done for a reason, because they are hard decisions. As a divisional CFO, you need to support that decision to be a team player.”
Even as some responsibilities become centralized at the corporate level, local leaders must stay on their toes so their “skills do not atrophy,” as Carl Francioli, CFO of Johns Hopkins Bayview Medical Center in Baltimore, puts it. “At Johns Hopkins, each CFO has a direct tie into financial leaders at the corporate level, and you have to make sure that you help them be successful so they will be equally invested in your entity.”
Time to shine
A universal view of financial matters is increasingly necessary in the era of health reform, another factor in the industry’s sea change. Enterprising CFOs can take this opportunity to present themselves as thought leaders--strategic as well as technical.
This is their time to shine. In the move from volume to value and the search for revenues outside of patient care, big bets are being made on population health management and risk-adjusted capitation agreements. Narrow network private label plans must be carefully calculated--all of these are major new undertakings for health providers accustomed to a fee-for-service model.
Fortunately, CFOs are in an excellent position to provide crucial guidance in this changing healthcare environment.
Next in this two-part series: The shifting healthcare CFO role: Career challenges in centralized systems