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The Changing Role of Healthcare CFOs

September 12, 2017 BY Alanna Moriarty

The Changing Role of Healthcare CFOs

Updated November 2019

When the ACA passed in 2010, hospital reimbursements began to shift away from the traditional fee-for-service model and toward models emphasizing quality of care and patient outcomes. Before this legislation, CFOs primarily focused on corporate finance, availability of capital and the typical risks of investment and spending. A healthcare CFO had to balance a budget and manage the allocation of funds appropriately.

Now, as hospital profits become more reliant on coordinated clinical care, healthcare CFOs find themselves shifting attention from traditional risk and payment assessments and toward a more nuanced analysis of how funds are impacted by quality measures. The rise in accountable care organization (ACO) membership is impacting how payors compensate hospitals and physicians; fee-for-service is quickly becoming an outdated method as CMS offers greater incentives for care centers that consider a patient’s overall health during treatment.

The difference between healthcare CEOs and CFOs

A healthcare CEO is often the figurehead, providing direction for the hospital, health system, or other healthcare organization. The CEO oversees operational efficiency, internal policies, and organizational goals. They are the overarching strategic leaders and points of contact for internal and external leaders — including Chief Operating Officers, Chief Nursing Officers, Chief Medical Officers, and more.

As mentioned at the beginning of this article, healthcare CFOs are responsible for managing all of an organization’s financial risks, including record management and financial planning. Much like in other markets, the healthcare CFO manages budgeting, negotiates vendor contracts, and implements cost-cutting measures.

Then and now: technology and policy

Where healthcare CFOs may have historically had limited contact with physicians and other executives, they are now much more likely to be collaborating with people in these positions on a regular basis. It is important for healthcare CFOs to be skilled in communicating in a nonfinancial way now as much as ever. Healthcare CFOs are also going to need a strong overall understanding of the industry, including legislative changes and technology deployments.

One of the most obvious examples of this understanding is in regard to EHR implementations. Easy access to personal health information is vital to ensuring a positive patient experience and encourages patients to take an active role in managing their overall health. EHR systems make this information much more accessible, and allow physicians and care providers to share patient data with other professionals.

This kind of care coordination has financial incentives through CMS and the potential to reduce overall costs. Healthcare CFOs will have to determine which system is best for their hospital in regard to cost and return on investment, while also taking into consideration the needs of physicians and care providers.

Additionally, a growing number of hospitals are acquiring, opening, and affiliating themselves with ambulatory surgery centers (ASCs) and medical imaging centers. Healthcare CFOs should have experience in acquisitions and a working knowledge of  the risks and benefits of such relationships.

The adoptions of MACRA and value-based reimbursement policies have increased the gross revenue risk for hospitals to between -17 percent and +35 percent, much higher than it has historically been. Healthcare CFOs are expected to manage funds and take financial risks based on imperfect data, as the government continuously rolls out new policies and programs.

Top 10 Health Systems by Net Patient Revenue and Their CFOs

Rank Definitive ID Health System CFO Name Net Patient Revenue
1. 4710 HCA Healthcare William Rutherford $42,937,374,750
2. 4713 Kaiser Permanente Kathy Lancaster $38,252,242,505
3. 981465 CommonSpirit Health Daniel Morissette, CPA $28,628,351,167
4. 845346 Kaiser Permanente Southern California N/A $18,812,985,786
5. 845347 Kaiser Permanente Northern California C.J. Bhalla $18,634,238,441
6. 4695 Ascension Health Elizabeth Foshage $17,461,135,191
7. 4716 Providence St. Joseph Health Venkat Bhamidipati $15,766,347,730
8. 4685 Tenet Healthcare Daniel Cencelmi $13,774,639,937
9. 4712 Trinity Health Benjamin Carter $13,161,597,445
10. 560423 University of California Health Nathan Brostrom $12,063,083,551

Fig 1 Data from Definitive Healthcare’s comprehensive Hospitals and IDNs platform. Financial data is reported by hospitals at the end of every fiscal year (which differs between individual facilities), and aggregated by IDN.

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