CFOs are battling a multitude of challenges, but there are four that are not only top of mind but make-or-break for hospitals and health systems.
Hospital and health system CFOs are constantly facing pressure to reduce costs while maintaining high quality patient care especially as labor costs are skyrocketing and margins are being squeezed.
This means CFOs must carefully analyze cost structures and look for opportunities to improve operational efficiencies in order to remain financially viable.
To talk strategy and find solutions to these challenges, dozens of finance leaders from across the country recently met in San Diego for our HealthLeaders CFO Exchange. During the event, attendees discussed four main ways they are securing that financial viability.
15-months ahead?
One key takeaway from the event is the importance of starting negotiations with payers early—very early.
Many health system CFOs at the event said they are beginning their discussions on renewals and contract negotiations as early as 15 months in advance. When a few months out was once the norm, CFOs say starting yearly ensures they can get the terms they really want.
“Starting those payer contract negotiations early has been imperative for our system,” Hannah Jacobs, senior VP and CFO at Frederick Health said at the event.
Thinking this far ahead is crucial for CFOs to ensure that they are securing favorable terms and reimbursement rates from payers, which directly impacts their organization's financial health. By initiating these conversations early, CFOs have a greater opportunity to advocate for fair payment rates and avoid unnecessary financial strain.
Budgeting for AI, And Doing it Wisely
Another critical pain point for hospital and health system CFOs is budgeting for AI.
It’s essential for CFOs to carefully consider their organization's specific needs and goals when investing in AI technology, especially as every department in the hospital is likely coming to you looking for some sort of solution.
Simply purchasing AI tools for the sake of staying current with technology trends can lead to wasteful spending and inefficiencies, the attendees said.
So, the best solution for both of these challenges? Creating a consolidated, organizationalwide AI policy.
“We have leaders in every pocket of the system asking for AI in their department, but there is no overarching AI strategy in place which makes budgeting disjointed,” said Donna Wallace, VP of financial accounting from Integris Health.
Once the budgeting can be streamlined, leaders must then evaluate how AI can be effectively utilized to improve revenue cycle management, operational efficiency, and patient care outcomes.
By budgeting wisely for AI technology that aligns with their strategic objectives, CFOs can maximize ROI and drive sustainable growth for their organization.
Pictured: Attendees discuss major pain points during the 2023 CFO Exchange.
Where Have All The Hospitalists Gone?
Yes, nursing recruiting and retention is still a huge pain point for CFOs, but don’t forget about the physicians.
As more physicians transition to the ambulatory setting in search of more pay and better hours, hospital and health system CFOs say they are dealing with the challenge of retaining these providers both at the bedside and within the network.
Reassessing retainment strategies is obviously the best place to start, the CFOs at the event said. And on the same hand, it’s crucial for CFOs to develop a strategy for accommodating physicians who may want to return to the system in the future. This includes exploring alternative incentive models, such as value-based care arrangements, to attract and retain providers without solely relying on monetary incentives.
By proactively addressing the evolving needs of physicians and adapting to changes in the market, CFOs can strengthen their organization's position and foster long-term relationships with healthcare providers.
Does a Decrease in LOS Mean More Revenue?
Lastly, CFOs must be cautious about assuming that a decrease in length of stay (LOS) automatically translates to increased revenue.
Attendees agreed that it’s imperative for CFOs to assess the true ROI of their technology solutions and initiatives, especially since many vendors don’t come armed with any data.
Implementing technology that streamlines workflows and enhances patient care may lead to shorter LOS, but CFOs must evaluate the financial impact of these efficiencies.
“At our hospital, we implemented new technology that reduced our LOS, but I had to add 20 other FTEs to accommodate for the tech,” Wallace said. “So, CFOs need to be aware that a reduced LOS does not always equal an increase in revenue.”
By conducting thorough financial analyses and performance evaluations, finance leaders can ensure that their technology investments are generating sustainable revenue growth and improving overall financial performance.
So, what did we take away from this year’s event?
Well, hospital and health system CFOs are addressing the complex and rapidly evolving healthcare environment by executing early payer negotiations, strategic budgeting and planning for AI technology, physician retention strategies, and ROI assessments for technology investments that look beyond LOS; and you should be doing the same.
Our Spring 2024 CFO Exchange is taking place until May 10 at the Fairmont Grand Del Mar in San Diego.
Are you a CFO or finance leader interested in attending an upcoming event? To inquire about attending the HealthLeaders Exchange event, email us at exchange@healthleadersmedia.com.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
Amanda Norris is the Director of Content for HealthLeaders.