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10 things hospital CFOs should know in 2013

Things just won’t get any easier for hospitals in 2013. In the wake of a contentious 2012, this year proves to be just as challenging for hospitals and the healthcare industry in general.

“It’s tough being a CFO at a hospital,” said Brian Sanderson, managing partner of the health services group at Crowe Horwath. Sanderson often serves as a consultant to hospital CFOs.

Given the challenges CFOs will be facing this year, here are Sanderson’s top 10 things every hospital CFO should do in 2013:

1. Be prepared for ICD-10. The new coding will not be implemented until 2014 but getting ahead of it now should be a major focus for CFOs. “The bulk of the work should really be done in 2013,” said Sanderson. Three key aspects that should be addressed are:

  • technology: insuring all vendor connections are in place
  • training: physicians need to understand what the rules are
  • coding: learning the dictionary

Sanderson said CFOs should put an emphasis on coding. “The implications of this are vast. It’s a completely new dictionary for a lot of people,” he said. “Putting this in place will be very important.”

2. Organizations need to determine their strategy for physician integration. There are two approaches hospitals are taking, according to Sanderson. CFOs can take an offensive approach or play it defensively. Sanderson said being on the defensive is not much of a strategy at all.

3. Understand the financial implications of horizontal integration. Organizations are coming together to form new entities for a lot of reasons. Access to capital is one of them, Sanderson said, and hospitals need to be aware of how to utilize that and have a plan.

4. Make revenue an organization-wide responsibility. “It’s not just the CFO’s responsibility,” said Sanderson. It’s an all-hands-on-deck approach to keeping a hospital’s bottom line afloat. “Revenue isn’t just finance and expense isn’t just operations.”

5. Get the CFO involved in the cost side of a hospital’s budget. Expenses are part of a hospital’s bottom line and CFOs need to be involved with whatever helps make a hospital more or less profitable, he said. “The CFO needs to understand both sides of it.”

6. Define what population management means for your organization and your role in it. Sanderson said it’s important for organizations to be able to assume risk. Population management can help dictate this.

7. Financially model your organization. There are several layers to this, Sanderson said. First, CFOs should have all commercial contracts reverted to Medicare rates and see how the organization stands. “That’s where the bar is being set.” Also, hospitals should double self-pay to help cover the gap. Sanderson said it’s important for CFOs to project a net revenue loss of 1 percent each year over the next 10 years. “It’s their role to be very realistic about what the future looks like. There will be cuts in margins. Things will be happening over the course of time that will put revenues at risk. Most of the CFOs that I talk to believe that the rate of revenue increase, particularly on the managed care contracts, is going to flatten. Revenue is not going to escalate the way it has in the past.”

8. Commence the annual revenue assessment. Look at revenue cycle, privacy and security issues and technology, said Sanderson.

9. Recalibrate the compliance program. “You go back five to 10 years ago, people used to follow the OIG program,” said Sanderson. Now there are all types of programs that are performing audits and the amount of resources for compliance has increased significantly.

10. Capturing the real cost of charity care. “Organizations haven’t been good at this,” Sanderson said. It’s not a matter of taking part in charity care, he said, but rather taking advantage of the tax benefits of the process. “There are lots of opportunities to capture the tax exempt of their charity care,” said Sanderson.


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