While the old image of a healthcare chief financial officer centered on accounting, budgeting and overseeing the financial operations in general of a healthcare system, changes to the industry are turning that idea on its head. As clinical quality and technological prowess now have direct effects on the financial health of a hospital, the modern CFO must have a far more overreaching set of skills to perform at the highest level in their jobs.
To illustrate that, Healthcare Finance spoke to three CFOs in the field about how they got to the top and how that role has evolved during their tenures. All of them said the job demands more strategizing, collaboration and concern over quality than ever before.
Jeff Francis, Nebraska Methodist Health System
"Nebraska nice" is the phrase Jeff Francis says people use to describe the feeling in Omaha, and it's a philosophy he said that carries over not just to neighbors but to his staff.
The 125-year-old system serves the Omaha metro area of roughly 900,000 people, comprised of three hospitals, a 200-plus physician group that has been part of the system since the late 1980s, a college for allied health and nursing and a distribution center. From a market share standpoint, they rank third with 23 percent of the population using their services.
As an undergraduate, Francis studied math and then later earned a Masters of Business Administration. According to him, he jumped at the opportunity to enter healthcare.
"What's different about healthcare is the complexity that you add in with a third-party: the insurer. There aren't many industries where you have that third-party interaction. So not only do you have to treat each patient in a unique way but you have payer contracting, each with its own set of rules and regulations. It's a fun, complicated environment."
According to Francis, success as a CFOs is not so tied to education as it is to the ability to create processes that support the business. A CFO must be able to make others successful, getting important information out timely and accurately so that operations people can have the right staffing level, supply spend info and, if a new project is the table, what it means from dollars and sense standpoint.
While a detail-oriented mind is a must, it's important to be able to take a broader view, he said. That's where successful CFOs will separate themselves from those who come up through the accounting field or other related areas.
"They get the details … which is important. But when you're trying to work with senior leaders or other operations people you need to be able to take a step back and help them understand the concept," Francis said.
Collaborating with senior leadership more is a rising trend in how a hospital or health system C-suite operates, and for Francis, the colleague he works with the most is the chief quality officer. It's a relationship that is fueled by the move from fee-for-service to quality.
"As we start to have more of our reimbursement at risk either through CMS value-based purchasing or some at-risk contracts with commercial payers or Medicare Advantage, we need to have the quality, because quality is driving reimbursement."
This shift is one of the biggest changes Francis said he's seen over the last five years.
"In the past that perspective wasn't really asked for or required in those discussions."
As systems get more data and use EHRs to marry financial health with quality for a more accurate picture of the system's success. To do that collaboration is key, and it's something he hopes to see more of in the C-suite.
"I do think that somebody could come in from the outside as a senior leader within finance to be able to understand and get the experience on the clinical, the quality, the payer relations, and then be able to ascend up to CFO," he said.
Linda Hoff, Legacy Health
Linda Hoff has held the CFO position at Legacy for almost three years, after being recruited from Meriter Health Services in Madison, Wisconsin where she served in the dual roles of CEO of the system's health plan and Legacy CFO. Meriter later affiliated with UnityPoint Health in 2014.
The move to Legacy brought her to a system that, from a revenue perspective, is twice as large, with $1.8 billion in revenue and an operating margin of 5 percent that is expected to stay the same for fiscal 2017.
As a student, Hoff eyed medicine, but it was her accounting classes which came most naturally and led her towards healthcare finance.
"I found it to be complex, challenging, ripe with opportunity for improvement and I think all those attributes apply today," Hoff said.
But there is the human side to healthcare, and that drew her in.
"The fact that you are able to apply finance abilities to an industry where you are doing good things for people. It's really rewarding. As part of a nonprofit, producing a bottom line that is invested in the community is really important to me. It's a lot more motivating than paying shareholders."
For her, a deep understanding of finances, especially from an analytical perspective, is key. A good CFO has to understand how if one lever changes in system, how it may affect finances.
"The reason I highlight that is sometimes accountants can get heads down and they can't provide an educated guess as to what the outcome might be based on a set of circumstances. You have to be able to do that … without sitting down and crunching numbers for two days."
That all comes back to strategic thinking. For her that includes helping the CEO with a perspective on how Legacy can be positioned in the market, what it means from a financial perspective, and in general serving as good counsel to the CEO and the board as they contemplate different strategic options. That relationship, she said, can make all the difference in the success of your system.
"You really have to be shoulder-to-shoulder with your board because a lot of what's going on in healthcare today is not for the faint of heart. Leadership can't execute that on its own. Your governance needs to be there with you helping you think broadly about your strategies and understanding the risk and opportunity that goes along with those strategies."
According to Hoff, finance pros like investment bankers have a passion for the deal and the finance aspects of it. In healthcare, she said, that's simply not enough.
"You have a passion for what you're doing within your facilities, how you're interacting with patients. You have to be as interested in patient satisfaction and quality as you are in the financials. If you don't have that passion for all those aspects, you're really not going to land yourself in a CFO role especially today."
Hoff expects CFOs should also work closely with chief information officers. With consumerism driving demand for convenient and mobile health services, health systems will have to consider how much they should be investing in IT.
Of course, staff development is also very important.
"Always be working yourself out of your job; always be bringing in the best and brightest talent without reservation about what that may mean for your future. I say that often around here. Push me."
Stacey Malakoff, Hospital for Special Surgery
When Stacey Malakoff came to New York City's Hospital Special Surgery 27 years ago, she came from a traditional finance role at Ernst and Whinney, now Ernst and Young. In 1998, she became their CFO.
"There could have been another woman CFO in the NYC metro area, and I just didn't know her, but it was not common. Now there are lots of us."
But her path into healthcare was forged early at Ernst and Whinney, since first client was the Hospital for Special Surgery.
"Luck of the draw," she said.
The stock market crash of 1987 led her to question her Wall Street plans, and it wasn't long before she left the firm to join HSS.
Back then, the system as a whole saw revenue numbers around $90 million. Today, enterprise-wide revenue tops out at $1.04 billion.
With that kind of growth, it's no surprise that Malakoff said her role as CFO is also evolving everyday. A big part of what she does also hinges on collaboration with the senior leadership team.
The executive team leadership of eight people includes the chief nursing officer, chief operating officer, chief information officer, and senior vice-president of global and academic affairs. Malakoff said many employees start at HSS and never leave, which means many of them have worked together for almost two decades.
"Nobody's afraid of speaking up and saying what they believe and talking through the issues," said Malakoff.
Looking ahead, she sees the role continuing to evolve along with the industry. And while she said that ideal CFOs have a well-rounded finance background, that set of ideals could be flexible as healthcare embraces elements of a retail. She said someone coming in from outside healthcare should tout a good strategic understanding, quick learning and a good business mind.
"That's what I enjoy coming to work for everyday, the challenge of the future."