The healthcare industry is undergoing dramatic change. Mergers and acquisitions are being announced almost weekly, patient records are going all-digital, and healthcare reimbursement is evolving.
Along with these changes is a new role for the hospital chief financial officer – one that is more strategic, and which requires some very specific skills and experiences.
“The traditional CFO model in years past had been more bottom-line focused with an emphasis on revenue and expenses,” explained Paul Esselman, executive vice president and managing principal at Cejka Executive Search in St. Louis, Mo. “The demands and expectations of today’s hospital CFO reflect the changing priorities of the organization and the evolution of healthcare reimbursement.”.
Esselman said there remains a very high demand for talented and effective hospital-based finance leaders, but the desired qualifications are changing.
“As hospitals prepare to shift to value-based business models, CFOs are being asked to facilitate physician employment arrangements and must be prepared to address issues related to care coordination, population health management and ongoing performance measurements,” Esselman says. “These are new challenges for hospital leadership teams, and the CFO has to play a key role in the transformation.”
[See also: CFOs earn a fraction of CEO pay.]
That view is shared by Thomas P. Quinn, a senior partner in Witt/Kieffer’s Boston office. Quinn specializes in all aspects of executive search for healthcare, including leading search assignments, identifying and evaluating prominent candidates for key leadership roles.
The market for hospital CFOs is “hot” right now, Quinn said. His firm is currently conducting searches for 26 CFOs. Most in demand are financial leaders with backgrounds working in hospital settings, larger health groups, physician groups, and health plans. But beyond the basic healthcare background, Quinn agrees that the ideal candidate must bring other qualities to the job.
“They must help clinical folks manage bigger and better healthcare groups, keep costs under control, and look for new revenue opportunities,” Quinn explained. Think of the role as no longer just running the treasury, but helping to run the business. The hospital CFO needs to be a true strategic business partner.
Success in the role requires someone that isn’t fazed by change or challenge. Much of the impact of changing requirements in healthcare falls right into the CFO’s lap. As a result, while non-healthcare finance professionals will be considered, the best match for a CFO vacancy is clearly someone already in the industry, and especially in a hospital setting.
“When recruiting hospital CFOs, there is a strong preference for healthcare finance experience and particularly hospital finance experience,” Esselman said. “Candidates who have spent the majority of their career in hospital and health system finance are usually preferred to other healthcare finance candidates such as medical group or managed care.”
So what is the ideal background for today’s hospital CFO?
Definitely experience as a CFO already, Quinn said, and preferably in a hospital setting. Combine that with experience managing physician-based contracts, health plans, and risk management. The individual should not only be a good cost controller, but a solid strategic business partner.
“Generally, someone who has a strong accounting foundation with a CPA,” Esselman said. “They have progressively held positions of expanded responsibility in finance areas such as accounting, budgeting, revenue cycle/patient financial services, managed care contracting and strategic financial planning.”.
Beyond hospital experience, what else should the ideal CFO candidate have on their resume?
“Strong communication, negotiation and planning skills,” for starters, Esselman said. Next up: “The ability to interact and engage with the board, senior leadership and managers, as well as physicians.”
In terms of education and training, “This varies, but most have a degree in accounting or finance with an advanced degree, such as an MBA with CPA certification,” Esselman noted.
Quinn agreed, saying CFO candidates “must have a CPA or an MBA – ideally, both.”
Finally, the successful hospital CFO needs to be highly analytical as well as strategic and forward thinking.
“Most importantly; the CFO must have the ability to be flexible and adapt and respond to a changing healthcare market,” Esselman said. “They must be attuned to the community they serve, understand the market dynamics and competitive landscape, and be able to participate in the strategic direction of the organization.”
In terms of training in hospital operations for the CFO candidate, the more the better, Esselman said.
“Operations training allows the CFO to have a strong understanding of the challenges and opportunities for each department and how it impacts the hospital’s bottom-line,” Esselman affirmed. “Challenges of staffing, supply chain management, length of stay and physical plant operations can be complex issues, which can have a significant financial impact. The better informed and knowledgeable a CFO is, the better they can manage the budget.”