Hospital financial managers spend a lot of time trying to estimate or quantify what is virtually unquantifiable: future revenue and expenses.
So even though a hospital or health system chief financial officer might be used to a large amount of uncertainty and estimation, trying to do that in the dual worlds of fee-for-service and fee-for-value reimbursement seems as though it could be stressful.
A recent webinar sponsored by the AHA-affiliated Hospitals in Pursuit of Excellence outlined some core strategies that might ease some of that stress. Based on a recently published guide, "Navigating the Gap Between Volume and Value," one of the speakers described some of the practical steps he takes as a health system financial manager during this time of transformation.
Brian Kelly, executive vice president and CFO for Excela Health, made the case for why two sets of financial spending limits can be appropriate for handling the current industry uncertainty. As outlined in the guide, targets can be set for financial gauges such as "days cash on hand," operating margin and debt service coverage, with the understanding that strategic moves may be necessary to exceed those targets. That's why a minimum threshold also should be set.
"Ideally, an organization would have that targeted level as its threshold," Kelly said. But change is happening so quickly, it's unrealistic to think every contingency can be prepared for and embedded in that target.
"I'm sure, as finance folks operating within the industry, you get requests on a daily basis that aren't 'within the plan,' but are strategically necessary to help position against some of the changes taking place in the industry," Kelly told the attendees.
"Sometimes you have to press on those targets and they're not achievable, but by setting a minimum threshold, you're sort of drawing a line in the sand."
The webinar speakers also presented a number of questions that should be asked within five broader areas of concentration: strategic cost management, physician enterprise, clinical practice variation, business restructuring and merger integration.
Co-presenter Jason Sussman, a managing director for Kaufman Hall consulting firm, noted that the questions financial managers must ask to be prepared are changing. "These questions are not financial in nature. They're strategic in nature," Sussman said. "This is a significant change. We have to be far more aware of the external environment and the changes in that environment and translate that into the internal plan."
Content by Health Forum, Sponsored by: VHA