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Finance: Prioritization Is Key

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For more analysis and a look at the complete survey results from all sectors, please visit our HealthLeaders Media Industry Survey 2009 Web page, which features downloadable reports covering CEOs, finance, technology, quality, marketing, health plan, physician, and community and rural leaders.

Hospital and health system chief financial officers are arguably the senior leaders most removed from clinical operations, yet they are surprisingly tuned in to the organization's top priorities, which are strongly clinical, according to our annual survey of hospital CFOs. When asked to rank their organization's top priorities, both CFOs and CEOs ranked quality and patient safety among the top three priorities for their organization over the next three years—and by a wide margin, CFOs saw it as the top priority.

Of course, with recent efforts by many payers to link quality with reimbursement, financial well-being is more connected with clinical quality than ever before. But among issues over which CFOs exert more direct control, other priorities take precedence.

"I would place physician inefficiency at the top of the list," says John Winfrey, CFO at DCH Health System in Tuscaloosa, AL. Indeed, CFOs ranked physician inefficiency as a cost driver exceeded only by government regulations, labor, and clinical technology. "If we as an industry could control excess ordering of tests, more timely attention to discharge, and more accurate documentation, then much of the cost and reimbursement issues would be handled," Winfrey says.

The survey also shows that about 37% of CFOs believed consumer-directed healthcare offered the best hope for the long-term viability of the industry; government-mandated universal health insurance was a strong second place, at 27%.

Financial stability for hospitals is strong in most cases, although it must be noted that most respondents completed the survey in late September 2008, just as the dramatic scope of the economic crisis was beginning to take hold. For instance, about 49% of hospital CFOs expected their organization to make at least a 3.5% margin in 2008, while only 7.5% expected their hospital to lose money during the fiscal year.

Bradley King, vice president and CFO at Oregon Health & Science University, was surprised that so many CFOs predicted strong positive financial results for this fiscal year. "I guess they don't have many investments, nor count on the investment income for much of their bottom lines," he says.

More than 30% of CFOs expected their capital spending levels to stay flat in 2009, perhaps reflecting the economic downturn. But significantly, more saw a slight or significant increase in capital spending for the coming year (22.6% and 17.5%, respectively) than the other way around.

Given the growing influence on billing and collections, hospital finance departments are expected to grow in a healthy manner in 2009. While a little more than 4% saw any decrease in finance FTEs in the coming five years, more than 40% saw an increase coming. More than 35% had days cash on hand, a key metric, of more than 90 days, and more than 35% expected their days cash to improve, although more than 25% expected that metric to worsen in the coming year. The accounts receivable days metric was not as impressive among our respondents. Nearly 90% were more than 36 days, but anything less than that is excellent—and most respondents expected that the metric would improve substantially.

Most CFOs did not find long-term planning to be very strong at their hospital, but one CFO had an interesting opinion about this question.

"I found the percentage of CFOs who thought long-term planning was strong [40%] surprising," says Kimberly Boynton, CFO at Crouse Hospital in Syracuse, NY. "In today's healthcare environment and economy it is so difficult to produce any long-range plans. I find the most difficult part of my responsibilities as CFO today is the completion of the hospital's five- and 10-year projections."

For the next HealthLeaders magazine story in this package, visit www.healthleadersmedia.com/industry_survey/quality. For complete, detailed survey results, visit www.healthleadersmedia.com/industry_survey.

—Philip Betbeze

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