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Finance: Buoying the Bottom Line

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The recession caused a nationwide shift in priorities last year, so it's not surprising that after watching their once buoyant financials plummet, healthcare CFOs would also reshuffle their priorities. The result: Quality was moved down as a priority in favor of physician recruitment and cost reduction, according to the HealthLeaders Media Industry Survey 2010.

Results reveal that the dual-track economic and healthcare reform rollercoaster has CFOs rethinking what's important. Financial leaders ranked their top three priorities for the next three years as:

  1. Physician recruitment and retention (37.50%)
  2. Cost reduction (35.53%)
  3. Patient experience/patient satisfaction (33.55%)

Flashback to a year earlier, when CFOs prioritized this way:

  1. Quality/patient safety (68%)
  2. Physician recruitment and retention (38%)
  3. Reimbursement (31%)

This year's report shows that several of the 2009 priorities slipped quite a bit. Reimbursement moved to the sixth slot, dropping three positions and 4 points, with just 24% of respondents seeing it as a top priority versus 31% the previous year. Meanwhile, revenue cycle spiraled down from fourth place to ninth place, with only 14% of financial leaders ranking it as a top priority versus 20% in last year's report.

Physician recruitment, specifically specialist recruitment, is consistently important at facilities. However, in the past year it became essential in terms of reimbursement levels as well as a potential marketing opportunity.

"Physician recruitment jockeyed up to first because CFOs realize physicians are the source of the patients that come to the institution; so, they are looking to maximize revenue through the recruitment and retention of physicians," explains Michael Burke, CFO at New York University Langone Medical Center.

"New doctors bring in new patients and incremental volume. That's easier to do than to make constant, repetitive cost reductions," says Burke of why recruitment surpassed cost reduction on the priority list.

Providers that had large investments generating returns in excess of what their institution generated from operations were able to benefit from the returns the equity and alternative markets could provide, explains Ann Pumpian, CFO at the nonprofit, San Diego-based Sharp HealthCare, a regional healthcare delivery system.

When the equity market collapsed, those organizations were put in a position to drive significant cost reductions to meet their financial targets. "Sharp HealthCare has not had the opportunity to benefit from large investment returns. As a result, our focus has always been on managing our costs as efficiently and effectively as possible," Pumpian says. "Certainly the legislative direction discussed in health reform suggests that providers will need to continue to find ways to provide high-quality care at a lower cost."

For some facilities, however, cost reductions represent one-time savings. "You can't cut yourself to prosperity," notes Burke. "Sustainable growth comes from sustained growth on the top line and constant stringent management of the variable cost of that top line, and then making sure you get margin by growing."

Karen Minich-Pourshadi

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