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The 2007 HealthLeaders Annual CFO Survey

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Healthcare entities are doing well—at least that’s the view from the finance suite. More than half of the 281 respondents to HealthLeaders’ first annual survey of chief financial officers say their hospital, health plan or physician practice made more than a 5 percent margin in its most recent fiscal year, while slightly less than 8 percent experienced a negative margin. The overwhelming majority of respondents come from small, medium and large community hospitals, so those numbers suggest that if now is not the best of times for hospitals, it’s very close.

Some results are surprising, some are not. But in its entirety, the survey paints a complex picture of what’s on healthcare CFOs’ minds.

More than half of CFOs say they will add employees to their operations over the next five years, but very few, only 2.15 percent, expect that number to grow substantially. Just more than 40 percent are happy where they are or will slightly shrink their ranks.

The survey also indicates that now seems to be a good time to issue debt, which validates a trend I’ve noted in my reporting over the past year. More than 50 percent of survey respondents have issued bonds during the past five years, and of those, nearly 30 percent have done so in the past year. Rates are historically cheap, so it’s no wonder cranes and earth-movers are rumbling around healthcare facilities across the country. Perhaps not surprisingly, more than 70 percent of respondents plan to boost their capital spending in the coming fiscal year, and almost 35 percent plan to do so significantly.

Negative publicity about financial disclosure policies and collection efforts seems to have had some effect on behavior out of the finance suite, though without historical information from previous surveys, it’s difficult to definitively reach that conclusion. Despite that bad publicity in isolated but high-profile cases over the past couple of years, however, the overwhelming majority of respondents still report using outside collection agencies to service their self-pay accounts. Those who have abandoned the practice, though few, seem to have discontinued external collections either because they experienced a public relations problem or because they’ve instituted better internal collection policies. Similarly, more than 65 percent of respondents say that making financial information easily obtainable by the general public is at least somewhat important, a positive trend for an industry for which a large majority of facilities depend on their nonprofit status to survive.

One final note: We were surprised about the level of optimism about the potential for Medicare and commercial payer reimbursement increases over the next five years. That nearly 75 percent of respondents predict that Medicare will boost its at-risk-based reimbursement over that time period suggests that the trend toward pay for performance in both government and commercial plans still has plenty of room to run.

Philip Betbeze
Finance Editor
pbetbeze@healthleadersmedia.com