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4 Perspectives on What Financial Leaders Must Do Next

 |  By kminich-pourshadi@healthleadersmedia.com  
   July 09, 2012

The tagline of this year's Healthcare Financial Management Association annual conference—"Do the impossible. Do it again"—was apropos for healthcare CFOs, who sought answers for the frustration and confusion embodying the current healthcare climate. While uncertainty definitely remains, four perspectives remain with me:

From a banker: Bank of America Managing Director Andrew Bressler recommends that financial leaders anticipate and plan for reductions in Medicare payments. While a great deal of uncertainty comes from the pending Presidential elections and from the Congressional Super Committee's inability to agree on pending automatic budget reductions, the fact remains that a 2% reduction in Medicare payments is inevitable, as the government attempts to wring out $100 billion in the next 10 years, which will apply to 90% of Medicare spending, he notes.

Bressler also encourages CFOs to plow ahead with Medicare shared savings programs and accountable care organizations and to establish bundled payment initiatives.

From a ratings expert: Fitch Ratings Senior Director James LeBuhn says the current and future outlook for the not-for-profit hospital and health system sector will hold at stable to negative, which will dampen credit ratings. LeBuhn's perspective on the road ahead for financial leaders might best be summarized as "proceed with caution." Not-for-profit hospital and health systems will endure continued reimbursement pressures, budget issues, consolidation to achieve size and scale, and questions surrounding value-based payment models, he says.

The picture isn't all bleak, though. LeBuhn points to consistent financial stability among many hospitals and health systems in recent years, which he says is a credit to "very strong leadership" as well as solid community support and political ties.

Not unlike many healthcare sector analysts, however, LeBuhn believes that one healthcare segment in particular will be challenged: the standalone hospital. The industry trend toward consolidation in order to achieve a necessary level of size and scale to attain operating efficiency will likely widen the credit gap between large systems and standalones, he says, adding that "The gap is already there."

Outside of standalone facilities, Fitch believes the not-for-profit healthcare sector has some core credit strengths to its credit. Four areas which LeBuhn and his organization say will offset some of the negative economic and legislative pressures influencing ratings are: the essentiality of healthcare services, being the major employer in a community, strong and improving liquidity, and a strong political voice at the state and federal levels.

From a former U.S. Comptroller: Former Comptroller General of the United States and CEO of the Government Accountability Office for over 10 years, David Walker believes the ACA "is not affordable and it is not sustainable." Many financial leaders in the audience nodded in agreement with this statement. But that doesn't mean that healthcare reform in some capacity isn't needed, Walker notes.

"We have to recapture control of the budget, including healthcare," the keynote speaker told a packed audience at the conference. "We must find a way to make healthcare more appropriate, affordable, and sustainable. Given the nation's rising debt load and the cost of healthcare, we must do so quickly—by the end of 2013."

Difficult decisions will need to be made in the coming years, and healthcare leaders should be prepared. "Understand the federal government is going to have to have a budget for what it spends on health care," Walker said. Along with individuals taking responsibility for and monitoring their own healthcare spending, he espouses a universal plan that includes preventive care, wellness, and catastrophic care which is financed through the government and the private sector.

From the HFMA chair: Ralph Lawson, executive vice president and CFO of Baptist Health South Florida in Coral Gables and the 2012–2013 HFMA national chair, said CFOs must deal with transformation and prepare their organizations for the future.

"We must be persistent, determined, and patient," he said. "[CFOs] are the ones who have the talent, the energy, and the know-how. Who's better than us to lead this effort to solve the healthcare problem?"

The timing of this year's HFMA national conference couldn't have been more fitting. As financial leaders discussed how to handle the complexities of government mandates, the U.S. Supreme Court was putting the final touches on its Patient Protection and Affordable Care Acxt ruling that effectively upheld the individual mandate and said states couldn't be forced to expand Medicaid. Even without the benefit of the justices' decision, all four speakers at HFMA agreed on one piece of guiding advice for attendees: although it may seem impossible to achieve all that needs to be done in healthcare in the coming years, there is no choice but to continue full speed ahead in an effort to accomplish better care at a reduced cost.

 

Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
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