5 Hospital Finance Questions to Ask Right Now

Late December is the time of year when we look at ahead with anticipation at what the future holds. With only days left in 2010, financial leaders will be shifting their thoughts back to financial forecasts. To help guide the planning, I checked in with two seasoned healthcare CFOs to get their insights on what 2011 may hold. These are five questions to which every CFO should have an answer.

1. What is one issue that you believe will influence your hospital/health system in 2011?
Physician shortage: "People have talked for years about the primary care physician shortage… there's a lot of talking but not much is done about it. There are a large number of people hitting Medicare age and there are fewer physicians who are taking new Medicare patients. There doesn't seem to be any solution on the horizon."–Jeff Rooney, senior vice president and interim CFO at 430-bed St. Agnes Medical Center in Fresno, CA.

EHR and Reimbursement: "Health reform is going to impact hospitals from a couple of different perspectives: the requirement to implement EHR and how it affects reimbursements. If you don't implement an EHR and you can't demonstrate meaningful use then your reimbursement will be potentially negative. This is the number one issue that will kick in in 2011. Though you have several years to demonstrate [meaningful use], if you don't get going in 2011 it will be difficult to meet the requirement in time."–John Ortiz, partner at Tatum LLC, a Atlanta-based executive services firm, and the former director of management services at Sisters of Charity Health System in Cleveland, OH.

2. What do you anticipate will have the greatest effect on hospital's margins, and why?
Accountable Care Organizations: "The financial pressures over the years have only increased and the margins have only become thinner. The margins on outpatient services are larger than on inpatient. The whole ACO model is where doctors and hospitals … will take a more comprehensive look at the [financial] pie—it's not the doctor's pie and the hospital's pie with different margins, now there will be one pie to divide."–Rooney

Meaningful Use: "Reimbursements are going to be reduced for hospitals if they don't effectively implement EHRs, and demonstrating meaningful use is extremely costly… so the ability to actually incur that cost as well as the possible downside impact if don't implement their EHR well could be a double whammy. It's one of the reasons you'll all see more independent hospitals looking for partnerships, alliances and acquisitions."–Ortiz

3. How should CFOs try to offset negative influences from the issues you mention?
Lean and Six Sigma: "Healthcare, despite all the industry resources, is still behind on the deployment of process excellence and using Six Sigma and Lean initiatives to ratchet down costs. Administrators will say they've done a lot to control costs, but I'd say, 'I don't think we've done enough.' Regardless of what's been done, there's not going to be much margin to split in the coming years…we need to be very focused on costs for the next few years as we've been for the last four years."–Rooney

Cutting Costs: "They're going to have to better manage their operations; many feel they have done as much as they can but in my experience many in healthcare haven't done enough to lower their costs. Hospital executives are going to have to leave their comfort zones–it's really going to be a challenge."–Ortiz

4. What are the greatest financial challenges hospitals will face in 2011 and going forward the next 5 years?
Revenue Cycle and Collections: "Not much different than what's been their challenge all along: collection and revenue cycle [management]. Now if you have real efficiency in one area then you don't have to focus on that. But it's a never-ending series of improvements."–Rooney 

Reimbursements and EHR Implementation: "Though I know I said it before, the pressure on reimbursement is going to be big challenge–they are not going to go up for hospitals or physicians." – Ortiz

5. Do you anticipate a double-dip recession for 2011 or do you feel the economy is rebounding, and why?
Slow improvement: "My feeling is that unemployment rates are still high … and healthcare is not immune. A lot of CFOs will tell you that bad debt and charity care have been skyrocketing and insured people can't afford their care. I don't see it getting better soon… it's not a pretty picture at least for a couple more years."–Rooney

Stabilizing: "I don't sense we'll experience a double-dip. The healthcare industry has experienced a lot of negative impact from the recession with more and more self-pay [patients], … but it's stable at this point and in some cases numbers are going down in terms of patients without insurance. Still I don't sense a momentum that would lead to a quick reversal; I think it's going to be slow and steady improvement."–Ortiz

While Rooney and Ortiz offer a quick glimpse of what some healthcare CFOs are anticipating for 2011, if you'd like to read more thoughts on what your peers anticipate for 2011, check out this recent article in HealthLeaders Magazine. Although there are many challenges ahead for healthcare leaders, here's wishing all hospitals and health systems a very prosperous new year.