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Q&A: Catholic Health Initiatives' New Senior VP for Capital Finance

May 20, 2013

Nick Barto recently stepped up his role at the 80-hospital health system to increase CHI's focus on strategic finance in light of healthcare reform and the shift in patient volumes to outpatient settings.


Catholic Health Initiatives, the 80-hospital, $10.7 billion nonprofit health system based in Englewood, CO, recently added the position of senior vice president for capital finance to its executive lineup. The new function will increase CHI's focus on strategic finance in light of healthcare reform and the shift in patient volumes to outpatient settings, says Nick Barto, who stepped into the role on May 7.

Barto oversees an annual capital budget of $1.1 billion, which he says will be largely invested in technology initiatives, revenue cycle solutions, physician practice management, and care management in 2013.

I spoke with Barto about the health system's decision to create the new position and about CHI's capital spending plans.

HealthLeaders Media: The position you are stepping into is new at Catholic Health Initiatives. What motivated the health system to add a senior vice president for capital finance?

Nick Barto: The many changes that have come—and will come—through healthcare reform and the Affordable Care Act have presented the entire industry with some considerable challenges. The industry and the environment continue to evolve, and large organizations like CHI, which operates in 17 states, must evolve and change with the times. … This position is connected very closely to strategy in terms of the ability to connect all things related to capital formation, capital acquisition, and capital deployment. This connection also extends to capital acquisition related to the debt program, outside investors, and banks—that is, our ability to access the capital markets and raise money from investors and commercial banks to help fund our growth strategy.

HealthLeaders: What will be your biggest challenge in this new role?

Barto: We are moving into an entirely new system of reimbursement in which health providers will be paid for value and outcomes and not for the volume of their services or the number of procedures. As we assume more of this risk, we need to be sure we are providing the best quality of care at the best and most affordable price. It's vitally important that we continue to improve clinical operations to remain financially healthy in this new landscape for healthcare.

One key area of focus is information technology. CHI is spending about $2.2 billion over five years in capital and operating expense on a system-wide, universal electronic health record that will help us improve care and better monitor our patients and our populations. … The challenge is the balance between what we've historically focused on in building integrated systems of care with a hospital-centric model and the focus on population health.

HealthLeaders: With all the priorities competing for capital dollars, how does CHI decide where to invest its funds?

Barto: The decision-making process is a balance between a bottom-up approach and a top-down approach. Our ministries continue to drive the need for investment in terms of replacement capital and growth capital related to their market priorities. At the same time, CHI has a perspective on some of the national capabilities we need to build in order to grow and diversify our geographic footprint as well as the revenue mix across the enterprise—specifically with a focus on growing non-hospital care and other services that enhance patient experience in terms of quality, satisfaction, and outcomes.

HealthLeaders: Where will CHI spend the bulk of its capital dollars in 2013?

Barto: In a significant departure from past years, when bricks and mortar tended to dominate decisions on capital investment, the majority of capital spending in FY13 is for information technology services. Spending in that key area represents about 37% of the budget, which is a significant increase from ITS spending in 2010 of just 6% of the total budget.

Spending on strategic capabilities and growth also has increased significantly over the last three years. This year, CHI will allot 24% to that area. In 2010, when our capital budget was about $825 million, it represented 10%.

To highlight the shift to these areas from more traditional bricks and mortar, the budget for routine replacement and facility repositioning and expansion represented 84% of the capital budget in 2010; this year, those two areas amount to 39%. So it's been a significant shift across the enterprise. The investment in ITS will improve our ability to gain some of the efficiencies we need in this new era of health reform, and generate the revenue to sustain the ministry.

HealthLeaders: Looking a little further out, what are CHI's strategic goals around capital investing for the next three to five years?

Barto: Our principal strategic goals include organic and new market growth in key areas, including statewide networks in Kentucky, Nebraska, and the Pacific Northwest; physician practice management—that is, the development and growth of employed physician networks across the enterprise, especially in terms of primary care—and investments in strategic initiatives, including care management and disease management and the development of clinically integrated networks.

Another key area is outpatient services. CHI is moving from a hospital-centric system to one that spans the entire continuum of care. A few years ago, the amount of net patient services revenue from outside the four walls of the hospital amounted to about 45% of the system's total. We are now around 52% and have established a long-range goal for 2020 of having 65% of all net patient services revenue from non-acute care services.

HealthLeaders: What is CHI's long-term growth strategy? Are you looking for merger/acquisition/partnership opportunities, etc.?

Barto: CHI is actively involved in opportunities for growth, both in existing markets as well as other areas when we feel we could improve and expand our healthcare ministry. Especially under healthcare reform, which is shifting the focus from volume to value, we need to have the size and scale that will allow us to develop truly integrated networks of care across all of our markets. That means creating alignments with many other providers—including employed and independent physicians, insurers, and other hospitals, among other potential partners—to move toward a system of coordinated care that provides the highest quality at an affordable cost.

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