Nurses are striking. Payers are flexing. What’s a CFO to do?
2023 may end up being the year that healthcare chief financial officers envy their counterparts in retail or manufacturing. When costs go up for those CFOS, they can always raise prices. Not so for hospital financial leaders whose revenue butts against the brick walls of commercial payers and the U.S. government.
What has pushed health system margins to the breaking point has been an unprecedented rise in the cost of clinical labor, coupled with a slow return to pre-COVID volume that might help make up for narrow operating margins. What CFOs can do in the meantime may fall back to good old hard decisions: cut labor costs strategically, play hard with payers and take risks on new revenue streams.
How to attack these hard decisions requires some careful planning, and some advice. We asked the members of the HealthLeaders CFO Exchange for the top issues they are facing in 2023. Below are just a few. For a deeper dive, the members of the HealthLeaders CFO Exchange will gather March 22-24 to talk strategy, workarounds and solutions to:
Hard decisions for the workforce
Of particular concern for CFOs is the potential for nursing labor costs to lead to nursing labor strife. No CFO who wants to get to the point where their caregivers are walking out, but neither can a reasonable CFO ignore the rise of clinical labor costs and how to incorporate that into a long-term strategy. Inherent in that discussion is a realistic view of temporary labor.
CFOs are always looking for ways to keep labor nimble, with solutions that optimize costs by more closely matching with volume.
Leverage with payers
There is no such thing as mutual “payer relations” these days as the nation’s health insurance conglomerates continue to enjoy record profits, and along with that the leverage to keep forcing down rates in negotiations with health systems. Providers are finding it increasingly difficult and costly to manage the delays and denials payers are throwing at them.
How to respond? Looking to lock in contract rates over a longer term may help even out the effects of recent inflation.
Fighting back has its risks. Some providers are scaling back participation in Medicare Advantage plans, which may end up alienating patients. Some providers may also revisit the idea of provider-owned health plans, hoping that the experience will provide more value than previous cycles.
Market dynamics: Threats and opportunities
Even in a down market, growth is still an imperative. Whether to build, buy, partner or merge will depend on the threats or opportunities in your market. But 2023 demands a consistent and methodical approach, looking carefully at the effects of inflation on proformas and new services.
And while CFOs are looking at those, don’t forget to watch your physicians, who may be having lunch today with the provider wing of a giant payer or VC-backed clinic that will cherry pick what is left of your reliable customer base.
Debt, investments, and cash
Even with strategic questions taking up considerable executive bandwidth in 2023, there is still the urgency to keep all the cash you can now. Are you reviewing every contract for value? Have you squeezed out all the value you can in supply chain and employee benefits?
Is the investment portfolio correctly balanced for risk and growth? Are you buoyed against looming debt covenants? Is your bond rating at risk of a downgrade?
None of these questions are necessarily new for 2023.
But the solutions just might be.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
Join us March 22-24 in Miami for the 2023 HealthLeaders CFO Exchange. To inquire about attending a HealthLeaders Exchange event, email us at exchange@healthleadersmedia.com. Space is limited so reach out immediately.