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Analysis

CFOs Take on Bigger Roles as Strategic Advisors

By Gregory A. Freeman  
   January 15, 2018

With the healthcare industry landscape so uncertain, CFOs are feeling pressure to 'advise on the financial impact every decision an organization makes.'

Healthcare CFOs are increasingly becoming strategic advisors for their organizations, with stakeholders looking to them for answers about how they should best position the hospital or health system.

CFOs are feeling the pressure to trade in their spreadsheets for crystal balls, when what they really want is a good way to integrate long-range financial planning with the tactical cost reductions they are implementing every day.

The changing landscape for reimbursement and the uncertainty over issues such as health insurance legislation mean that there is more focus on the financial impact of every decision made in the boardroom and the C-suite, says Jay Spence, vice president of healthcare solutions with Kaufman Hall, which provides consulting and software solutions to the healthcare industry.  

Making the call

"[CFOs] are being asked to determine and advise on the financial impact of every decision an organization makes. They need to be able to project out multiple versions of the future, multiple scenarios," he says. "The idea of making assumptions about the future and then having one forward-looking plan could be done 10 or 15 years ago with a fair amount of confidence, but not now. They're being asked to do that with multiple possible scenarios now."

It is becoming critically important for CFOs to be able to support initiatives-based and scenario-based modeling capabilities around financial planning processes, Spence says. That means being able to set baseline assumptions around market volumes, reimbursement rates, and cost structures.

"That's what they will need to keep operating margins back, maintain a certain amount of capital spend, and have a certain operating margin to support that. All of those things are impacted by the decisions that have to be made on a daily basis, and healthcare organizations are increasingly looking to the CFO for the answers," Spence says. "CFOs are feeling the demand but they are not always sure how they are going to predict the future and make the right call."

The plight of today's healthcare CFO

In the company's 2018 CFO Outlook report, 95% of surveyed healthcare CFOs said they are experiencing increasing pressure to have greater insight into how financial results impact business strategy, and 90% think their organizations should be doing more to leverage financial and operational data to inform strategic decisions.

Gregory A. Freeman is a contributing writer for HealthLeaders.


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