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Inflation, Staffing Shortages, and More. How Mount Sinai South Nassau is Weathering The Storm

Analysis  |  By Amanda Schiavo  
   September 14, 2022

John Pohlman, CFO and SVP of Finance for Mount Sinai South Nassau, speaks about the challenges currently impacting healthcare leaders.

Maintaining the financial operations of a hospital or health system comes with a unique set of challenges that takes a steady hand to navigate. Labor shortages, rising expenses, COVID-19 infection surges, and other challenges have been plaguing the healthcare industry for years, forcing healthcare organizations to reevaluate the way they budget and do business.

John Pohlman, CFO, and senior vice president of finance for Mount Sinai South Nassau has been working to overcome these challenges since assuming the role back in October of 2019.

He has always been mathematically focused and wanted a career in finance. He came into the healthcare industry with an understanding of how unique it is, knowing it wasn’t an area to be taken lightly, and that the financial well-being of an organization must walk together with the well-being of patients.

Pohlman recently connected with HealthLeaders to discuss the financial challenges currently facing the healthcare sector, how to overcome those obstacles, and his ultimate goal for Mount Sinai South Nassau.

HealthLeaders: What financial challenges has Mount Sinai South Nassau been facing?

John Pohlman: I'll speak regarding the last six to eight months. I'll call it "post-pandemic" even though we’re still dealing with the pandemic, but we’re not in the heat of the battle like back in March and April of 2020. The challenges we’re facing currently, first and foremost, is staffing shortages—and it’s really across the board. Obviously, RNs are leaving, but it's also lab technicians, radiology technicians, and pharmacy technicians, too. It seems like every day we're dealing with a different job function and the shortages that exist. That's certainly driving wages a lot higher than what we saw a year or two ago. That's probably the biggest thing that keeps me awake at night.

The second is from a supply chain perspective. It's the supply chain challenges, inflation, and the impact that has had on our non-labor costs. I was recently in a meeting where I saw our utilities—natural gas and electric—have doubled in the last two months. That is certainly putting a strain on financial operations. And then in general, the cost of care is increasing at a significant pace and the problem we have in healthcare is we can't pass that cost on as quickly as they can in other industries.

HL: What strategies are you putting in place to overcome these issues?

Pohlman: We have reimbursement rates with our managed care companies that are locked in usually over several years. So, we are really locked in on the rate side and have to get creative and maybe open up discussions with those managed care companies or insurance carriers and say, "Listen, folks, we're seeing double-digit increases on the cost side, and we really need to open up negotiations and talk about reimbursement." Obviously, we don't want to impact the quality of care; we want to maintain that high quality of care that our communities deserve and that we're used to providing. So that really has been the struggle over the last eight months. I anticipate that it'll continue through the end of this year and into next year.

When it comes to staffing shortages, there has been a lot of focus on recruitment and retention. We probably have to focus more on the retention side and try to figure out how to keep our high-quality employees. We've recently rolled out what we call "senior leadership rounding" and it's senior leaders getting out to the different units and speaking to the leaders of those departments, but also the frontline staff to really understand the challenges that they're facing on a day-to-day basis. We've seen some positive results from those rounding episodes [that] we've had in place probably for a couple of months now. It's really allowing the frontline staff's voices to be heard, and it's eye-opening for the senior leaders as well because we're not out there in the trenches. To really understand what's going on day to day and the challenges that are that our teams are facing, [it helps] us as leaders to sit down and make some decisions that will support the entire organization.

HL: Have you personally sat down with any of the hospital staff to get a better understanding of what would keep them in the organization?

Pohlman: I haven't sat down with every department, but the departments I've been involved with are not shy. The number one item on their list, in my opinion, is wages. We look at wage data on an annual basis and we compare it to competitors in the area. We compare it to the metropolitan area as well, so that's one of the tools we have in place to make sure that we're competitive on the wage side. Because we're dealing with all the pressures of inflation, our employees are certainly feeling the pain on that personal finance side. We're making market adjustments throughout the year when the market tells us that wages are heading in a certain direction. We certainly adjust the best that we can.

HL: What is your goal for not only the financial well-being of the organization but also to continue providing high-quality care to patients?

Pohlman: Looking at an income statement every year, my goal is usually a 3% operating margin. We have top-line revenue of about $700 million. So, a 3% operating margin would be a surplus of around $20 million. With that surplus of $20 million, we can reinvest back into the organization. There are multiple buckets or silos that I think of when I talk about reinvestment. One is around capital and technology. We want to make sure that we're replacing our radiology equipment, MRI, CT scanners, and all the equipment in the operating rooms that support our surgeons and allow them to take care of patients. We want to make sure that we have the latest technology because that's going to provide the highest quality of care to our patients.

That's one reason why we need that operating surplus. The other reason is we want to reinvest in our staff and our employees. We want to continue to give wage increases and make market adjustments when necessary. Investing on the capital side and on the labor side certainly drives higher quality and patient satisfaction. That's always my goal from a financial perspective. We need to operate on the surplus side so we can continue to reinvest in the organization to support the communities that we serve and provide them with that high quality of care.

Amanda Schiavo is the Finance Editor for HealthLeaders.

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