The California health system's new CFO gives insight on his strategic approach to maneuvering a challenging market.
There have been easier times than now to take over the finances of a hospital or health system.
While the COVID-19 pandemic is nowhere near its peak, the ramifications of the variants are still being felt. Between that and broader economic issues, financial decision makers in the healthcare industry have their hands full.
New Scripps Health CFO and corporate senior vice president Brett Tande is embracing the challenge, making the move from Cottage Health, where he served as CFO and senior vice president of finance since 2016, to the San Diego-based four-hospital health system.
Since taking over on March 28, Tande is responsible for financial planning and financial operations, which includes corporate finance, treasury, hospital and ambulatory financial operations, real estate operations, payroll, revenue cycle and all affiliated functions.
HealthLeaders had the opportunity to speak with Tande about his new role, the current financial trends in healthcare, and how to navigate a turbulent landscape.
This conversation has been edited for clarity and brevity.
HealthLeaders: How has the experience been so far of rolling up your sleeves and diving into the work?
Brett Tande: Scripps is not unlike every other healthcare organization coming out of omicron. We've seen volumes be tough. There's been a lot of reports out there about operating margins within healthcare. There have been organizations that have been losing a little bit of money. The last couple of years have been a lot different, say, than the two decades before that in terms of hospital operations. A lot of folks were able to groove into an operating margin that was, lets call it 3%, and you can make that work. And we're finding ourselves in a fiscal year, everyone is, that is a little bit upended.
Of course, very few people probably budgeted omicron, very few people budgeted some of the inflationary pressures that we're seeing today. And as we think forward, it is a different planning environment than we've had, I would argue since the early 1980s, maybe a little bit in the late 90s with the Balanced Budget Act during the Clinton administration.
In California, we have seismic compliance law. Scripps is one of those organizations that has to comply with that. We've got rebuilding projects that are under way at La Jolla. We're going to soon be starting that at our Encinitas campus. And we have those downtown at Scripps Mercy and at Scripps Chula Vista. So those capital programs could require as much as two billion in capital expenditure over the next five to 10 years. So we're going to have to make sure that we plan accordingly and find ways to maintain quality, to continue to grow, to maintain a bottom line that's in the black and fund these programs to make sure that we can continue providing the high level of care that we have in the past.
HL: Has there been one primary area of focus for you since you've joined?
Tande: The organization has done a lot of great planning, and that's going to have to continue because the plans we made, or for that matter any organization made, call it five or six months ago, you can take that and toss it aside. Given there are certain variables or assumptions you make related to volume, related to inflation that can dramatically change that. So whether it's a short-term financial plan or a long-term financial plan, a lot of those are going to have to get refreshed with current market thinking, the course corrections that may be necessary there and start to plan for those.
And there's ways to do that. Whether it's in revenue cycle, I would say there's always opportunity to make sure that we're coding things correctly. We don't want to get paid a penny more or a penny less than what we think should be paid given the care that was delivered to patients. We want to make sure that we're being smart with our operating expenses.
Recruitment has been a challenge, and so a lot of organizations have filled that in with travelers. We have to make sure we get down to not only how we recruit folks, but that we minimize the premium that's being paid to the extent that's possible. And that we're procuring supplies as cost effectively as we can.
HL: What do you identify as the biggest pain points for healthcare CFOs and decision makers right now, as well as going forward?
Tande: It does tend to be the case that healthcare systems' revenue on a per patient basis is perhaps a little bit more fixed than you would see on the expense side. So as an example, if we're short-staffed and revenue cycle are on the clinical side and need to supplement that, there are ways to do that with short-term staffing solutions. And that usually comes at a premium so you can see that expense pop pretty quickly. You won't necessarily see your revenue be as flexible to that as well.
The current pressure right now is variable expenses that are going to react to inflation, and we are going to see increases there. That's not how healthcare reimbursement works, right? Medicare is not going to be making those similar movements and you won't see that with commercial contracts either. So that is going to be a challenge and trying to modulate those increases with the timing there to make sure that it works for various health care systems. Those with bigger balance sheets are going to be able to weather that turbulence a bit better than perhaps those that don't.
The last couple of years, there have been other challenges to come up as well. Cybersecurity has been increasingly near the top of a lot of risks, to organizations to spend. If you would compare that five years ago to what it is today and the risks that organizations face on that front, it's a lot different. That won't be ebbing at any point soon.
HL: What are there some of the specific strategies that could be used to combat these challenges?
Tande: I always tend to view revenue cycles as being one of those, making sure that we're getting accurate bills put together and out the door as quickly as we can. Responding to inquiries from payers, having timely follow-ups. In healthcare, a lot of times, it's focusing on the rules and regulations on every front.
To the extent that we can make sure that we understand those, follow those rules, and make sure we're as precise as possible and efficient on what I'll call the back office, particularly from a financial perspective. The clinical teams are always doing a great job and to the extent that we can be efficient and precise on the back office of it, and help deliver the organization to that positive bottom line, that's always helpful.
“The last couple of years have been a lot different, say, than the two decades before that in terms of hospital operations.”
Brett Tande, CFO and corporate senior vice president, Scripps Health
Jay Asser is the contributing editor for strategy at HealthLeaders.
Photo credit: SAN DIEGO - 2020 Scripps sign logo on the building facade of nonprofit health care system Scripps Health. / Michael Vi / Shutterstock.com