Nick Morse explains how healthcare organizations can reimagine their budget when it comes to offering employees a supportive work environment while also providing patients with high-quality care.
Maintaining their workforce has been a challenge for healthcare organizations even before the onset of the COVID-19 pandemic. Hospitals and health systems were dealing with a shortage of nurses and losing their staff to more lucrative and well-paying opportunities.
Having the responsibility of managing the finances for a large healthcare provider means having to weigh what is best for your workforce against what is best for the organization's overall financial health.
To help CFOs better understand how to balance their workforce and their bottom line, HealthLeaders connected with Nick Morse, interim CFO for Nadora Healthcare, a spine center, and pain management care provider, to hear his thoughts on the best solution to this problem.
Morse discussed the ever-evolving healthcare workforce, where hospitals and health systems should be making investments when it comes to their employees, and the best attraction and retention solutions organizations should be utilizing.
HealthLeaders: Where should hospitals and health systems make the biggest investments when it comes to their workforce?
Nick Morse: You want to keep up with inflation—I know that’s a hot topic right now, but consumer purchasing right now has to do with how much your employees can buy with what they make. If they're doing the same amount of work, but their purchasing power goes down, you’ll want to make sure to try to stay in line with that. So, the first thing I would say is just straightening out their paychecks. People love pizza parties, people love new gear, and people love pens, hats, swag, and all that stuff. But really, it comes down to this old political adage: 'people make decisions at the dinner table.' If you're going to retain good employees, you want to invest in your employees' paychecks.
The second area where hospitals and health systems should make investments in the workforce is thinking about how you right-size your staff so that your nurses, doctors, CNAs, PAs, MAs, and all the other acronyms we know aren't feeling burnt out. It is extremely important to make sure that if you know it will take three people to facilitate great patient care, you should really staff five or six. This way if Mr. or Ms. Smith needs a day off or they get sick, you aren't stressing the system or forcing other people to do more work than they can mentally and emotionally stand.
HL: How has Nadora Healthcare managed to attract and retain its own workforce through the great resignation?
Morse: Paying people well is important. Even with our starting salaries for incoming nurses, we make sure to pay competitive hospital rates even though we're an ambulatory surgery center. When it comes to attracting and retaining the workforce, attracting is almost easier I think because when someone is looking for a new job, they have already made up their mind about not working here. So, when you're recruiting new people, you're able to say, here's our compensation package, here are your hours, here's how much you make, and here's who you work with. And if they choose to come over to you, great, do the paperwork, bring them in, get them trained, and in about six to nine months, they're capable of working in all the departments at our company, and they can move forward.
Retaining the workforce is the difficult part. Any trained professional who's a clinician can jump from employer to employer so retaining the workforce is much more difficult. And like I said, it's not pizza parties, even though we have those. It is, do they like the work they do? Do they enjoy the people they work with? Are they treated well at work? So, these are professionals, you know, once they're trained, we let them do their work, and we stay out of their hair? And are they compensated correctly with where they live?
HL: Would you agree that there has been a shift in the mindset, where it used to be that employees should be grateful to have a job, but now employers are the ones who should be grateful for their workforce?
Morse: You should always be looking around the corner. These trained professionals can quit at any time and go down the street and be employed within a day. The companies that you're seeing be successful and not closed down are not having people working 80 hours a week, in a field where they should be working 40 or 50 a week, I think they've treated people right all along. That's just my opinion. I think the pandemic maybe was enlightening for employees to say, what am I doing here? Why am I wasting my time I make 50 or 60 bucks an hour, I can go make 70 bucks an hour down the street and be treated better. Sometimes it takes external influences to cause us as humans to rethink our situation. And so, for some companies, yes, they absolutely needed a culture shock.
HL: How can healthcare organizations reimagine their budget when it comes to providing employees with a supportive work environment but also providing patients with high-quality care?
Morse: Access to high-quality care is the most important thing—you can never lose sight of that. But reimagining your budget to provide employees with a supportive work environment, there are certainly things you can do. Let's just for the sake of argument, say, you don't have to worry about the paycheck problem, and all your employees are compensated well, that’s the first thing you need to cover.
But number two is benefits. We have a pretty creative benefits package here, it's not just healthcare, dental, and vision. It getting creative on paid time off, can paid time off be cashed out? That is something that I see a lot of, when you save up 80 hours of PTO you can cash it out at your hourly rate. It’s making sure you're bringing, not just in services for training at the jobs that they feel confident in what they're doing in their department, but bringing mental health resources, physical health, massage, PT, those sort of things into your facility so that people can take a break at work. Those things are really important. Making sure that the facility is safe, as simple as that sounds, make sure people feel comfortable and secure when they're at work. All those things can go into reimagining your budget.
George Hammer, who previously served as the chief financial officer of the physician management arm of Pacific Hospital has been sentenced to 15-months in prison.
George Hammer, the former chief financial officer for the physician management arm of Pacific Hospital—a California-based healthcare provider with 184 acute care beds—has been sentenced to 15-months in prison for his role in an illegal kickback scheme, according to the Department of Justice.
Hammer was also ordered by United States District Judge Josephine Staton to pay an $8,000 fine and forfeit $500,000 in proceeds he allegedly gained from the fraud. Hammer was originally charged back in 2018, at the time he pled guilty to one count of filing a false tax return.
Hammer was the financial officer for various companies controlled by Michael Drobot, who owned Pacific Hospital in Long Beach. The Department of Justice says Drobot conspired with doctors, chiropractors, and marketers to pay kickbacks in return for the referral of thousands of patients to Pacific Hospital for spinal surgeries and other medical services, which were primarily paid for through the California workers’ compensation system.
During the final five years of the fraud, the Department of Justice says it resulted in $500 million in bills for kickback tainted surgeries. To date, 22 defendants have been convicted for participating in the kickback scheme.
"Through his role at the Drobot-controlled entities, [Hammer] ensured that doctors were paid more than $40 million…in kickbacks," prosecutors said, according to the Department of Justice. "The scheme was too complex for Drobot to do alone. It could not have been accomplished without complicit executives like [Hammer] who furthered the scheme."
In January 2018, Drobot was sentenced to five years in federal prison for his crimes in this matter and awaits a March 2023 sentencing hearing after pleading guilty to three criminal charges for violating a court forfeiture order in the Pacific Hospital case
Learn about how healthcare CFOs are dealing with the industry's biggest issues in finance.
It’s a challenging time for healthcare CFOs as they navigate an ongoing pandemic, labor shortages, inflation, supply chain issues, and more. These leaders are seeking actionable solutions to these problems that won’t impact their workforce, patient care, or their bottom line.
HealthLeaders has recently connected with several hospital and health system CFOs to learn how they are navigating these difficulties. Here’s what they had to say:
HealthLeaders: How can hospitals and healthcare systems cut costs without sacrificing their workforce?
JoAnn Kunkel, CFO for LCMC Health: It's about being more efficient and having people work to the top of their ability. It's about being able to focus on what's important and making sure that you're automating what you can and supplementing with resources to help people work at the top of their skill sets. We must look at things like that as we move forward and plan for the future. You must have the right number of people to be effective and efficient, but also be as nimble and lean as you can.
HL: What should healthcare CFOs be focusing on in 2022, as the pandemic continues to be an issue?
Kunkel: The biggest thing we're all struggling with is, what is the new normal? 2019 was the last time things were normal, then 2020 it was a total pandemic, 2021 was up and down. In January and February of this year things were difficult for healthcare in the United States, emergency department volumes were changing and there were such labor shortages. So, how do we work more efficiently? How do we adjust to the new volumes? We were already looking at shifting from inpatient to outpatient and home-based care. And that's been exacerbated by the pandemic, and those trends are going to continue.
HL: What are the biggest challenges hospital CFOs are facing right now? And how can we solve them?
Michael Sunday Jr., CFO for Pardee UNC Health Care: Today, hospitals are facing multiple issues in the healthcare industry, including the rising cost of labor, a labor shortage, rising costs of supplies due to inflation, pandemic spikes, and reductions to Medicare and Medicaid reimbursements. To take on these challenges, we are first looking at ways to not rely on contract labor. That could mean creating a hospital contract labor pool to reduce the impact of contract labor. Other steps would include hiring in-house recruiters to help bring qualified employees into the organization and finding ways to reduce costs, including the reduction of waste and energy consumption. Charge capture is also important to ensure all documentation is being captured on the front end to reduce the likelihood of denials from insurance companies.
HL: How do you solve some of the pain points St. Jude's healthcare staff are struggling with?
Pat Keel, CFO of St. Jude Children’s Research Hospital: There's been a lot written about the stress on the clinical workforce during the pandemic, and it's no different here. Our kids are at higher risk to contract diseases than other people, so we've had to be careful during the pandemic, and that put a lot of stress on our clinical staff because they have multiyear relationships with these kids. So, we've built a resilience system to support staff that includes some of the traditional tools that most hospitals have implemented like a 'code lavender'—a peer support program people can reach out to when they are feeling stressed. It's helped our staff feel supported during the pandemic and allowed us to retain people despite some of the attractive salaries that traveling programs are offering them. We've also added a dog—Rosalie—who dedicates her time to supporting staff, students, and faculty. Anytime Rosalie shows up, it is always a much needed and much happier break.
Kyle Vining will take over as the new chief financial officer of the $6 billion 186-bed healthcare system.
McLaren Port Huron, a $6 billion 186-bed healthcare system with 14 hospitals in Michigan and Ohio, has named Kyle Vining as its new chief financial officer.
"I’m impressed with the strong culture at McLaren Port Huron, especially how well the team works together to provide high quality, compassionate care to the community," Vining said in a release announcing his new position. "I’m looking forward to the opportunity to contribute to the overall success of the organization and the community we serve."
In his new role, Vining will be responsible for leading and overseeing all of the accounting and finance, regulatory compliance, patient access, reimbursement, medical records, utilization management, and supply chain duties for McLaren Port Huron.
Vining previously spent eight years with Beaumont Health, having most recently served as the director of finance for the Dearborn and Farmington Hills hospitals.
"We’re excited to have Kyle as part of the team here," Eric Cecava, president, and CEO of McLaren Port Huron said in the release. "Combining his passion for health care with his experience in managing the finances of two large hospitals makes him a great asset."
Keel recently connected with HealthLeaders to discuss solutions to some of healthcare's greatest financial pain points.
Building a sustainable financial strategy for a hospital or health system is not without its challenges, especially when considering the pandemic, the labor shortage, inflation, and a host of other issues. But when your organization is mostly funded through outside donations, those challenges can grow exponentially.
That is the case for St. Jude Children's Research Hospital, a $2 billion nonprofit health system focused on treating, researching, and curing terminal illnesses in children. CFO Pat Keel has been leading the organization's financial strategy for six years and has encountered numerous financial challenges and has met those obstacles through actionable solutions. Keel recently connected with HealthLeaders to discuss some of St. Jude's biggest financial struggles, the impact of the great resignation, some of the workplace pain points hospitals are currently dealing with, and more.
HealthLeaders: How does St. Jude's financial strategy differ from other hospitals and health systems?
Pat Keel: We are heavily dependent on donations, about 80% of our funding for operations and capital comes from donations. We also receive grants for research; however, we never bill patients or families, and we provide their transportation, meals, and housing while they are here in treatment, and they can be here in treatment for several years. That funding model allows us to focus on scientific discoveries, rather than things like patient volume and profitability of service.
HL: How does St. Jude create its long-term budgeting plans when it is so dependent on donations?
Keel: A couple of ways. Our donations come from our fundraising system, so those are separate companies that make contributions and there are a number of multiyear commitment donations. We also have a reserve that's been built up over the last few decades. We do plan our budget like most other organizations in that we set out a strategic plan. It is a six-year strategic plan, and we are at the end of our first year. We've identified for the remaining five years what we believe our financial resources will be and it matches up with our ability to fund. So going forward, we know that we have that ability, and that strategic plan is our road map. Other organizations tend to do their strategic planning annually, but we do it in a six-year bucket, and we update it quarterly. It is the basis—when we're doing our annual budget—of the decisions we make around funding new initiatives.
HL: What financial goals has St. Jude set for this year?
Keel: The strategic goals for my area are focused on improving the processes so that researchers and clinicians can focus on making more discoveries. The next five years of our plan calls for us to add about 2,300 people. It's a very ambitious growth plan. And so, part of my goals and my focus is on creating an infrastructure that's going to grow with that organization, with that increase in people, and continue to facilitate and support achieving those overarching organizational health goals.
HL: What are some of St. Jude's biggest financial challenges?
Keel: We have supply shortages; we have delivery delays and those can be frustrating. We've had to work closely with all our internal departments, our external vendors, and our network of peer organizations to understand how we can either find alternate suppliers, alternate types of supplies, or share amongst our departments to maximize our inventory on-site. A lot of our strategic plan has a lot of construction in it, and so that's been a challenge not just for us but for our contract vendors who are completing our building projects.
HL: What about on the workforce side of things? What solutions did St. Jude find regarding the challenges of the great recession?
Keel: We worked hard in maintaining our nursing services, and some of our facilities' positions like electricians, plumbers, and carpenters. We made adjustments to some of our starting internal salaries to remain competitive, especially on the hospitality side. We did initiate sign-on bonuses for a short time period, and we got out front with our recruitment.
HL: What are some of the pain points St. Jude's healthcare staff are struggling with?
Keel: There's been a lot written about the stress on the clinical workforce during the pandemic, and it's no different here. Our kids are at higher risk to contract diseases than other people, so we've had to be careful during the pandemic, and that put a lot of stress on our clinical staff because they have multiyear relationships with these kids. So, we've built a resilience system to support staff that includes some of the traditional tools that most hospitals have implemented like a 'code lavender'—a peer support program people can reach out to when they are feeling stressed. It's helped our staff feel supported during the pandemic and allowed us to retain people despite some of the attractive salaries that traveling programs are offering them. We've also added a dog—Rosalie—who dedicates her time to supporting staff, students, and faculty. Anytime Rosalie shows up, it is always a much needed and much happier break.
HL: How can hospitals and health systems prioritize financial needs without sacrificing care or their workforce?
Keel: It's a check and balance. Going back to my days when I was in a traditional health system model, doing scenario planning—when you are preparing for potential volatility—can help identify solutions to implement if needed. And it's worth finding that solution to ensure that [it's] not going to disrupt patients. The biggest thing is, that you have to be transparent with the financial needs of the organization or financial constraints. You must have various input from a diverse group of people and allow people to feel like they have a voice and to raise concerns as you're preparing your budget plan. Communication and collaboration are absolutely foundational.
Modesto Gato was named chief financial officer following three years as associate vice president of finance.
Broward Health Coral Springs, a Florida-based healthcare provider with $960 million in net patient revenue, has promoted Modesto Gato to the role of chief financial officer, following his three-year tenure as the hospital’s associate vice president of finance.
"Modesto has a proven record of budgeting and long-term financial forecasting that will help us further enhance the services and care we provide the Coral Springs community," Jared Smith, CEO of Broward Health Coral Springs, said in a release announcing the promotion.
As associate VP of finance Gato was responsible for the hospital’s accounting, he oversaw the operating and budget process and supported the health system in the development of financial strategies. He joined the health system in 2016 as regional director of finance at Broward Health Medical Center. He also served as regional director of financial management for Broward Health.
Before joining Broward Health, Modesto spent eight years with Miami Children's Hospital, where he served as Director of Financial Planning and Budget, according to LinkedIn. There he oversaw Miami Children’s Hospital’s finance analytics department, where he was responsible for analyzing the hospital's data requests and preparing the hospital's long-term financial forecasts and strategic initiatives.
Owen is taking over for former CFO Tom Legal, who left the organization in early 2022.
Summer Owen, an 18-year healthcare finance industry veteran, has been appointed the new Chief Financial Officer for Great Plains Health, a Nebraska-based 116-bed regional medical system with over $265 million in net patient revenue, following an exhaustive nationwide search.
Owen officially took over the role on June 13, 2022. She takes over for former CFO Tom Legal, who left the organization in early 2022.
"Summer has a true talent for driving financial performance and process improvement," Great Plains Health CEO Ivan Mitchell said in a release announcing Owen’s appointment. "She is already an asset to our team, and we are confident in the wealth of knowledge and leadership she brings to Great Plains Health."
Before joining Great Plains Health, Owen was the CFO of Colorado Plains Medical Center—a 50 acute bed hospital—where she oversaw the organization’s financial strategy for eight years following her promotion from the position of controller, where she oversaw the accounting and financial management functions for the organization.
"Joining the team at Great Plains Health is an exciting step," Owen said in the release. "I am impressed by this organization’s commitment to the health and wellbeing of Greater Nebraska. I am eager to contribute to the continued success of this organization and community."
Wrigley joined the company in 2014 and has previously served as Cedars-Sinai’s senior vice president of finance. Cedars-Sinai says Wrigley has led initiatives that have strengthened Cedars-Sinai’s financial operations and contributed significantly to its growth. Wrigley will officially step into the position of CFO for Cedars-Sinai on July 1.
"Today’s post-COVID-19 economy presents unique challenges to all health systems," Wrigley said in a release announcing his appointment. "I look forward to meeting those demands and working to continue the history of excellence for which Cedars-Sinai is known."
As executive vice president and chief financial officer for Cedars-Sinai Health System, Wrigley will have broad oversight of financial planning and reporting, revenue cycle, treasury, financial operations, capital structure planning, risk management, corporate compliance, and new financial ventures.
"David is a highly effective leader and a strong advocate for our health system and its employees," Thomas Priselac, president and chief executive officer of Cedars-Sinai, said in the release. "We are fortunate to have a leader of his caliber with deep knowledge of healthcare finance."
Dalfonso is replacing recently retired CFO Chris Nicosia.
Hilda Dalfonso—a 23-year healthcare industry veteran—has assumed the role of Chief Financial officer for two of Corpus Christi Medical Center’s hospitals and five affiliated care providers. Dalfonso began her new job on June 1, 2022, replacing recently retired CFO Chris Nicosia.
Dalfonso is joining Corpus Christi Medical Center— a system with over $400 million in net patent revenue and 250 staffed beds—after serving as the vice president of finance of SCL Health Good Samaritan Medical Center, a 234-bed hospital in Lafayette, Colorado. There she provided leadership over financial activities and key clinical and non-clinical operational areas. She also served as an interim leader supporting the chief operating officer and oversaw related departments.
During her career, Dalfonso has successfully developed key service line growth strategies, expedited facility expansions, and secured the center of excellence designations for robotic surgery. Dalfonso—a fellow of the Healthcare Financial Management Association and American College of Healthcare Executives—also co-led a hospital incident command team and provided operational leadership in response to the COVID-19 pandemic.
"Hilda’s previous experience as a healthcare executive and her proven leadership record will be an asset to Corpus Christi Medical Center as we continue to expand our operations and patient services to meet the growing needs of the communities we serve," Eric Evans, CEO of Corpus Christi Medical Center, said in a release announcing Dalfonso’s appointment. "I look forward to working with her and have no doubt she will be a great addition to our senior leadership team."
A recent analysis from Kaufman Hall shows hospitals and health systems saw significant decreases in patient volumes and revenue in April.
Hospitals and health systems are still struggling to rebound from the winter omicron surge as they experienced significant decreases in patient volumes and revenue in April, with expenses barely easing for the month, according to the latest National Hospital Flash Report from Kaufman Hall.
One of the biggest factors at play in this downturn is the patients who have been delaying care amid various COVID-19 surges and concerns about the overall seriousness of their illnesses keeping them from seeking care. However, there are solutions available for CFOs to help combat the financial challenges associated with unstable patient volumes.
Despite a slight rebound in both revenue and volumes in March, median operating margins were in the red in April. The median change in operating margin was down 38.1% from March to April 2022, and down 76% from April 2021. Additionally, patient volumes and days spent in the hospital were down by 5.7% in April, compared to March. Adjusted patient days dropped 6.5% from March to April but were up 1.8% compared to April 2021, according to the Kaufman Hall data. Adjusted discharges decreased 3.3% from March and decreased 0.3% compared to April 2021. The drop in patient volumes led to a dip in revenue for the month.
"The main driver in the revenue decline, at least in April, was a pulling back of volumes," says Erik Swanson, senior vice president of data and analytics at Kaufman Hall. "There are a few factors that might be the cause of this, and, in some ways, as we look at what happened in March as well, again, a lot has been driven there by volume. One thing to know here is that once we see these general waves or surges of hospitalizations primarily attributable to these COVID-19 cases, as those waves begin to rise, you tend to see a bit of a pullback on volumes."
What's Driving Pullbacks?
Those pullbacks are due in large part to a behavioral component among patients, he says. Patients might have concerns about the rise in COVID cases and will ultimately choose to postpone care. Another behavioral factor he suggests is contributing to the decline in volumes is that patients may feel as though they are not sick enough to need to visit the hospital.
"The other thing to note though is that as we look back, the first few months of this year were decimated by the impact of the omicron wave, but as the omicron wave subsided, we had a bit of a rebound in those volumes, and that's what you saw in March," Swanson says. "However, it wasn't a rebound to the full historical volumes, and that is again because of that wave. But then we saw that pullback and so what we see a lot of in this data and when it seems to reflect is primarily driven by these volume ebbs and flows."
As a result of these fluctuations in volume, hospitals and health systems also felt more pressure when it came to their overall expenses in April. Gross operating, inpatient, and outpatient revenues all dropped approximately 7% from March levels; however, all are up year-to-date compared with the same period in 2021—with gains of 6.6%, 5.3%, and 8.5%, respectively, according to the Kaufman Hall data.
Expenses dropped 4.3% from March but remain high compared to 2020 and well above pre-pandemic levels. Labor shortages and supply chain issues also contributed to the expense levels. The report shows that expenses grew 8.3% since April 2021 and 9.6% year-to-date compared with the same period in 2021.
Managing expenses has always been a challenge for hospitals, one that the pandemic has only exacerbated as more patients required unique methods of care.
"Sicker patients come with higher resource utilization, thus driving much of the expense increases as well," Swanson says. "So, not only are there some larger macro-economic factors at play on the expense side, but as the sicker patients come in, they often require more expensive drugs and supplies, more advanced care, and tend to be a bit more expensive."
Strategies to Ease the Expense Burden
Other factors negatively impacting hospital expenses include the labor shortage and supply chain issues. Fluctuations in revenue aren't something that organizations can manually manage, but with careful management of their expenses, they can ease their financial burden.
"The revenue side is a bit more challenging for organizations to control, Swanson says. "Many are looking at their internal revenue cycle, understanding where there can be improvements in their own process, improving just the performance of the revenue cycle that improves the collections rates. Many are also trying to renegotiate with payers and negotiate perhaps as aggressively as possible to get the best rates. But I think where you see much of the levers that organizations can pull is on the expense side and there are quite a few strategies at which they are taking on the expense side."
One such lever relates to the current nursing shortage, which has forced many hospitals and healthcare organizations to become dependent on contract labor and traveling nurses, which can come with exponential financial burdens. One strategy Swanson says larger hospital systems are utilizing is the internal staffing agencies that can evaluate where the greatest need for labor is across the system and send nurses and other staff already on their payroll to help in those locations.
"Finally, because a lot of these challenges are due to these ebbs and flows in volumes, many organizations are also looking to see how they can embrace more data-driven predictive type models to look at volumes and think about how they can optimize their workforce to better handle these ebbs and flows of volume," Swanson says. "This very often includes thinking about the appropriate size of float pools, the number of times that you need to pay overtime versus hiring new individuals, so many organizations are taking those approaches to bend the cost curve. There are quite a few levers that organizations are pulling to bend this cost curve down to ultimately improve their margins overall."