CFOs must be strategic business partners to both clinical and operational leadership.
When Lankford Wade, the CFO for Summit Medical Group and CityMD, joined the healthcare provider in early March of 2020, he knew his job wouldn’t be easy—the merger between the two providers had only been finalized seven months prior—but what happened over the next few weeks would fundamentally change the business, the healthcare system, and the role CFOs play within the business of medicine.
Wade recently connected with HealthLeaders to discuss how he led the organization’s financial operations since the onset of the COVID-19 pandemic, how the organization has grown, and how he’s seen the CFO role evolve over the course of his career.
HealthLeaders: What was the pandemic’s financial impact on Summit/CityMD?
Lankford Wade: When I joined the organization on March 2, 2020, little did I know that the business would be fundamentally transformed just a few weeks after I joined. Initially, we faced a lot of the same financial challenges that most providers across the country faced. It happened earlier for us here in the northeast than for a lot of others in the country. We saw visits drop off dramatically thanks to stay-at-home orders, and like everyone else, we ended up furloughing a significant portion of our employee base.
But, with the advent of COVID testing, visits at our urgent care locations took off dramatically by mid-April to early May. We had most political leaders in the region directing patients to CityMD because the emergency rooms were overwhelmed with positive COVID patients. And so, we became one of the primary testing locations for the greater New York, New Jersey areas over the course of two years. We had something in the magnitude of around 10 million patients visiting us for COVID-related testing services. So, the business took off from that perspective.
As we provided those essential services, it allowed us to bring back our staff and allowed us to continue to support our multi-specialty practice. It ultimately allowed us to continue to invest in and grow our business. We were able to grow our provider count very significantly; we were able to invest in real estate to support that growth. And so now we have somewhere in the magnitude of around 2,700 providers. So, we’ve grown very significantly over the course of the last three years.
HL: Why was Summit/CityMD able to grow during this period, while other providers struggled?
Wade: We had different experiences. Those providers were incredibly supportive of patients who were very, very sick during the pandemic. I think because they were so inundated with these incredibly sick patients, we became an alternative because patients still needed [non-COVID-related] care that historically they might have gotten from one of those locations. Those patients ended up coming to our outpatient service providers, multi-specialty care providers, or urgent care locations.
HL: What lessons do you think healthcare providers should take away from this?
Wade: I think the pandemic accelerated the increasing push toward outpatient care. Now patients are seeking solutions from providers like us, that can do it in an office-based setting or can do it in a community-based healthcare setting as we have with our urgent care locations. Patients want the convenience of being seen by their provider when and how they want. Increasingly, we’re seeing health systems follow that lead as a lot of them have been acquiring physicians’ groups so they can offer that outpatient care. They're also forging some pretty interesting ad partnerships, whether it's with urgent care operators, or starting their own urgent care locations to be able to have that community-based healthcare setting to meet patients’ needs when they don't want to go into the hospital.
HL: How have you seen the role of the healthcare CFO evolve over the course of your career?
Wade: It's evolved from being the scorekeeper-in-chief to someone that is now a strategic business partner to both clinical and operational leadership. Don’t get me wrong, you still need to keep score and make sure results are reported appropriately. But the best CFOs are those who can define divine the right insights from those financial results and help steer the business into the future. CFOs need to be a part of the team that takes those results and uses them to create a better tomorrow. That might look like taking operational ownership of various parts of the business, or just having a team that can really engage with that leader to actually push the business to the right place and make the right strategic decisions.
The organization wants to keep out-of-state organizations from controlling Minnesota’s academic health system.
The University of Minnesota has reached out to the State of Minnesota to request state support for its health system, UMN Health—an organization with 743 beds and over $1 billion in revenue.
UMN Health says it is requesting state support so it can acquire and operate flagship healthcare facilities before a merger between Fairview and Sanford is completed, to prevent out-of-state control of Minnesota’s academic health system.
"Before us is a once-in-a-lifetime opportunity to channel the University’s 170-plus year legacy of discovery, service, and world-class impact to elevate the health of Minnesotans for generations to come," University President Joan Gabel said in a release. "But we can only do so through a strong partnership with the State. The positive return on this investment is clear."
UMN Health is requesting preliminary funds of $300 million so it can acquire the University Medical Center East and West Bank facilities, Masonic Children’s Hospital, and the Clinics and Surgery Center. The funds will be used to support the facilities’ workforces, leaders, and union contracts. UMN Health is also requesting a further $650 million in funding so it can successfully operate these facilities and cover payroll, supplies, as well as other professional services. The money will also be used to provide time to turn around operating losses and begin generating positive financial results.
This request is subject to formal Board of Regents action, which is expected on March 10, 2023.
"We must forge a new path: one that centers on the needs of Minnesotans’ healthcare now and for decades to come," Myron Frans, senior vice president for finance and operations, said in the release. "One that recognizes the economic benefits of continuing our best-in-class healthcare sector, including the education and training of future healthcare professionals. And one that recognizes the treatments and cures U of M researchers will discover."
The digital healthcare company also reported a net loss of over $3.8 billion for the fourth quarter of 2022.
Teladoc Health, a Purchase, New York-based virtual primary care provider, reported its fourth quarter and full year 2022 earnings results, which included a net loss and weaker-than-expected guidance for 2023.
Teladoc reported a net loss of $3.8 billion for the fourth quarter of 2022, compared to $11 billion, for the fourth quarter of 2021. For the full 2022 year, Teladoc posted a loss of $13.6 billion, compared to a loss of $428 million for 2021. Revenue jumped by 15% quarter over quarter to $637.7 million and by 18% year-over-year to $2.4 billion.
"We are pleased with the strong fourth quarter and full-year operating results," Jason Gorevic, CEO of Teladoc Health said in the earnings report. "Despite a challenging macro environment, we were able to expand our product offerings and enhance the level of care delivered across our integrated whole-person platform."
Although the organization is pleased with its latest financial results, Teladoc issues guidance for the 2023 first quarter and full year that fell short of analysts' expectations. For the 2023 first quarter, Teladoc is expecting earnings of $610 million to $625 million versus the $648.72 million estimate, according to Benzinga. On a per-share basis, the company is anticipating a loss of .45 cents to .55 cents, while Wall Street estimates were for a loss of .43 cents per share.
"As we look ahead to 2023, we see healthy demand for solutions that promise better access and outcomes while lowering the cost of healthcare," Gorevic said. "Our key strategic priorities remain our whole-person suite of services including our virtual primary care offering - Primary360, our suite of chronic care management solutions, mental health, and continued growth in our BetterHelp consumer brand. We remain committed to a balanced approach to growth and margin which will allow us to invest in key initiatives across our product roadmap."
Teladoc Health stock was trading in the red on Thursday morning.
The retail giant purchased the healthcare provider for $3.9 billion.
Amazon has closed its $3.9 billion deal to purchase San Francisco-based healthcare provider One Medical. The acquisition gives Amazon access to One Medical’s 200-plus brick-and-mortar medical spaces, which operate in about 26 markets, and includes over 800,000 members.
"We're on a mission to make it dramatically easier for people to find, choose, afford, and engage with the services, products, and professionals they need to get and stay healthy, and coming together with One Medical is a big step on that journey," Neil Lindsay, senior vice president of Amazon Health Services said in the announcement. "One Medical has set the bar for what a quality, convenient, and affordable primary care experience should be like. We’re inspired by their human-centered, technology-forward approach and excited to help them continue to grow and serve more patients."
Although the deal has closed, Amazon may still face some pushback from the FTC, according to some reports, which could ultimately decide to bring an antitrust suit to derail the merger.
"The FTC’s investigation of Amazon’s acquisition of One Medical continues," FTC spokesman Douglas Farrar told CNBC. "The commission will continue to look at possible harms to competition created by this merger as well as possible harms to consumers that may result from Amazon’s control and use of sensitive consumer health information held by One Medical."
This isn’t Amazon’s first foray into the healthcare space. The company acquired the online pharmacy, PillPack, in 2018 for $750 million. Retailers have been entering the healthcare space in an attempt to revolutionize the way healthcare is delivered. CVS recently announced its acquisition of primary care provider Oak Street Health for $10.6 billion.
"If you fast forward 10 years from now, people are not going to believe how primary care was administered," Amazon CEO Andy Jassy said in the announcement. "For decades, you called your doctor, made an appointment three or four weeks out, drove 15-20 minutes to the doctor, parked your car, signed in and waited several minutes in reception, and eventually were placed in an exam room, where you waited another 10-15 minutes before the doctor came in, saw you for five to ten minutes and prescribed medicine, and then you drove 20 minutes to the pharmacy to pick it up—and that’s if you didn’t have to then go see a specialist for additional evaluation, where the process repeated and could take even longer for an appointment. Customers want and deserve better, and that’s what One Medical has been working and innovating on for more than a decade. Together, we believe we can make the healthcare experience easier, faster, more personal, and more convenient for everyone."
Eric Strucko is taking over for departing CFO Paul Castillo.
Michigan Medicine, an Ann Arbor, Michigan-based healthcare provider with over $5 billion in total revenue, has appointed Eric Strucko—who has over three decades of financial industry and healthcare experience—as its new chief financial officer.
Strucko took over the position on February 16, 2023, after serving as CFO of Keck Medicine of the University of Southern California for over two years. As the chief financial officer for Michigan Medicine, Strucko will be responsible for managing its financial and control activities. He will direct financial reporting and control, financial planning, budgeting and revenue cycle, and compliance operations. Michigan Medicine is the academic medical center of U-M and includes the Medical School and U-M Health, the health system’s clinical enterprise.
Strucko has replaced departing CFO Paul Castillo, who led the organization’s financial department since 2011. Before he joined Keck Medicine, Strucko was senior vice president and chief financial officer for Penn State Health’s Milton S. Hershey Medical Center and Medical Group. He has also served as associate vice president for finance and business at Penn State University and controller of the College of Medicine, the chief financial officer of the University of Virginia Physicians Group, and budget director of the University of Virginia Medical Center.
"We are so pleased to welcome Eric Strucko to this crucial position at Michigan Medicine," CEO Marschall Runge said in a press release. "He brings a wealth of experience in all aspects of healthcare finances."
The financial dip was due to labor costs, and lower operating revenue which could be linked to payer changes and lower inpatient volumes.
Community Health Systems, a Franklin, Tennessee-based healthcare provider, released its fourth quarter and year-end 2022 financial results, which highlighted a decline in revenue for both the quarter and the full fiscal year.
Net operating revenues totaled $3.14 billion for the quarter, a decline from the $3.23 billion posted in the same quarter the year before. Net operating revenues for the year ended December 31, 2022, totaled $12.2 billion, a 1.3% decrease compared to $12.36 billion for the same period in 2021. Net income attributable to Community Health Systems stockholders was $414 million, or $3.18 per diluted share for the fourth quarter of 2022, compared to $178 million, or $1.34 per diluted share for the same period in 2021. Net income attributable to Community Health Systems stockholders was $46 million, or $0.35 per diluted share for the year ended December 31, 2022, compared to $230 million, or $1.76 per diluted share for fiscal 2021.
The financial dip was due to labor costs, and lower operating revenue which could be linked to payer changes and lower inpatient volumes, the organization said in the earnings release. Other challenges impacting the organization’s finances included negative macroeconomic conditions, inflationary pressures, increasing expenses, high-interest rates, and supply chain shortages and disruptions.
But despite these economic pressures, Community Health Systems is pleased with how it was able to navigate the final quarter and full fiscal year of 2022. While the organization didn’t provide guidance for fiscal 2023, it did does have a positive outlook for the year.
"We were pleased with our progress during the final quarter of the year, including solid volume growth in admissions, adjusted admissions, and surgeries," Community Health Systems CEO Tim Hingtgen, said in the report. "We also significantly reduced contract labor from its peak in early 2022, while improving overall employee recruitment and retention levels. I am grateful to our healthcare system leaders, clinicians, caregivers, and support teams for their unwavering commitment to advance patient care and achieve operational improvements in 2022. Looking forward, we are optimistic about our opportunities in 2023."
CFO Robert Richman discusses how ensuring that physicians have full transparency into how value-based contracts work creates a successful VBC program.
Adopting a value-based care model can seem like a risk to some healthcare providers, but other organizations have seen success in rewarding providers with incentive payments for the quality of care they provide patients with Medicare.
One organization that has been successful with this approach is Esse Health, a Missouri-based physician organization focused on primary care. Esse Health recently merged with population health leader, Navvis, to form Surround Care, which has over $663.5 million in total revenues.
"Esse Health was formed back in 1996 when two independent physician groups joined together and even way back in 1996 were focused on value-based care," Esse Health CFO Robert Richman says. Value-based care was a much smaller arena back then. We run our business by focusing on keeping patients healthy, which of course is the best way to succeed in any type of value-based care environment."
Richman recently connected with HealthLeaders to discuss the success the organization has had with its VBC model, as well as the challenges facing the industry because of the continuing labor crisis.
HealthLeaders: How is Esse Health making value-based care work for it?
Robert Richman: Value-based care is focused on patient outcomes. And so, it is looking at the patient in their entirety over a long period of time. So, when we want to help establish a relationship with a patient it is our plan to be with that patient for the rest of their lives. Many times, value-based care is more focused on the older population. That is certainly where the majority of the spending is, as everybody knows, but we also have a large pediatric group and so we are looking at the patients from birth all the way to the end of their lives.
One of the things that Esse does to help is focus on disease recognition. We've developed an entire program where we train our physicians to understand disease recognition and what it means. I'll give a simplistic example because I'm not a clinician. Diabetes is a common disease, and the idea is that if a patient is starting to show some of the risk factors, instead of waiting until they are more unhealthy for lack of a better term, you'll start doing lifestyle changes and maybe basic medications to help that patient start to address the issue before it becomes full-blown diabetes. Value-based care is about keeping patients healthier for longer, so they don't eventually have expensive complications that are typical in a diabetic population.
HL: Why might some providers be reluctant to adopt a value-based care model?
Richman: Value-based care requires a different way of thinking. In a traditional fee-for-service, you see the patient, you treat the patient for the symptom. And then you move on to the next issue that the patient is having. Value-based care requires you to take a long-term view of the patient and requires a shift from focusing on volume. It's a cultural change and that's one of the biggest challenges.
The other piece is developing proper infrastructure. We have put a substantial amount of resources into the care management function, where we surround our physicians with the capabilities to manage these patients—it's not just about the physician and the patient. It's about the relationship between the patient and the physician's team of care. We will bring in care managers who will reach out to patients if the patient has other issues. Those care managers spend time training patients to manage their various diseases. So, there is an upfront investment to create the infrastructure necessary to properly adapt to a value-based care environment. Sometimes it's challenging for organizations to do that.
HL: Let's change topics and discuss the labor issues in the healthcare space. What is the biggest workforce challenge healthcare providers are facing?
Richman: We're not immune to the labor shortages that are affecting everybody. We've had issues, but our current open position roster is small. We're able to create an attractive environment for our employees, making them want to come work here. Because we're primary care and a specialty-focused physician organization, we hire a lot more medical assistants and patient service reps. We do certainly have nurses as well but our need for the sheer number of nurses that, say, a hospital system may have, it's going to be smaller. So, we may not be experiencing the same level of challenges.
But the biggest challenge, quite frankly, is that as we compete with all the hospitals and health systems for talent, it drives the price up of that talent. However, the nature of insurance contracting, whether it be value-based or fee-for-service, does create a bit of a dynamic because, unlike a lot of other industries, healthcare can't raise prices. So, part of the squeeze that we're all feeling is having contracts that may have a one-year, two-year, or three-year timeline, and the payers can be reluctant to change the terms of those contracts or recognize the inflationary pressures.
We have certainly, as has everybody else in the industry, reached out to payers asking for release in those contracts. Some payers have said yes, and some have not. But ultimately, that is a concern when your costs of providing good patient care are going up, but your reimbursement levels stay flat. Because then you get squeezed from both sides. So, that's a significant challenge not just finding people but then being able to pay them the going wage rate when you cannot increase prices to cover that.
HL: How do you think CFOs can take a more proactive role in maintaining the financial well-being of the organization, without losing the quality of care or talent?
Richman: As a CFO, what I'm looking at is providing the resources and tools that will allow us to be successful. Those resources and tools include making sure the physicians have full transparency into how the value-based contracts work. One of the things we figured out many years ago was to make sure that physicians understood how the value-based contracts work, and how what they do impacts the performance under those contracts. By making them partners in the financials, they understand that what they do and how they treat patients impacts the success of the value-based programs. As CFO, I make sure that information is available to my physician partners, so they are able to make appropriate decisions.
Industry veteran John Mordach will assume the CFO position for Jefferson effective March 20, 2023.
Jefferson, a Philadelphia-based healthcare, and higher education provider that includes Thomas Jefferson University, Jefferson Health, and Health Partners Plans, will be getting a new chief financial officer toward the end of March.
Industry veteran John Mordach will assume the CFO position for Jefferson effective March 20, 2023.
"John brings a depth of experience and knowledge of health systems, universities, large practice plans, physicians’ groups, and health plans," Jefferson CEO Dr. Joseph Cacchione said in an email release. "He's well-versed in leading change and his approach is rooted in operational rigor. John is the ideal finance leader for this complex period in Jefferson’s history."
Mordach has previously served as senior vice president and CFO for Duke University Health System. Prior to joining Duke in 2020, Mordach served as CFO for Rush University System for Health and Rush University Medical Center in Chicago.
"I’m honored to join the Jefferson leadership team and look forward to continuing to build upon the strong financial foundation that has been established," Mordach said in the release. "Jefferson has an incredible reputation and has built a tremendous network. The recent acquisition of Health Partners Plans further reinforces the commitment to population health. I look forward to helping the organization achieve its mission to improve lives while also being the best employer."
The health system says expenses are increasing faster than the rates it is paid for its services.
Over the past three years hospitals and health systems have been forced to make the difficult choice of cutting their workforce as the financial pressures caused by the pandemic wreaked havoc on their economic well-being.
St. Luke's Health System—a Boise, Idaho-based healthcare provider—says it has come to the same arduous decision to cut its own workforce by two percent. Pent-up demand for services, workforce shortages, supply chain disruptions, and a more complicated payment environment all led to its decision to reduce its staff, the organization said in a release shared with HealthLeaders. St. Luke's President and CEO Chris Roth also said another factor contributing to the need to slash its labor is because its expenses are increasing faster than the rates the health system is paid for its services. Impacts will be primarily in non-clinical and administrative areas.
"This trend is not sustainable, and we expect significant financial and resource pressures to continue,” Roth said in the release. "We have outlined multiple response plans to help ensure our ability to deliver on our mission and advance our performance in this complex environment."
Those plans include reducing its discretionary spending and contracted services, including traveler reliance. St. Luke’s has accelerated the consolidation of real estate holdings to improve efficiency and reduce costs. It has also accelerated investments in programs that expand access to services. St. Luke’s said it has trimmed executive leadership positions and slowed hiring in non-direct patient care areas. The organization has also reprioritized and decreased its capital spending.
"The post-pandemic environment and multiple other global and national factors have created sustained headwinds across the healthcare landscape," Kate Fowler, Senior Vice President, and Chief Financial Officer for St. Luke’s Health System told HealthLeaders. "Many health systems—ours included—are being impacted by overlapping issues. These impacts will not be temporary, and we must adapt accordingly. Despite these challenges, St. Luke’s remains a strong organization, and we must ensure we remain that way for years to come – we believe our multiple response plans will help us do just that."
Net revenue rose slightly for the 2022 fourth quarter to $4.9 billion from $4.8 billion.
Tenet Healthcare—a Dallas-based health system—has reported its 2022 fourth-quarter earnings result and is projecting strong growth in fiscal 2023.
Net income from continuing operations available to common shareholders in the fourth quarter of 2022 was $102 million, or $0.92 per diluted share. Net income for the 2021 fourth quarter came in at $250 million or $2.30 per share. Despite the year-over-year decline, Tenet Healthcare says it came out of the final quarter of 2022 in solid financial positioning, which is setting up the provider for a robust 2023.
The healthcare provider also posted a quarter-over-quarter rise in its net revenue for the 2022 fourth quarter of $4.9 billion, versus $4.8 billion for the 2021 fourth quarter.
For the 2022 full fiscal year, Tenet Health reported net income from continuing operations available to common shareholders of $410 million versus $915 million for the 2021 full fiscal year. Earnings per share for fiscal 2022 were $3.78 compared to $8.43 for the 2021 full fiscal year.
Looking ahead to the 2023 full fiscal year, Tenet Health expects adjusted earnings before interest, taxes, depreciation, and amortization to come in between $3.16 billion and $3.36 billion.
"We closed the year with a strong fourth quarter and demonstrated operating discipline in a dynamic environment while providing patient-centered high-quality care," Saum Sutaria, M.D., Chief Executive Officer of Tenet Healthcare, said in the earnings report. "Our momentum going into 2023 positions us for continued growth as we remain focused on expanding our industry-leading ambulatory business and investing in technology, innovation, and talent."