After serving in the CFO role at several hospitals and healthcare systems, David Cauble decided he wanted, and was prepared for, a much larger role.
David Cauble recently became the CEO at Sky Lakes Medical Center in Klamath Falls, Oregon, a 176-bed teaching hospital, after spending many years as a hospital CFO. Cauble was previously the executive vice president and CFO at Children's Mercy Hospital in Kansas City, Missouri, and held prior CFO positions at St. Vincent's Health System (now Ascension St. Vincent's) in Birmingham, Alabama; at CarolinaEast Health System in New Bern, North Carolina; Trover Health Systems in Madisonville, Kentucky; and The Emory Clinic in the Greater Atlanta area.
HealthLeaders spoke with Cauble about his journey from CFO to CEO, what inspired the move, how his background prepared him for the change, the top challenges for healthcare executives in 2022, and his advice for other CFOs that want to make the jump to CEO.
HealthLeaders: Prior to your current appointment as CEO at Sky Lakes Medical Center, you came from the CFO ranks in your previous roles. When did you decide you wanted a CEO role, and what drove that decision?
David Cauble: My interest in becoming a CEO began many years ago as I started to grow as a leader, and I developed a strong orientation to the mission of serving the health and well-being of communities.
I have benefited from some great mentors in my career, who invested in me and helped me develop and prepare for the eventual opportunity to become a CEO. I have experience in a variety of organizations, and those opportunities provided a great environment to learn and grow as a leader.
The broad exposure to new environments and new challenges helped prepare me for a larger role. That led me to conclude that the timing was right to pursue a CEO position, where I could apply all that I have learned and make a positive impact for a new organization.
HealthLeaders: When you set your sights on a CEO role, tell me about the self-assessment you did of your professional skills, personal traits, and career background to identify strengths and growth opportunities.
Cauble: Objectivity is challenging when conducting a self-assessment. That makes the role of a trusted advisor and sponsor critical.
As I evaluated my personal development and readiness for the CEO role, I was fortunate to have strong advice and counsel from those who I trusted and could help guide me through the growth process. Listening to, and observing, other leaders offered an additional opportunity to learn and better understand where I needed to grow and focus on my development.
HealthLeaders: What did you consider to be your top professional and personal strengths for such a role?
Cauble: Early in my career I developed an open and collaborative leadership style that invites engagement and input from leaders who represent diverse opinions and perspectives. With increased responsibility came the opportunity to expand my network and deepen relationships in areas outside of the traditional scope of a CFO.
I have always enjoyed learning. That, coupled with a willingness to listen and engage others, has developed into an important strength that I routinely rely upon to gain new insights and inform decisions.
I have also received positive feedback on my ability to maintain perspective and a sense of calm in most every situation. I have learned the importance of listening first before attempting to respond or solve a problem. Listening and providing a safe space for others to express their concerns or issues helps to create a calm environment. And it provides the opportunity to create clarity and alignment on a chosen course of action.
HealthLeaders: What areas did you identify as growth opportunities for your role, both personally and professionally?
Cauble: Healthcare is complex and it requires a willingness to rely on the strengths of others. The most effective leaders I have known are those who remain curious, are open to new ideas and perspectives, and are willing to seek the help of others.
Coming from a CFO role, the greatest challenge I have faced is overcoming the perceived limitations of that role and engaging with leaders in areas outside of what is considered the normal scope of work. Transitioning to a CEO role requires the willingness to seek the help of others. You should surround yourself with leaders who know more and have greater experience in key areas.
I have successfully surrounded myself with strong leaders, and I invite them to contribute their strengths. That will ultimately make the enterprise stronger and allow me to focus on the areas where I can have the greatest impact.
I can, and have, made incremental improvements in the areas where I have any weakness. But focusing all your energy on improving in a weak area does come at the expense of the time invested in truly developing your strengths and impacting the organization in ways that only you can.
HealthLeaders: What actions did you take to address the growth opportunities that you identified?
Cauble: Mentors and those interested in helping me grow played significant roles in identifying my strengths and weaknesses. In some instances, I used insights from others to proactively invest in my skills and improve in specific areas.
As an example, learning to listen and address difficult conflicts was a skill that I needed to develop. With intentional effort, and great support from my trusted advisors, my skills improved and the weakness became a strength.
In other instances, I have intentionally added to my team leaders who possessed skills that were needed to better serve the organization, but which were not among my strengths. This has invariably led to better results than if I had attempted to overcome a weakness on my own.
HealthLeaders: What do you believe were the most important messages you delivered in your interviews for this CEO role that helped earn you the position?
Cauble: I have a passion for rural health and a commitment to impacting the health and well-being of this community. The board has a shared passion and commitment to this community and finding a leader who was aligned with that vision was important.
The depth and breadth of my experience as a transformational leader was also important in giving the board confidence that I was fully capable of maintaining the independence and financial health of the system while setting the direction for the future.
HealthLeaders: What mission have you been given in your new role, and how do you think your experiences as CFO have helped prepare you to meet that mission?
Cauble: Sky Lakes is a strong health system that is vital to this region. The board is fully committed to serving this community and maintaining financial independence. There is a great foundation of leadership from the hospital in the region, and a strong commitment to the mission that "strives to reduce the burden of illness, injury and disability, and to improve the health, self-reliance and well-being of the people we serve."
The charge that I have received from the board is to continue serving the mission, while ensuring the system remains independent and well positioned to further the positive impact on the health and well-being of the community.
My vision for Sky Lakes is well aligned with the board's direction, and my experience has given me a depth of knowledge and resources to sustain the mission and grow the impact on this community.
Editor's note: In the upcoming part two of this article, David Cauble discusses the top issues facing healthcare CEOs in 2022, finding solutions to those challenges, opportunities for CFOs to become CEOs, and his advice on how to be successful in the move.
The large number of workers leaving the healthcare industry is causing roles to be redefined to handle the loss, including that of the CFO.
Editor's note: This is part three of a three-part series about the Great Resignation from the healthcare CFO perspective. Read parts one and two.
The healthcare industry has been hard hit by the so-called Great Resignation, with the trend impacting recruiting, retention, and rewards strategies at health systems and hospitals. It is also helping to redefine several job roles, including that of the CFO.
HealthLeaders examines how the CFO role at many hospitals and healthcare systems has taken on much broader responsibilities resulting from the Great Resignation. Sharing their views on what those changes include are Terry Lutz, CFO at Scheurer Hospital, a 25-bed critical access hospital in Pigeon, Michigan; Carlos Bohorquez, CFO at El Camino Health in Mountain View, California; and Dr. Gail Gazelle, MD, assistant professor of medicine at Harvard University in Massachusetts and a master-certified coach for physicians.
How the Great Resignation affects the role of the CFO
From a strictly operational perspective, the pandemic has significantly increased the workload for most healthcare CFOs. That includes handling and accounting for rounds of stimulus money, complying with new regulations, and managing skyrocketing accounts for healthcare services.
"My role as CFO has become much more active as I try to balance the normal work of the monthly financial statement process; the annual budget process; year-end and audit preparation; and cost reports, with managing the additional funding received as a result of COVID—how to effectively and appropriately expend it; and analyzing new services along with market evaluation of pay structures," explains Lutz.
"My workload has increased significantly. It doesn't help when stimulus money is sent to the organization with strings attached that haven't been detailed," Lutz says.
But due to the Great Resignation, CFOs are also finding that their role is becoming more people-oriented than numbers-driven.
"It has forced me to think about things that are not 100% germane to finance numbers," says Carlos Bohorquez, CFO at El Camino Health. El Camino Health includes two nonprofit hospitals: Mountain View Hospital and Los Gatos Hospital, as well as urgent care, multi-specialty care, and primary care facilities.
Bohorquez says he now needs to have a strong grasp on human resources issues. Topping the list are practices around recruiting and retention. But he says the CFO must also have empathy to what staff have been experiencing during the pandemic.
"Leaders—whether they're financial, operational, or medical leaders—need to support their frontline workers. They need to show up on the frontlines and express their appreciation," Gazelle says.
"What is interesting is how many leaders in healthcare will send out a weekly email to their people saying, 'Thank you so much. We see how hard you're working. We wouldn't be able to do this without you.' But, sadly, many of the recipients of those emails—the clinicians on the frontlines—have become a little bitter. Their thinking is, 'If you really cared about us, you'd come down and see what we're doing.' There's a sense that they're not being seen, that their efforts aren't being appreciated."
"The number one advice that I have for anybody in leadership in healthcare, is to get out there and see what your workers are doing," Gazelle says. "That personal touch can make a large difference in the sense of morale and the commitment of your frontline workforce."
Long-term impacts
Hospitals and health systems are so busy dealing with the staffing shortage that it is difficult to look far ahead. Nevertheless, the healthcare industry could be on the verge of significant change in how care is delivered. At least, that is how some see it if things don't change soon.
"The impact on the healthcare system is almost unimaginable," Gazelle says. "For example, say you have an ICU with incredibly ill and vulnerable patients who need constant nursing attention and monitoring. And perhaps the normal nursing ratio would be one nurse to one patient, or at most, two patients. What we're seeing now is not just one nurse to three patients, but sometimes even one nurse to four patients."
The effect is that nurses—no matter how good or how committed and devoted they are—can't keep up with the needs of the sickest patients, Gazelle says.
"There is a lot of rightful concern about what this is going to mean for all of us and for our loved ones. It's a concerning situation," Gazelle says.
While Gazelle acknowledges that she always tries to be an optimist, the impact of the Great Resignation has her worried about its long-term implications.
"We're in a difficult situation as a nation. We really are," Gazelle says. "I don't know what the future holds. Many of us in positions of leadership don't know how this is going to play out. But we can imagine that healthcare is going to look different in the foreseeable future."
For one thing, "staffing changes will mean differences in quality of care," Gazelle says. "That will mean that perhaps family members will have to be at a sick person's bedside, doing some of the duties that we may not have staff to do."
Steps for CFOs to combat this trend
So, what should CFOs be doing in response?
Increase salaries when possible, but carefully
"My best advice is to make every effort to limit the amounts of increases requested for perceived market changes, since other positions will end up being increased as well," Lutz says. "Be prepared to recommend changes to operations to decrease costs, without impacting care provided. Know which services either have to be discontinued or revamped to make up for the additional costs being added in other areas."
Focus on worker needs, both operationally and emotionally
"It's a lot cheaper to retain employees than to recruit and train new employees to the organization," Bohorquez says.
Employees want to be heard, Bohorquez says. They want acknowledgement by leadership of the work that they're doing. CFOs can help open channels of communication and find ways to reward workers beyond the normal paycheck.
"We all come to work each day because we love what we do. Employees want to feel like they're recognized for their commitment and dedication to the organization. We need to say 'Thank you' to everybody for all the work they do. If we don't, we can't function," Bohorquez says.
Strive to be an employer of choice
No one knows when the Great Resignation may end, or even slow. The expectation is that the staffing shortage in healthcare will only grow worse over the next few years. That will place even greater pressure on the battle for key talent.
"It will create an even greater competition for qualified staff," Gazelle says. Those hospitals and healthcare systems that win in this battle will be the ones that are seen as top employers—that pay top dollar, that provide training and career development opportunities, that listen to and engage with the workforce, and help them feel that their efforts always matter and improve the quality of care that patients receive.
Leading CFOs will step up to this challenge by advocating and supporting job benefits and opportunities that differentiate a great place to work versus a good place to work, Gazelle says.
Hospitals are spending more money on retention, recruiting, and benefits programs to maintain staffing levels and working to ensure the same quality level of care.
Editor's note: This is part two of a three-part series about the Great Resignation from the healthcare CFO perspective. Read part one here.
One of the biggest hopes of healthcare executives is that COVID-19 case numbers and hospitalizations will continue their current decline, enabling countless burnt-out healthcare workers to get desperately needed breaks from long hours, constant stress, and grueling job demands.
Those factors are said to be the primary reasons for the mass exodus of healthcare workers who have left their jobs, and in some cases, the field of medicine entirely.
For each hospital or healthcare system, this workforce trend has greatly increased the number of open job requisitions at organizations. In turn, it has meant spending more money on recruiting, training, and compensation programs to maintain staffing levels, and ensuring that quality of care is retained.
Sharing their views on how the Great Resignation is affecting their organizations are Terry Lutz, CFO at Scheurer Hospital in Pigeon, Michigan; and Carlos Bohorquez, CFO at El Camino Health in Mountain View, California. Dr. Gail Gazelle, MD, assistant professor of medicine at Harvard University in Massachusetts and a master-certified coach for physicians, also shares her insights on what organizations can do to combat this trend.
How hospitals are affected
Employee turnover at Scheurer Hospital has increased during the pandemic, says Lutz, at the 25-bed critical access hospital.
"It has been due to a combination of people leaving for retirement, for other jobs, or simply deciding not to work since they were getting stimulus money," Lutz explains. "With almost 500 employees, we normally would have about 10–25 job openings. But it has been as high as 60 openings and is currently just under 40 job openings."
With COVID-19 numbers now declining, Lutz says he hopes the workforce will return to some normalcy. He says pay increases at Scheurer Hospital and other hospitals should help convince people to stay in healthcare. Many employees who left jobs for financial reasons or who feared the risk of infection will hopefully decide to return, he says.
"The challenge is whether we can handle the additional cost for what we have to provide them, by becoming more efficient and decreasing services that aren't providing enough benefit to the community," Lutz says.
The same is happening at El Camino Health, Bohorquez says. El Camino's two hospitals are paying more to keep workers employed and motivated. But the health system is also not being reimbursed at the same rate normally received for the care it provides.
"A lot of organizations are struggling financially, and it's often tied to unfunded mandates," Bohorquez explains. "What they are reimbursed [for COVID care, especially] does not always cover the full cost of providing care. When an organization faces financial challenges, [it is] often forced to make difficult decisions."
Quality of care
Gazelle worries about the effect that the Great Resignation is having on the quality of care that hospitals and healthcare systems can provide. Even if a hospital has been able to hire traveling workers to maintain staffing levels, she questions if the quality of care is the same, she says.
While traveling nurse positions generally afford higher pay, these nurses often work in communities they have no personal ties to.
"When we don't have a committed dedicated workforce, it makes it difficult for the whole healthcare system to thrive," Gazelle says. "If you think for a moment about a physician in a busy emergency room, where they've lost some of their regular nurses and now they're having to work with traveling nurses, those new nurses probably aren't familiar with the needs of that particular population. It's quite disruptive. It makes it difficult for the advanced emergency physician to provide good care to vulnerable individuals."
But many hospitals simply can't get by with traveling replacements, and the staffing shortage is forcing them to get creative.
"We have had to keep patients in the emergency room since our staffing and volume in acute care didn't allow for the internal transfer," Lutz explains. "We haven't been able to transfer some patients to larger tertiary hospitals, since their staffing shortages resulted in beds not being available. It has resulted in some innovation on our part, in conjunction with a larger facility, where we initiated telehealth in the inpatient unit to access specialists needed to care for patients."
Retention and reward efforts
The Great Resignation is adding more pain to an already challenging workforce shortage in healthcare. Hospitals and health systems that are viewed as leaders and innovators will likely fare better than others.
"In healthcare, it's almost like a rotating door with so many people leaving their jobs," Gazelle says. "We're in the midst of a major national nursing shortage and nurses can make much more by leaving their job and signing up to be a traveling nurse. At the same time, levels of burnout in physicians are high, especially given the added demands of the pandemic. Many physicians are moving to a different practice or, for some, simply throwing in the towel on the career they worked so hard to attain."
These trends are placing greater pressure in the battle for qualified staff, as well as the struggle for organizations to be viewed by job candidates as a great place to work, Bohorquez says.
In that effort, Scheurer Hospital has added a monetary incentive for employees to recruit new team members, Lutz says.
"We have also utilized part of the [COVID-19] stimulus funds to provide a bonus for our entire employee group. We are increasing pay for some of our employees and evaluating how much we need to increase others to retain them. We are also considering how we staff various departments, and whether we can or should provide all of the services we currently are providing to the community."
Nursing schools and grads fill vacancies
Even before the pandemic, healthcare executives knew that the industry was heading into a major nursing shortage. That places greater focus on how many people are entering nursing and medical schools.
In the short term, many hospitals and healthcare systems are increasing their college recruiting efforts. That is a step taken by Scheurer Hospital.
The hospital added a college recruiter, "in the hope of encouraging more new grads to work for us. We have also added a program to pay for part of their college debt in return for a commitment to work for [us for] a period of time," Lutz says.
What remains to be seen is what effect the pandemic will have both short term and long term on the number of people who want to enter the healthcare field.
There is some good news on that front. According to the American Association of Colleges of Nursing, enrollment in nursing school programs increased by 6% in 2020. The 2021 numbers have not yet been released.
Countering this increase in the number of students entering nursing programs is the continued decline in available nursing faculty, and the number of positions available at hospitals due to mergers, acquisitions, and organization closures.
Editor's note: In part three of this series, we will look at how the Great Resignation is affecting the role of the healthcare CFO, and further steps CFOs can take to combat the Great Resignation
In this three-part series, HealthLeaders looks at the significant loss of workers in the healthcare industry and how it will impact quality care and finances.
The healthcare field has lost an estimated 20% of its workforce over the past two years, including 30% of nurses, according to several recent studies. By any account, those statistics are staggering.
Healthcare is not alone. The so-called Great Resignation has gripped several industries. Millions of U.S. workers have left their jobs, and in many cases their field of work entirely. The reasons cited for doing so are many.
In this three-part series, HealthLeaders examines what is happening in the healthcare sector regarding job resignations, the reasons for them, the implications for the quality of care being provided, and the potential impact on the CFO role at hospitals and healthcare systems now and in the future.
Sharing their views on these issues are Terry Lutz, CFO at Scheurer Hospital in Pigeon, Michigan; Carlos Bohorquez, CFO at El Camino Health in Mountain View, California; and Dr. Gail Gazelle, MD, assistant professor of medicine at Harvard University in Massachusetts and a master certified coach for physicians.
How the Great Resignation impacts the healthcare industry
Recent job tracking numbers reveal that an estimated 5 million U.S. workers overall have decided to quit their jobs without having a replacement employer. In many cases, workers are deciding to leave their career fields entirely.
"The Great Resignation is occurring for a variety of reasons and the pandemic has played a large role," stresses Harvard's Dr. Gail Gazelle. "After the flexibility of working at home, many people don't want to return to the constraints that a workplace involves. Others have reconsidered their goals and priorities, leading them to try something new or move to a new organization."
Perhaps more important, especially in the healthcare space, is the toll of job burnout, caused by working endless long hours with little relief in sight.
"The levels of burnout are high in healthcare and in many other fields, so many people are leaving in an effort to focus on their mental health. Whatever the reason, the level of disruption throughout the economy is high," Gazelle says.
Gazelle says that she has spoken with several professionals in the medical field, who have all confirmed that the pandemic has left them feeling exhausted, past their breaking points, and in some cases, resentful. That is especially true for those working in COVID-19 units, where doctors and, especially nurses, have often been on their feet for 12–13 hours with only two breaks to use the bathroom, eat, and take care of other business.
"Add on the fact that the full personal protection equipment that they use is not very breathable, causing heavy sweating, and you have a recipe for disaster," Gazelle says.
The reasons healthcare workers are leaving their jobs or the industry
Carlos Bohorquez can confirm the toll that job burnout is having in the healthcare field. As CFO at El Camino Health, he says there was already a staffing shortage at the healthcare system before the pandemic, and that forces each worker to put in a bit more effort. But when the pandemic hit, and many healthcare workers were forced to do double shifts or work without days off, some quickly reevaluated their commitment to the profession. Then, as healthcare workers started quitting, things got especially bad.
"Even before COVID, there was always a shortage of licensed nurses and other clinical staff. But the COVID pandemic has stretched the workforce to the limit," Bohorquez confirms. El Camino Health includes two nonprofit hospitals: Mountain View Hospital and Los Gatos Hospital, as well as urgent care, multispecialty care, and primary care facilities. Mountain View and Los Gatos, California, have a combined population of 116,000.
It is a similar tale at Scheurer Hospital, a 25-bed critical access hospital located in rural Michigan in an area on the east side of the state called "The Thumb." Scheurer Hospital serves a community of approximately 18,000 in its primary market and another 7,000 in its secondary region.
"There appears to be a group of people who have reflected on their lives during COVID and realized that they didn't need to continue working since they were in good shape financially," Lutz explains. "As a result, they stopped working instead of earning additional wages at the end of their careers. This was more prevalent with the registered nurses."
Another group at Scheurer Hospital took new jobs at Walmart or Meijer (a regional store like Walmart), since both retailers increased their wages in the competition to lure workers. The result was that healthcare workers could now earn nearly the same pay by leaving their healthcare jobs, where the risk of contracting COVID was perceived to be higher. This group included medical assistants, receptionists, and housekeepers, Lutz says.
"A few left because they didn't want to be mandated to get vaccinated," Lutz adds. "We were required to either have our workforce vaccinated or get a medical or religious exemption from those that weren't. If we didn't comply, then we would lose payments from Medicare and Medicaid, which is about 65% of our revenue. That would effectively close our doors," Lutz says.
The specific job roles that have been hardest hit
Ask Lutz which job roles have experienced the greatest losses from the Great Resignation and he is quick to confirm those of registered nurses and medical assistants, "which have each accounted for about 25% of our open positions," Lutz says.
Scheurer has also struggled to fill lab tech positions over the past two years, and the hospital has depended on agency help as well as asking staff to work extra shifts to make up the difference.
The experience at Scheurer is also happening at hospitals and healthcare systems across the country.
"Nurses are leaving in large numbers, and we have a national shortage of nurses that was predicted before the pandemic started," Gazelle says. "The pandemic has made the worst of a bad situation."
Contributing to the large-scale exodus of nurses at hospitals and healthcare systems is the growing trend of traveling nurses.
"Nurses can now leave their own home institution and do what's called traveling nursing and get paid a lot more," Gazelle says.
"Economics are a big driver for all of us. One can appreciate that nurses who have a family to feed and debts to pay will jump at the chance to move on, even if their personal allegiance is to their own community. But this has caused a great deal of disruption in the healthcare landscape," Gazelle says.
That disruption is also being keenly felt at the physician level.
"There is great concern about the numbers of resignations by physicians," Gazelle explains. "The levels of burnout in physicians was already extraordinarily high before the pandemic. With the incredible new demands and pressures of taking care of seriously ill and often dying patients with COVID, they want change."
For many physicians, that means looking elsewhere, Gazelle acknowledges.
"They're thinking, 'Maybe the grass is greener if I move to a different hospital or healthcare system. Maybe things will be better.' And sadly, they are not better. In addition, some physicians are just throwing in the towel on this career that they have invested so much in, and leaving the field completely," Gazelle says.
Editor's note: In part two of this series, we will look at how the Great Resignation is impacting the quality of care, and how it is changing recruiting, staffing, retention, and rewards strategies. In part three, we will explore how this trend impacts the role of the CFO, what are the expected long-term impacts, and what steps CFOs can take to combat or ease the effects of the Great Resignation in healthcare.
Most healthcare CFOs expect their organizations to be thriving in one year, but labor shortages, supply chain disruptions, and Provider Relief Fund paybacks threaten their viability.
Three top financial threats are pressuring hospitals and healthcare organizations in 2022, but the majority of healthcare CFOs (82%) say they expect their organizations to be thriving one year from now.
Those are among the findings of the CFO Outlook Survey for 2022, released by the BDO Center for Healthcare Excellence & Innovation. The survey polled 100 healthcare industry CFOs. Respondents represented organizations with revenues ranging from $250 million to $3 billion. The survey was conducted in October 2021.
Threatening an otherwise bright outlook:
Supply chain challenges aren't going away. The top healthcare business risk of 2022 is supply chain disruption (cited by 84%), and the top supply chain challenge is rising material costs (39%).
Providers must pay back Provider Relief funds (PRF). 35% of CFOs say they are worried about fulfilling PRF reporting requirements, and 78% say that regulatory uncertainty is a risk to their business.
Labor issues are likely to continue. Top workforce challenges of 2022 include retaining key talent (40%) and attracting new talent (40%).
HealthLeaders spoke with Steven Shill, partner and national leader of the BDO Center for Healthcare Excellence & Innovation about the survey findings, and what they mean for CFOs.
This transcript has been edited for clarity and brevity.
HealthLeaders: Tell me about the BDO Center for Healthcare Excellence & Innovation.
Steven Shill: The healthcare dilemma in the United States touches every one of us. From individual patient care to population health, our healthcare problems can feel insurmountable.
We are the adviser to healthcare leaders, solving complex problems through holistic thinking that drives patient care and financial resiliency.
HealthLeaders: What were the most surprising findings in the survey related to healthcare CFOs, and why?
Shill: There were a couple of note. The first involves bond or loan default concerns in 2022—25% of healthcare CFOs we polled are concerned they will default this year, even if they did not in 2021 (42% said they did default in 2021). This shows that, in spite of healthcare CFOs' optimism for the year ahead, financial strains haven't gone away and will continue to impact the industry. This is further evidenced by relatively low levels of cash on hand among the respondents surveyed.
The second relates to primary care spending—less than 1/3 of the CFOs we polled are increasing primary care spending, and nearly 1/3 are planning to decrease investments in primary care. This decrease might have to do with deal-making in primary care. We've seen deal prices increase sharply, which has made transactions less attractive to many organizations, especially if they're currently strapped for cash. Further, closing deals requires a robust professional staff—consisting of accountants, lawyers, auditors, and more. And right now, finding talent is particularly challenging.
HealthLeaders: A majority of healthcare CFOs say they expect revenue growth in 2022 over 2021. But 2021 was a year stymied by the pandemic. How will 2022 projections compare to pre-pandemic levels?
Shill: Generally speaking, the industry is still expected to outperform pre-pandemic revenues significantly, as 2020 and 2021 both showed an uptick despite a brief dip in Q1 2020. The continued investment in new drugs and therapeutic technologies, and increasingly accessible care models (including telehealth) are sure to help drive revenues higher than years past.
We're seeing a lot of optimism, which could be the result of a few factors, including expectations around increases in elective surgeries and the potential for additional support packages from federal and state agencies. However, these projections may be overly optimistic as these organizations are facing staffing, supply chain, and financial pressures that could impact their performance.
HealthLeaders: What are best practices for encouraging patients to get more involved with their own care and wellness, and how can this help the bottom line of hospitals?
Shill: Bringing patients closer to their care can take many forms. For instance, encouraging patient portal participation (digital front door strategies) …, offering suggestions for medication apps to help patients stay on track with prescriptions, and even automating phone calls to help encourage follow-up appointment scheduling.
When patients are more involved in their healthcare, it means they are likely to be looking to providers for medical assessments and treatments more often, and less likely to develop high acuity conditions requiring lengthy hospitalizations or complex procedures, which can often get costly and present payment issues for some patients. This more regular cadence of patient interaction results in a favorable outcome for both patient health, provider sustainability, and the overall move toward a value-based care system.
HealthLeaders: To help their organizations travel the road to profitability, what specific actions can healthcare CFOs take?
Shill: Healthcare organizations concerned about their financial health should review the underlying causes of their distress to gain an understanding what can be attributed to the pandemic, and what will persist once it's over.
After that, they should consider engaging financial advisors who can help reevaluate budgets, review leasing decisions, address risks of bond covenant violations, and entertain additional financing options.
Additionally, since financial health of an organization is usually directly impacted by operating decisions, strategy, and market conditions, we recommend that the next step would involve operational, clinical, and digital advisors examining all of the aforementioned areas with the objective of ensuring the sustained financial health of the organization.
HealthLeaders: While a majority of respondents say they expect revenue growth in 2022, a majority also say they have defaulted or will default on debt heading into 2022? Why this seeming contradiction?
Shill: 2021 proved challenging for healthcare organizations due to the unexpected resurgence of COVID. This surge forced many elective surgeries to be pushed off yet again, keeping many patients from returning to healthcare facilities.
Additionally, we have seen a dramatic expansion of costs. This increase is a result of rising payrolls due to staff shortages caused by burnout and other reasons. Global supply chain issues can also be blamed for growing costs, as supply shortages drive up prices of essential resources. This, combined with depressed higher margin revenues and higher operating costs have led many providers down the road of distress and lending defaults.
However, these defaults are widely understood as anomalies. Technically, they were defaults, but not due to substantive underlying issues—this financial strain is mostly regarded as temporary. Because of this, they were not of much concern for bond council. This may, however, change depending on macroeconomic factors such as sustained inflation and a tightening liquidity environment with higher interest rates.
HealthLeaders: Short of paying healthcare workers more money, what steps can CFOs take to offset worker burnout, fatigue, frustration, and the so-called Great Resignation?
Shill: Beyond salary increases, healthcare organizations can look to improved benefits packages, increased flexibility, employer-provided mental healthcare and childcare to support and retain their current staff.
Making investments in your employees' careers is another great way to help improve retention, alongside supporting a diverse and inclusive culture that helps employees feel more comfortable sharing their ideas, frustrations, and perspectives with leadership.
HealthLeaders: The vast majority of healthcare CFOs say supply chain strain is a top risk in 2022. What are some steps CFOs can take to ease that pain?
Shill: To manage the supply chain squeeze, healthcare CFOs and leadership can consider second- or third-tier suppliers when purchasing materials and supplies. Looking to suppliers that are not "physician preferred" can often yield more frugal or more plentiful options. Collaboration with other healthcare organizations is another option, which may result in a fair trade of supplies, or even an IOU to be repaid down the road.
Providers should also consider increasing inventory stores, as well as working with their staff to ensure they understand the supply challenges the team is facing, and how they can help by conserving resources and choosing supplies wisely.
HealthLeaders: Many healthcare systems are considering digital transformation or some "big risk, big reward" growth strategy. What does digital transformation mean for the typical healthcare system or hospital?
Shill: Digital transformation for healthcare organizations is often a holistic progression to implementing new technologies into the care model. This can include everything from telehealth investments and improving their ability to monitor and analyze data from wearables, to analyzing data generated from internal programs and services, to adding efficiencies into the day-to-day operating activities. Digital transformation is an ongoing process that leverages modern tech in an effort to improve care through data.
HealthLeaders: Is there anything else you would like to comment on related to this survey?
Shill: We would be remiss not to mention that compliance and regulatory concerns, and the associated costs, are impacting the healthcare industry. We have seen Price Transparency, The No Surprises Act, as well as other legislation, both state and federal (including the expiration of emergency waivers), weighing heavily on healthcare organizations. The Provider Relief Fund and its compliance is another great example of post pandemic fallout that is sapping healthcare provider resources.
To manage their future regulatory and compliance needs, healthcare providers will need to dedicate significant resources.
Hospital CFOs talk about how their organizations are challenged with and maintaining training programs that develop required skills, ensure quality care, and keep workers engaged and loyal.
While case numbers for COVID-19 are declining in many parts of the country, hospitals and healthcare systems continue to be stretched for staff resources and available ICU beds. Most hospitals are anywhere from somewhat to woefully understaffed as they wage this battle. That makes it challenging to focus on such traditional offerings as training and career development programs.
But hospitals can't afford to let training efforts fall behind during even these trying times. It is vital to both the short-term and long-term success of the organization.
Leading healthcare systems recognize that employees must keep their skills up to date to meet industry licensing standards and to provide the best care. Furthermore, the organization's leaders of tomorrow must be developed today, and that requires a commitment from current management to formal training programs.
The current state of training
Maintaining training investments can be especially challenging at smaller hospitals and care centers. That is certainly true for Monadnock Community Hospital. Located in a rural community in South Central New Hampshire, Monadnock Community Hospital serves 13 towns with a combined population of approximately 40,000. It is one of the largest critical access hospitals (CAH) in the country.
While staffing shortages are easily the top concern at Monadnock Community Hospital, training opportunities are a close second, says CFO Richard Scheinblum. "We have limited hands-on training opportunities," he stresses.
Even in good times, the hospital's size works against providing all the training programs it would like. "Sometimes we have to partner and send staff to other hospitals for training and development," Scheinblum acknowledges. But the pandemic has made that process especially difficult.
"I think that we were in crisis mode from March 2020 to the summer of 2021," Scheinblum says. As the pandemic raged, there was little time to focus on anything but treating the rapid increase in patients and perform only essential tasks. Even at the time of the interview for this article, Scheinblum said the hospital has 80 open job requisitions, and 30 staff out due to COVID.
Still, as the first pandemic surge waned in late summer 2021, hospital executives realized they needed to refocus on the strategic practices and priorities of the hospital. Topping the to-do list were programs that would help develop, engage, and motivate existing staff, and help with the recruiting of new employees.
"We started having robust conversations about recruitment and retention of employees, including how we can support people to develop in their careers. Our vice president of human resources has multiple interdisciplinary work groups developing plans," Scheinblum explains.
The challenges of delivering top-level training
The challenges of offering robust training programs are just as real at larger hospitals and healthcare systems, and again, COVID-19 has played a significant role.
At El Camino Health, there have been three significant trends in training over the past two years. El Camino Health includes two nonprofit hospitals: Mountain View Hospital and Los Gatos Hospital, as well as urgent care, multispecialty care, and primary care facilities. Mountain View and Los Gatos, California, have a combined population of 116,000.
"I do believe that in-person training is always better," says Carlos Bohorquez, CFO at El Camino Health. "But given the obvious COVID restrictions to providing a safe environment for everybody, we have had to do it remotely. So having to [train] remotely and ensuring that people have access to the proper tools, that that would be challenge number one."
As with Monadnock Community Hospital, staffing issues have also impacted training initiatives. Hospital employees are working long hours and many days. But the hospital is also dealing with large numbers of employees out at any time due to COVID. That makes it difficult to allow employees to be 'out' for training activities.
The third significant challenge is ensuring that each employee gets the training they need to stay current in their skills, to meet licensing and industry requirements, and to feel valued by the organization. This last point is especially important right now, as hospitals and healthcare centers see large numbers of workers leave the field, Bohorquez notes.
Workers are receptive to digital and remote practices
But there is good news in all of this, Bohorquez says. For one thing, employees in nearly all industries have grown accustomed to communicating and interacting in new ways. The company water cooler has been replaced by digital tools and applications. This aids greatly in the delivery of remote training where able.
Another key area for hospitals to maintain and support is advanced education classes. Scheinblum says staff at Monadnock Community Hospital have specifically asked for additional tuition reimbursement benefits. In response, the hospital's philanthropy staff has raised money specific to nursing education and other disciplines. And the hospital revised its tuition reimbursement policy from the previous one-year waiting period to just 90 days.
"I think the most important thing is to lead a discussion with your C-suite on ideas that folks may have in regard to career development," Scheinblum says. Then, make sure that worthy ideas are funded in the organization's budget, and that it is communicated throughout the organization that those initiatives have top-level support."
The key role of leadership development programs
Maintaining a healthy training program is also key for leadership development within the organization.
"At El Camino, we believe that continuing to develop leaders is vital to the short-term and long-term success of the organization. Despite COVID, we have kept a formal leadership training process in place, and in each area [of the organization] we identify people who we believe are our future leaders."
That process is taking longer than it would have done before the pandemic, Bohorquez acknowledges.
"I talk to my team on a regular basis on the need to provide training to their staff, and the need to get leaders within the organization. We haven't slowed. We've just pivoted to the right structure," Bohorquez says.
"The fact that a lot of training can't be done in person does not preclude anybody from continuing to educate their staff and provide learning opportunities," Bohorquez stresses.
Healthcare organizations can also bring training to the workforce through internal subject matter experts and by soliciting outside experts to present at the organization whenever possible.
"One of the things that I think has had an impact on the entire industry is that a lot of conferences and other educational opportunities have either canceled or gone remote. I think developing that network of peers across the organization and across the industry—to help you see what other organizations are doing—is absolutely important. We are an incredibly great organization, but we can always learn from other organizations across the country, to understand what challenges they have and how they're dealing with them."
The role of the CFO in maintaining investments
"My advice would be to sit down with staff at various levels and ask them what they need to develop in their career," Scheinblum says. "Often, as a CFO, we are driven to just make changes. Taking a step back, asking targeted questions, and soliciting feedback when trying to make an organizational impact is the best approach."
That view is shared by Bohorquez, who also says that the most important contribution a CFO can make is to help the organization remain financially stable so that it can make the investments in staff that it needs and wants.
"At the end of the day, having a stable financial platform will allow us to fund the training needed, allow individuals to participate in conferences, and help us develop young leaders," Bohorquez says. "Everybody in our leadership team agrees that our most important resource is our employees. And right now, more than ever, the workforce is vital to the success of any organization."
Investments in healthcare by private equity firms are on the rise, which creates several issues for CFOs.
It has been well publicized that mergers and acquisitions continue at a brisk pace in the healthcare industry. Typically, these actions involve a larger hospital or healthcare system absorbing smaller or struggling organizations, or systems merging to share complementary healthcare services for mutual benefit.
Also on the rise are investments in hospitals and healthcare systems by private equity firms. Supporters of such investments generally argue that they can increase innovation in the recipient hospital. Critics of the practice generally say it threatens the quality of care provided by those hospitals.
While there are laws in place that prohibit private equity firms from causing harm to patients in any way through their investments, which does offer a degree of protection, there is a lack of hard data on the most recent investments. The last major study looked at the growth of private equity investments in the healthcare sector from 2003 to 2017.
While private investments in healthcare can mean different things to different people, "most people will think of the continuing trend of private equity and venture capital investments in healthcare providers, health tech, and related companies serving the broader industry," explains Rebecca Matthews, a partner and co-chair of the Health Care Transaction practice at the law firm Wiggin and Dana. After having spent several years in-house at a large health system, Matthews' practice is now focused almost exclusively on healthcare transactions, from collaboration arrangements to mergers and acquisitions.
Many investments in healthcare by private equity firms involve the outright purchase of a struggling hospital or healthcare system. In those cases, the equity firm attempts to increase revenues by taking one or more of several major actions, including reducing staff; merging multiple practices; closing portions of operations; renegotiating reimbursement rates with payers; and trying to grow certain specialty services or profitable practices.
Of course, certain conditions must be in place for the investment by an equity firm to take place. First, the hospital or health system must be willing to sell all or partial ownership. Top factors for an organization being willing to sell are: a health system is struggling financially overall; it has an innovative product or service but needs financial assistance to boost it; the health system has a difficult time meeting compliance requirements; or the practice owner or partner is retiring.
As noted, there are conflicting views on what impact these private equity investments have on the delivery of care and the well-being of patients. But there is no hard data to support either the pros or cons.
Still, anecdotally, some impacts would seem to be a natural result. For example, if a private equity firm consolidates healthcare facilities or closes certain hospitals or practices, those actions would impact where certain care is available to the public.
Likewise, when any of these events occur, healthcare workers could find their jobs changing, or even eliminated.
Three top issues for CFOs
There are three issues in particular that should be of concern to hospital CFOs in relation to private equity firms investing in healthcare, Matthews says.
"Probably the most significant issue is valuations—and understanding that hospitals and health systems are, in some ways, more constrained than private investors (by which I mean private equity in a broad sense) because of regulatory restrictions on financial arrangements with referral sources," Matthews explains. "That said, hospitals and health systems can offer different strategic benefits that may not be available from private investors. Explaining this to an investment target will be important so that they can compare offers in a more nuanced and sophisticated way."
"Another significant issue is the prohibition on the so-called corporate practice of medicine," Matthews says. "This rule varies by state, but often prohibits private investors from owning, directly, entities that provide certain licensed professional services such as medical services."
In some states, this also means that medical practice revenues cannot be shared or "split" with entities that are not owned by licensed professionals, Matthews continues. Contracts with entities who do not comply with the rule can be in jeopardy, so validating compliance is critical, she stresses.
As to the third top issue, "to the extent that hospitals and health systems are diversifying investments or supporting centers of innovation and investing side-by-side with private investors, they must consider fraud and abuse rules, disclosure requirements, and other regulatory concerns that may not be issues for the private investors. This may require additional representations and covenants from the target that may not be in a lead private investor's standard deal documents," Matthews explains.
Increased investments leads to rising scrutiny
The rising influx of private capital into the healthcare industry has resulted in more attention being paid to the prohibition on the corporate practice of medicine. Antitrust considerations have also been heightened, Matthews says.
"Hospitals and health systems always need to consider fraud and abuse rules in any transaction with a referral source," Matthews says. "In addition to the federal Anti-Kickback Statute and the Stark self-referral law, there may be state laws to consider. These laws are complex and multifaceted and require a close review of all remuneration to be paid or provided in an arrangement—so that means not only cash, but in-kind support and other benefits."
Because of this, Matthews advises CFOs to stay abreast of regulatory considerations and raise concerns or ask questions often.
"Building cross-functional teams and coordinating with other departments, including legal and compliance can be key," Matthews advises. "It's also helpful to avail yourself of resources from organizations that understand the complexity of healthcare and transactions in that space, such as the Healthcare Financial Management Association (HFMA) and American College of Healthcare Executives (ACHE), each of which has state and local chapters."
One of the most significant trends impacting the cost of healthcare is continued hospital consolidations and acquisitions, says AHIP director.
The staffing crisis in healthcare, along with the rising costs to provide quality care, will dominate the top issues facing healthcare CFOs in 2022. But equally important are the reduced or insufficient reimbursements that many hospitals and healthcare systems are receiving from payers.
Quite simply, as much as the healthcare sector is going through upheaval, so is the healthcare insurance sector, which accounts for the lion's share of revenues that hospitals depend on. Unfortunately, reimbursement rates from payers are not keeping up with inflation.
With increasing labor, supply, and pharmaceutical expenses, hospitals will be looking for increased rates from payer partners and will continue to focus on improving operational efficiencies to counteract those growing expenses, according to Charlton Park, CFO and chief analytics officer at the University of Utah Health.
HealthLeaders spoke with David Allen, director of communications and public affairs for AHIP, about the top payer trends that will directly impact the healthcare sector and consumers.
The impact of hospital consolidations and physician practice acquisitions
One of the most significant trends impacting the cost of healthcare is continued hospital consolidations and acquisitions, especially in crowded markets, Allen says.
"Every day, Americans bear the brunt of hospital consolidation. Hospitals in highly concentrated markets can charge higher prices for medical services and have greater leverage to negotiate higher prices from health insurance providers, leading to ever-increasing healthcare costs for individuals and families," Allen says. "Additionally, hospitals continue to buy up and take over control of doctors' practices, either by buying up their practices or hiring them directly. And hospitals are bringing prices along for the ride."
To reinforce this last point, Allen says that by the end of 2020, nearly half of American doctors were employed by hospitals or health systems—49.3%, according to an analysis from the Physicians Advocacy Institute.
"That's not surprising, given that 18,600 doctors left independent practice and became employees of hospitals in 2019 and 2020," Allen says. Meanwhile, the institute's data reveals that hospitals acquired 3,200 physician practices during that two-year period, for an 8% increase in hospital-owned practices.
"Evidence shows that this type of consolidation—when more and more of a region's doctors work for the same hospital or health system—leads to higher healthcare prices for Americans," Allen says. "When hospitals gain more market power by snapping up doctor practices, they can control referrals and demand higher prices, which in turn makes premiums and costs for everyone even higher."
The high cost of prescription drugs
Drug prices are out of control, putting life-saving medications out of reach for too many American families, Allen confirms.
Indeed, while inflation will have severe impacts in many areas of healthcare, that is especially true with the price of drugs.
"Drug inflation has been the most severe," says Denise Chamberlain, executive vice president and CFO at Edward-Elmhurst Health, a $1.7 billion health system in the suburbs of Chicago. "According to a Kaufman Hall report, the average drug cost per patient in September 2021 was up 40.4% compared to September 2020."
The greatest problem here is that drug prices are set by brand-name drug manufacturers based on what they think the market will pay, Allen explains.
"Generics and biosimilars provide much-needed competition to drive those drug prices down. But the uptake of biosimilars has been limited because previously, none have been approved by the Food and Drug Administration as interchangeable," Allen explains.
Biologics and biosimilars are important medical advancements that are being used to manage many chronic conditions, as well as to prevent, treat, and even cure diseases, Allen says. They represent the future of prescription drugs.
"But an innovative new drug doesn't do any good if no one can afford it," Allen stresses.
Addressing social determinants of health and health equity
To achieve health equity such that every person has a fair opportunity to live a healthy life, we must address root socioeconomic and sociopolitical causes of poor health and health disparities, Allen says.
"The cost of inaction on social barriers to healthcare has glaringly emerged during the COVID-19 pandemic, exposing the stark inequities that exist in America and demonstrating the crucial link between socioeconomic barriers and health outcomes," Allen says.
The good news is that many health insurance providers recognize the importance of meeting the basic needs of their members and have utilized policy levers to mitigate the socioeconomic barriers that they face.
"Health insurance providers respond to socioeconomic barriers in a variety of ways, ranging from offering services that are covered under the insurance plan to designing and implementing new innovative programs—often in partnership with community-based organizations," Allen explains.
"Many health insurance providers also invest in grant funding, reserve funds, or savings in community infrastructure and community-based resources to improve the socioeconomic living conditions of the communities they serve. So, the focus is not just on reducing disparities for their members, but also on advancing health equity across the community by increasing opportunities to live healthy lives," Allen says.
Increasing competition can lead to lower premiums
Perhaps the best financial news for many hospitals and healthcare systems is that the average consumer has a growing number of options when it comes to healthcare insurance providers. This has the potential of reducing the cost of such insurance for an individual.
"Every American deserves affordable, comprehensive coverage—regardless of their income, health status, or preexisting conditions," Allen says. "The individual market provides affordable, high-quality healthcare for hardworking Americans who buy coverage on their own. Through the Affordable Care Act [ACA] health insurance exchanges, health insurance providers compete to provide Americans with coverage that protects their health and financial security."
Competition among health plans is on the rise, Allen says, which could translate to reduced cost or increased coverage for an individual subscriber.
"The ACA's Exchanges allow Americans to compare plans and choose the benefits that best meet their needs. On the Federal Exchange through healthcare.gov, the average consumer has between 6–7 issuer options, up from 4–5 in 2021," Allen notes.
Competition lowers premium costs for consumers. Research shows that counties with one additional health insurance provider in 2019 experienced a 2.5% reduction in the benchmark premiums compared to 2018. Average benchmark plan premiums in healthcare.gov states decreased 3% from 2021 to 2022, after a 3% decrease from 2020 to 2021.
State issues
Finally, at the state level, Allen says AHIP continues to focus on affordability through a competitive market.
"That includes pushing back against drug manufacturers seeking to pass legislation that allows their drug prices to remain obscured to the consumer, and providers who want to limit the use of medical management tools to promote safety and the most effective treatments," Allen says.
The Biden Administration wants to know how and where hospitals and healthcare systems spent the COVID-19 monies they received. CFOs had better have a clear and complete paper trail.
The Biden Administration has put an increased focus on financial audits, investigations, and surveys, which will have significant implications for hospitals and healthcare systems in 2022. Chief among them will be CARES Act Paycheck Protection Program (PPP) investigations, as the government begins looking at where and how the pandemic relief assistance was spent.
As that process unfolds, if there is one overriding action that is needed on the regulatory and enforcement landscape for hospitals and healthcare systems, it is for the federal government to find some empathy and compassion. At least, that is the way Jody Erdfarb, an attorney and partner at Wiggin and Dana LLP, sees it.
Erdfarb works in the healthcare practice at the law firm, specializing in investigations in the healthcare sector. Wiggin and Dana has over 150 attorneys throughout its officers in New Haven, Connecticut; New York City; Philadelphia; Washington D.C., and Palm Beach, Florida.
"We represent providers of all shapes and sizes, either when audited or investigated by state or federal authorities, or audited by commercial payers. We help them through the entire process, from the moment they get first notice that they're either being audited or investigated, until the matters resolves itself one way or another."
The regulatory and enforcement landscape can be a rough road to navigate right now. Between come-due accountability for pandemic relief assistance awards and changes in industry regulations, scrutiny is at a high point. COVID-19 will be a significant part of the government's fraud enforcement efforts this year and beyond.
Hospitals must account for COVID-19 relief funds spent
There are a variety of reasons for the increased scrutiny in the healthcare regulatory and enforcement space. An obvious one is the sheer amount of federal assistance that was awarded during the early days of the pandemic. The goals were to help ensure that businesses survived and that the American workforce remained on the job, or at least on payroll, Erdfarb explains.
The government now wants an accounting for much of that COVID assistance, including assurance that if an organization accepted relief funds it spent them in the right areas, for the right reasons, and that employees were retained if that was a condition on receiving funds.
Healthcare CFOs and accounting departments must be on their A-game in defending how they handled any money received. Everything related to COVID relief funds needs to have been very carefully documented, Erdfarb says.
"The way that the healthcare industry and government enforcement happens right now, there are mechanisms to self-disclose, but even though they're punitive, under the OIG self-disclosure protocol, there's a 1.5 times multiplier on penalties, even if it's a totally innocent mistake," Erdfarb explains.
Erdfarb expects many healthcare systems will find themselves in this dilemma. The pandemic relief programs were a new entity. The process of approving and distributing funds at the federal level was a rushed effort. As a result, errors can have happened at any level. But most importantly, at the local hospital level, the guidelines were complicated and hard for many people to understand, Erdfarb says.
COVID-19 flexibilities may expire, changing term expectations
Healthcare CFOs should watch for the end of COVID-19 flexibilities this year. Since the beginning of the pandemic, the federal government has adjusted fraud and abuse regulations for the benefit of the industry, but many of the changes are temporary.
Some of the regulatory changes were in response to the challenges that hospitals and health systems were experiencing with physician contracts, compensation, or general staffing. It has been well-publicized that the healthcare sector lost more than 20% of its workforce over the past two years. As a result, the federal government issued a variety of waivers to provide relief from reimbursement and other regulatory requirements.
Many healthcare providers entered into arrangements or established care delivery systems based on new flexibilities in the regulations, and some have specific requirements that must be met. Erdfarb advises CFOs and healthcare accountants to keep careful records and documentation on how they are meeting guidelines and factoring in any waivers until such time as the pandemic runs its course, or the flexibilities are ended.
Telehealth services skyrocketed during the pandemic, adding to fraud fears
Also related to the pandemic, there was a substantial increase in needed telehealth services as physician offices and care centers shut down for a time, and as the need for mental health counseling skyrocketed.
"We can't really talk about our predictions for the regulatory and enforcement environment [this] year without talking about telehealth," Erdfarb says. "Everybody knows that telehealth usage has gone through the roof since the pandemic, and especially in the behavioral health area."
As noted above, the federal government issued several waivers during the pandemic regarding healthcare regulations, including some that expanded telehealth capabilities. For example, Erdfarb says that statutory requirements for a patient to be located in a rural area and physically present at a healthcare facility were relaxed. Healthcare services can now be delivered remotely to a patient anywhere, including at their home. Reimbursement amounts to hospitals were also increased to be on par with in-person visits.
Again, these waivers are only temporary, Erdfarb notes. They are currently in effect until the end of a federal public health emergency declaration.
The telehealth environment makes it potentially much easier for billing fraud to occur, which also has federal investigators on alert.
"What we've been seeing in this area is really bad actors, people billing for services that were literally never provided, such as by using stolen identities, or taking massive amounts of kickbacks on ordering prosthetics for people who don't need them," Erdfarb says.
CFOs can expect the federal government to closely review documentation related to telehealth billings.
Complaints and grievances getting thorough scrutiny
An area where CFOs can take a lead role is in the handling, or hopefully preventing, of formal complaints against the healthcare organization over perceived financial irregularities.
An increasing risk for hospitals and health systems are grievances filed by disgruntled current and former employees or by whistleblowers. And it seems obvious that there are a lot of unhappy workers in the healthcare sector right now.
"That's something that we have to keep our eye on," Erdfarb says. "Anybody involved in investigations knows that disgruntled employees can wreak enormous havoc on our healthcare providers, even during the pandemic or during a severe healthcare shortage."
"The government's perspective is that, even a broken clock is right twice a day. So even if it's a disgruntled employee or someone with little credibility, they still take those complaints seriously. They investigate them, and their investigation takes a lot of time and energy for healthcare providers to deal with," Erdfarb explains.
The best advice Erdfarb has for healthcare CFOs is for them to conduct their own thorough internal audits now, ahead of any that might be potentially imposed on an organization.
In real estate, the slogan is 'Location, location, location.' In healthcare compliance, it is 'Audit, audit audit,' Erdfarb says.
"The best thing you could do is to find potential problems yourself and fix them in real time. If you can fix them within a year, then you don't even have to file self-disclosure. If you can self-audit, the better off you're going to be," Erdfarb concludes.
Cheryl Matejka's promotion is one of several senior leadership role changes as newly appointed CEO Steve Mackin prepares to take over the reins at Mercy.
When Steve Mackin assumes his new role as president and CEO at Mercy on April 1, he will join several other new executive appointees, including Cheryl Matejka as the new chief financial officer, who began her role this month.
Matejka has more than 30 years of experience in the healthcare industry, with 15 years of those years at Mercy in a variety of roles.
"I've had the privilege of being part of many evolutions and care models in the healthcare industry," Matejka says. "I also willingly embrace future change to improve the healthcare model in our country to better serve our patients and communities. The wonderful thing about having had a long career with Mercy is that I know Mercy's plan and I can step into a new role with minimal disruption."
In announcing Matejka's appointment, the healthcare provider stated in a release, "Serving in various Mercy leadership roles since 2006, Matejka has broad experience and deep understanding of Mercy's finances. In partnership with operations across Mercy, Matejka has overseen significant strengthening of Mercy's financials over the past decade, often during times of regulatory and contractual change in healthcare. Matejka's promotions within the finance organization over the years are not only the result of her talent and business acumen, but also a deep commitment to Mercy's mission and focus on the highest quality care for patients."
HealthLeaders caught up with Matejka recently and asked her about her goals in the new role, as well as what she sees as the biggest issues facing healthcare CFOs in 2022.
HealthLeaders: Would you please tell us a little bit about Mercy and the community it serves?
Cheryl Matejka:Mercy is one of the 25 largest U.S. health systems and serves millions annually with nationally recognized quality care. Mercy is a highly integrated, multistate healthcare system including more than 40 acute care managed and specialty (heart, children's, orthopedic and rehab) hospitals, convenient and urgent care locations, imaging centers, and pharmacies.
Mercy has 900 physician practices and outpatient facilities, 3,500 Mercy Clinic physicians and advanced practitioners, as well as more than 40,000 co-workers serving patients and families across Arkansas, Kansas, Missouri, and Oklahoma. Mercy also has clinics, outpatient services, and outreach ministries in Arkansas, Louisiana, Mississippi, and Texas. We serve in both large and small communities across our footprint. We also have one of the nation's largest ACOs and are excited to help advance the national need to decrease the overall cost of healthcare in our nation.
HealthLeaders: Aside from the pandemic, what do you believe are the top three challenges facing healthcare organizations today?
Matejka: In order…
1. Staffing. Our extremely dedicated co-workers and medical team have stepped up again and again, after every relentless wave of COVID. While we have applied herculean and creative efforts to recruit more co-workers and support different care models to meet the need, the reality is that the labor market is very stressed.
2. Inflation. It's apparent that inflation will impact all of our costs in the foreseeable future. As an organization that cares about keeping costs low for our patients, this is a concerning trend. As a nation, we have to bend the healthcare cost curve. Rising costs will be a continual challenge.
3. The pace of change.
HealthLeaders: Have you been asked to lead any specific missions, and what goals to you want to achieve?
Matejka: Mercy has had a thoughtful strategic plan that has continued even through the past two years of the pandemic. The good news about a thoughtful and intentional internal transition is that I've been involved in developing and executing on that plan and know where we need to go.
Clearly, Mercy needs to remain financially strong to be able to serve our communities both now and in an uncertain national healthcare future. Ensuring we have the financial strength to support our mission to our communities, regardless of what is going on in our world, is a key focus and foundational to Mercy's essentiality in the communities we serve.
Our strong foundation has helped us be prepared to respond to a pandemic no one predicted. I want our communities to know that we can support them long into the future in spite of uncertainty. Our co-workers need to have that assurance as well. We must also continue to improve our care model over the coming years as we care for more patients than ever before.
HealthLeaders: How is the staffing crisis in healthcare impacting Mercy, and what role do you believe CFOs can play in addressing that crisis?
Matejka: CFOs need to understand the drivers of the shortage and help support new and innovative solutions, including different staffing models and creative reward programs that help attract and retain the best talent. Senior teams, including the CFO and CHRO, have to lock arms and work together to balance all the needs of an organization.
HealthLeaders: In what ways can CFOs help health systems, hospitals, and the healthcare industry plan for an uncertain and turbulent future?
Matejka: CFOs see opportunities and are positioned to help their organizations implement broad change to create improvement not only in cost but most importantly in quality and service. CFOs need to be open to enabling solutions that are different than anything in our past. The pandemic has accelerated change at a pace I never would have dreamed possible.
Being connected to what is happening in our clinics, hospitals, and communities is crucial to understanding how decisions impact the care we deliver. All CFOS should strive to have that level of understanding and engagement.
HealthLeaders: What advice do you have for other healthcare CFOs on how to best help their organizations succeed at serving patients, nurturing staff, mastering efficiencies, and surpassing the competition?
Matejka: It's critical to be nimble, as healthcare is constantly on the move. I believe every organization is unique and has unique challenges.
