Are CFOs making the right investments to solve their organization's issues?
Between an uptick in cybersecurity threats and piling workforce management woes, CFOs are searching for solutions. Montefiore CFO Colleen Blye recently spoke to HealthLeaders, sharing insights on these issues and how her organization is working to get ahead.
Blye took the role of executive vice president and CFO for the New York-based health system in 2016. Recently, she also added chief business officer to her title, taking on the business operations side of her organization as well. See our coverage of her new role in this previous article.
Blye’s top concerns as she progresses in her new role are where to make the best digital investments, and how to approach labor management.
Digital Services
Blye has digital services on her radar, understanding how Montefiore’s digital presence meets patients where they are. Digital communication is vital for patients and has become a critical element of their overall experience.
“That means we need to make it easy for them to find us and access their information online, and we need to provide this information in ways that best suit their communication preference,” Blye said.
As cybersecurity attacks persist across health systems, Blye ensures digital service investments are also top of mind.
“Digital services investments are always anchored in our responsibility to protect patient information and our commitment to ensuring safety protocols. Cybersecurity safeguards are always maintained to protect our patients' privacy,” she said.
Labor Management
Health systems across the country have been grappling with labor shortages and costs. One study notes that labor costs were starting to eat into hospital’s Q1 profits. What can a CFO do? Access to strong real time data plays into the equation here, according to Blye.
“Labor management is at the forefront of our stewardship focus,” she said. “One of the keys is a daily focus of a multi-disciplinary team consisting of operations, nursing, human resources, and finance. We are focused on making certain that real time actionable data is available to those making key staffing decisions.”
An additional aspect of labor management, Blye notes, is continuous investment for needed resources.
“We are equally focused on making certain that we are investing in a continuous pipeline and access to needed resources, as well as training and retaining our labor force.”
Value-based care looks promising, some market disruptors not so much.
At the HFMA conference this year CFOs dove into some of their top concerns and gave insight on areas where they are less concerned. Value-based care is a term that’s been thrown around healthcare for a while, with some health systems being more concerned about implementing this model than others. CFOs assured attendees at HFMA that a value-based care model is important, but that doesn’t mean it's easy.
Value-Based Care, Not For The Faint Of Heart
Value-based care is a sector it seems every CFO hopes to become more involved in. Michael Allen, chief financial officer at OSF Healthcare System spoke about their organization’s costs climbing up 15% over two years, and how they had trouble dealing with this, citing data access challenges in the mix as well. He also spoke about their struggles finding the right payer partners to create an incentive system that is transparent, and also incentivizes both parties to win together.
“It’s hard if you can’t get a transparent partner,” said Michael Allen.
Damschroder stated that health systems looking to shift to value based care must be ready to weather the storm, and examine the cost to scale.
“You can’t be in it for a year or two and think you’re going to turn it around,” he said.
Health systems should examine any and all options to stay on top of the national payers, including joint ventures to expand areas of care.
“I’d say it’s the least transparent place where commercial insurers are,” Damschroder said.
Are Disruptors Actually Disrupting?
Next, the discussion turned to CFO’s perception of market disruptors like Walmart and Amazon. Despite their moniker, there doesn’t seem to be much cause for concern.
While companies like Walmart and Amazon have the chance to disrupt and destabilize parts of the healthcare sector, they don’t seem to be in it for the long haul.
“Primary care economics don’t work on their own. You have to either be connected on the payer’s side in a value-base play, or you have to be able to make some money off it in another way,” Allen said.
“That’s why none of these are working. The private equity play into medical groups isn’t working.”
Damschroder emphasized that these companies are only in the business to make money, adding “When the risk gets too big, there’s not the same responsibility.”
Cook brought up her organization’s effort to push an on-demand virtual care visit option to offset Amazon’s offering and how it wasn’t received well, citing very low visits.
From tech innovation to sustainability wins, how one health system does it.
For Allina Health’s new CFO Doug Watson, there are two things at his health system that are making big strides. In a previous interview with HealthLeaders, Watson shared the main pain points he is facing in his organization, discussing labor expenses and his thoughts on how to make the patient experience a “friction-less” one. Now we’re talking wins, and how Watson’s health system puts their best foot forward.
Smaller Environmental Footprint = Smaller Costs
Outside of Watson’s new role, Allina Health recently made headlines for two other initiatives: an environmental sustainability award and a mobile app for breast cancer patients.
There are numerous benefits for health systems who accel sustainability efforts, from avoiding medical waste disposal fines to cutting costs, to having a positive impact on the surrounding community. At Allina, these benefits are not overlooked.
In May, Allina Health was awarded the 2024 System for Change Award by Practice Greenhealth for the second consecutive year, one of many awards held by Allina for its sustainability efforts. Watson points out that striving for sustainability is a win-win for health systems: sustainable practices equates to cost savings.
“We take our social responsibility very seriously,” Watson said. “If we can produce things more efficiently and more effectively with the same amount of resources, then it's a win both economically and environmentally.”
Tech Innovation
Cancer Connection is Allina’s new mobile app that provides breast cancer patients with accessible information to navigate their diagnosis and have control over their treatment, this is one of four apps that Allina offers to their patients. The app features a learning library, a customizable to-do list, and features to help patients prepare for appointments.
New tech like AI and automation have made huge strides in helping burned out medical staff; the reported burnout rate amongst healthcare workers was nearing 50% last year.
Watson spoke about the opportunities for healthcare to advance innovative tech not only to tackle hefty medical costs, but to significantly improve clinician’s quality of life.
“I think there's a huge opportunity as we start to think about how to get technology and use it to either take friction out, or to help our clinicians be able to be more effective, work more at the top of their individual license, and also hopefully improve quality of life for them,” Watson said. “Then they can do what they got into health care for to begin with, which is to be connected to the patient.”
Allina isn’t new to the health tech game, and Watson shared his intentions to keep the innovation wheel spinning to improve patient care.
How should CFOs strategize when it comes to payer denials?
The increase in payer denials brought a lot of heat at HFMA this year. From CFOs, to RCM to VPs of payer strategy, everyone had a tip or a strategy for dealing with payers.
The numbers don’t lie, studies show that prior authorization and denials saw a 67% increase in 2022. Another study cited that denials were up again to 11.99% in the first three quarters of 2023.
What can health systems do to work towards a better denial rate and a better relationship with their payers?
Top tips from the executives:
Set the tone: Ensure to set the tone of negotiations and meetings from the start of payer interactions. Make the payer understand why they are a good partner or not. Don’t be afraid to say: “We’re content going out of network if we need to.”
Analyze parity: Look at internal parity and how your organization’s payers compare to other payers. Be sure to understand where your organization currently stands, and where it’s going.
Over-prepare: Prepare your organization up front, even up to the board. Be transparent about challenges in managed care, and look at ways to file litigation if necessary. Customize communications according to the audience and patients.
Key Strategies:
Apply pressure: Don’t accept poor performance for inadequate rates
Drive the narrative: Reinforce the need for partnership, patient care over profits
No Delegating: Payers try to siphon off leadership tasks to minimize their input. Don't let that happen.
Stay the course: Be patient
Review deliverables: Hold them accountable. No two negotiations are the same.
Consider creating a national payer scorecard: Keep track of the reputations, strategies and tactics of every payer your organization does business with.
"We are not going to leave dollars on the table," CFOs say.
During a panel at last week’s HFMA Annual Conference in Las Vegas, CFOs discussed pain points they’re currently facing and emerging opportunities.
Topics ranged from action plans for addressing industry challenges to examining current financial trends that are impacting healthcare, but there were three specific areas where CFOs seem to be placing their focus.
Artificial Intelligence
One of the first trends spoken about was the implementation of artificial intelligence. CFOs voiced concerns about the governance of AI and how smaller organizations are having trouble implementing it. Some brought up the need for an ‘automation road map’ to serve as a guide, and the importance of a such a plan for every health system.
“We’re starting to dip our toes in, but it’s a slow process,” said Jana Cook, CFO of Phelps Health.
Perhaps this is something that every leader should keep in mind. The consensus was that AI implementation is a process that needs to be taken slow with the right type of governance in order to do it successfully.
Big Pharma
Big pharma’s impact on health systems was the next topic of conversation, with panelists and attendees discussing the 340B drug pricing program and the significance of improving the cost of pharmaceuticals.
“Pharma and the health plans are winning right now,” Robin Damschroder, executive VP and CFO of Henry Ford Health System said. “They’re winning in the battle of who is doing better in the community.”
Hospitals and health systems face a great financial burden as drug companies increase prices.
While drug manufacturers are trying to lobby against the program, Damschroder stressed the need for health systems to push back against big pharma efforts and the importance of coming together to speak with one voice.
In order to do that, Damschroder said, it will take a collaboration of colleagues at the individual professional associations within the different physician specialties to come together.
Payer Pains and Denials
Commercial payer denials are coming in at an alarming rate for many health systems. One study cited that commercial payer denials for inpatient and outpatient services increased to 15.1% in 2023, compared with 3.9% for Medicare in the first quarter.
One of the biggest changes the group spoke about was going from commercial pay to government pay. One CFO discussed the how their organization dealt with denials by implementing weekly payer meetings and putting an emphasis on documentation coding, calling it “long, hard, steady work.”
The HFMA Annual Conference tackled all things finance this year, but one area that seemed to dominate discussions? The revenue cycle. From payer woes to strategy improvement, here are a few key trends that were top of mind at the event.
Payers Aren’t Playing Nice
No big surprise here: payers are playing by their own rule book.
Almost every discussion at HFMA this year mentioned payers in some capacity. That’s because they’re causing more issues for health systems than ever before. Denial rates have been increasing year over year, and reimbursement can take up to three months or longer.
Heavily capitalized payers are becoming more and more common, and they’re often playing hard with health systems, from using AI to inaccurately automate denials to bringing reimbursement to a stand-still.
Several sessions spoke about the importance of partnering with the right payers and emphasized the importance of transparency in these partnerships.
Executive leaders said don’t be afraid to go out of network and use other hard ball tactics to push back on payers.
You need systemwide revenue cycle participation
With revenue cycle management being a major topic this year, executives shared what is working at their health systems.
One session discussed the importance of the relationship between CFOs and the revenue cycle team.
There must be a certain level of trust in this relationship in order for both departments to thrive. CFOs should not have to micromanage the revenue cycle but should be there for guidance and eliminating barriers.
One session discussed the concept of physicians being more involved in revenue cycle decisions. Afterall, physicians are the ones with the medical degree and are the ones experiencing the operational issues firsthand in their work.
RCM has a lot of room for improvement, and hope is not a strategy
Just about everyone thinks they have the solution to revenue cycle problems.
The reality is there is no one size fits all solution and executives will have to examine the specific needs of their organization to identify opportunities for improvement.
Often, health systems rely on dozens of vendor support to manage their revenue cycle. One study presented at a session cited that the average health system uses about 40 vendors to support RCM efforts.
There’s a number of solutions and support out there, but finding the right one will take meticulous tracking of revenue cycle. “Hope is not a strategy,” said one CFO during a session.
A few leaders shared their insights on where they think the revenue cycle may be five years from now, saying that the department will likely be far more automated. But leaders warned to not get too carried away.
Standard processes shouldn’t be automated, many said. Revenue cycle teams should look towards investing in the right technology to improve RCM efforts and ensure that the technology benefits the specific mission-critical components of their organization.
Reimbursement and growth strategies are at the forefront of the CFO's role and says it's the future for CFOs.
Colleen Blye took on the role of executive vice president and CFO for New York-based health system Montefiore in 2016. Now, she's taking on the role of chief business officer.
Blye recently stepped into her added role, describing it as “very exciting,” she believes that it’s where all CFOs are heading.
“The intersection of finance along with organizational performance and strategy is what allows us to truly execute strategically to be financially sustainable,” Blye told Healthleaders.
Montefiore is comprised of 10 hospitals and more than 200 outpatient ambulatory care sites. Working with an incredibly diverse population, Blye spoke about the forethought and strategy that goes into making decisions for the health system. She dove into some of the biggest pain points her organization faces, including government reimbursement.
“Across our footprint, [...] we are always making sure to invest where the needs are and to re-position as healthcare evolves,” she said.
“Today, we grapple with doing all of this in an environment where reimbursements don’t always cover the cost of care. As an organization serving 85% government payor, 50% of our revenue comes from the 15% of our patients who have commercial insurance.”
Blye noted that while the regulatory environment and resources allocations are well intentioned, it can result in reimbursement delays and, ultimately, gaps in care.
Strategic Growth
Despite reimbursement woes, Blye is focused on Montefiore’s growth, and the strategy includes academically pushing the boundary. Montefiore stands as a leading academic medical center with a focus on clinical care and academic research.
“They go hand in hand and, at the end of day, we’re making advancements in the field of science, and our communities benefit from our work,” she said.
“Looking for sound business opportunities to help us continue pushing these boundaries is what I’m most excited about.”
Blye’s new role also has her overseeing the systemwide initiative to position Montefiore Einstein for growth and sustainability.
“Our transformation work is focused on our future. We are thinking about how we can continue to meet our patients’ expectations while grappling with growing inflation, labor costs and the ever-changing financial dynamics of healthcare,” she explained.
“Transformation allows us to think big, looking across disciplines within the system to evaluate and prioritize for the long-term.”
Looking ahead, Blye says that while healthcare economics are complicated, nuanced and ever-changing, she is tuned in to one two-part question as she moves forward: “How do we ensure the delivery of care and what is the future economic model of healthcare?”
Payers can successfully negotiate if they can prove they can stabilize finances.
The tug-of-war between payers and providers hits the precipice at the negotiating table. Contract negotiation is more than just tough business, and the strategies each party takes to the table can be do or die for any organization.
Before going into a negotiation, both payers and providers need to put in some research.
For example, providers must ensure they’ve reviewed their contracts and create a habit of doing so often. On the other hand, payers must also ensure they are up to date on their contracts and can supply providers with accurate information and data throughout the negotiation process.
When it comes to successful negotiations though, proving that you can help reduce expenses is an important strategy for payers to utilize.
How to Show That You Can Reduce Expenses
Payers can successfully negotiate if they can prove they can stabilize finances. Although most healthcare leaders on both sides are optimistic and expect financial performance to improve, a few key areas will push them to do so.
“Rising labor costs in healthcare and a substantial increase to the regulatory and legislative mandates are driving increased costs for both providers and health plans,” said Krishna Ramachandran, Blue Shield of California’s senior vice president of health transformation and provider adoption.
Payers and providers will need to collaborate and examine specific avenues that health systems can take to reduce expenses to have a portion of the funds returned to their organization.
Both parties can bring up digitization, which can play a large role in the negotiation: from utilizing AI to reduce administration workload, to implementing EHRs to reduce paperwork and streamline operations, leaders must examine options that work for their system. Payers can cut costs and pass savings onto their organization; this is beneficial to both parties.
For payers this is important because the less the administrative cost, the better for everyone, Piyush Khanna, vice president of clinical services at CareFirst Blue Cross Blue Shield, explained, agreeing that AI has the potential to help, but must be done responsibly.
Part of that responsibility goes back to ensuring accurate data sets; technology will only be as good as the data. “The data backbone is extremely critical for these statistical models of the future to be able to leverage this information,” Khanna said. “These tools need good, curated data sets [in order to] to be meaningful.”
But health leaders should not only look to the newest digital solution to fix their problems. Digital tools and programs must be integrated in a way that best paves the road to success for that specific organization.
Ramachandran stated that to drive tangible change, industry leaders must provide solutions that are proactive and integrative, giving an example of how Blue Shield is investing in tools and partnerships to bring healthcare into the digital age: “This includes tools to streamline data exchange between providers and health plans so that we can reduce the burden of administrative transactions and focus efforts on member health.”
Private equity bankruptcies are projected to increase in 2024.
Private equity is woven into many health systems, and it’s not always playing out well. According to a new report by the Private Equity Stakeholder Project, health systems funded by private equity have entered a pattern of financial distress and bankruptcies. The report notes that 2023 marked a record year of large healthcare bankruptcies, and private equity accounted for some of the largest ones.
According to the findings, this wave of financial distress is projected to continue throughout 2024 as many organizations face credit rating downgrades and potential defaults. Most of the companies at risk are owned by private equity. This raises questions about private equity's place in healthcare, as well as CFO strategies and care outcomes. Taking this evidence into consideration, CFOs should look at weighing the pros and cons of private equity and if it truly is helping an organization move forward towards its financial and clinical goals.
The healthcare expenditure forecast is outpacing just about everything.
Healthcare spending is soaring and is expected to climb even higher over the next eight years. But the impact will be felt in places other than the consumer’s wallet.
Two new reports: The CBO National Health Expenditure Forecast to 2032, and The Bureau of Labor Statistics CPI Report for May 2024 and Last 12 Months (May 2023-May2024) are predicting significant increases in healthcare spending through 2032.
According to the CBO, which forecasts major increases from 2024 to 2032, the National Health Expenditure is expected to increase a whopping 52.6%, jumping from $5.048 trillion to $7,705 trillion, claiming 17.6% of the GDP. The NHE/Capita will increase 45.6%, taking it from $15,054 in 2024, to $21,927 in 2032.
Other major categories will also see a big jump: Physician services spending is expected to increase 51.2%, making up 19.7% of total NHE, and hospital spending also will accelerate to 51.6%, jumping to 30.7% of total NHE.
Two other categories are also set to jump: Prescription drug spending and net cost of insurance. Prescription drug spending will increase 57.1%, taking it to $728.5 billion, while the net cost of insurance will increase 62.9%, escalating it to $534.7 billion.
Medical services, which increased 3.1%, represent about 6.5% of the overall Consumer Price Index, but there is much variance among spending categories. Notably, hospital and over-the-counter prices exceeded the overall CPI. Hospital services were at 7.3% over the last year, (1.0% of the CPI total), and OTC prices were at 5.9%.
What does it all mean for the industry?
While the healthcare economy is large, and only expected to get larger, Paul Keckley notes that, outside of OTC products, consumers aren’t the ones who will notice the increase of expenses. Employers and state and federal governments who fund the majority of healthcare spending will feel the brunt of these increases.
Hospitals and physician services are expected to remain the same, he says, but prescription drugs and health insurance will increase. As these increases draw in more attention to price control methods, tensions between payers and providers will likely rise. These two parties will need to pace towards innovative price control practices to smoothen out negotiations around spending.
According to Keckley, there isn’t much to indicate that value-based care has lowered spending in any notable way, nor is it considered significant in these forecasts.
For value-based care to truly have an impact on healthcare spending, hospital executives and payers will need to work together to examine what types of value-based care models will create an impact specific to their organization. And while this type of care is fondly spoken about among health executives, implementation will require strategic plans in order to be beneficial to the industry.
As healthcare spending expands above the GDP, population growth rates, and overall inflation, Keckley says it may not be sustainable.
“Its long-term sustainability is in question unless monetary policies enable other industries to grow proportionately and/or taxpayers agree to pay more for its services. These data confirm its unit costs and prices are problematic,” Keckley says.
