What new skills will future finance leaders need in their back pocket?
Healthcare is becoming increasingly complex and high-stakes, especially for CFOs. The CFO role is not what it used to be. Now finance leaders must have a more diverse skill set than ever before to make their organization succeed.
The HealthLeaders UpNext CFO Exchange is gearing up for thoughtful discussions on the industry’s biggest challenges, in finance and beyond.
Here’s what we think future finance leaders will need to thrive in their roles.
Traditional finance strategies and isolated decision-making won't cut it.
The role of the healthcare CFO is evolving.
No longer just the financial gatekeepers, today's CFOs are thrust into an unforgiving landscape where the stakes couldn't be higher. With the entire fiscal health of the organization resting on their shoulders, they must make critical decisions in the face of economic turmoil, shrinking margins, and escalating labor costs. And in the rare cases when hospitals do fail, the CFO will be in the conversation about why.
Is this responsibility too big for one person? Many healthcare CFOs are burning out and leaving, crushed by the weight of expectations. On top of this, CEOs are now asking themselves if it's too risky for the entire financial wellbeing of a healthcare organization to rest on one person.
Teamwork
A key factor in the success of the modern-day CFO is a strong, dedicated team. CFOs will need close-knit collaborations with not only executive staff, but also clinical staff. With so much of healthcare happening outside the finance office and in direct care, CFOs must have an understanding of the clinical challenges and technology needs to truly drive financial success for the health system. Clinician input is essential to make the most informed decisions.
For executive staff, CFOs need to know where their colleagues from other departments can help. This includes collaborating with CTOs and CIOs to determine the best tech investments, collaborating with CMOs and CNOs for insight on clinical challenges, working with RCM teams to know where inefficiencies lie, and partnering with the CEO to build a comprehensive roadmap for the organization.
"I have to be able to push back; I have to be able to develop that trust before I let go of that authority and power," says the CEO of Bristol Hospital, Kurt Barwis. "And more importantly, I have to instill a really strong understanding that, 'No, you're not just going to make those kinds of decisions in isolation.'"
Soft Skills
One of the biggest foundational pillars of smooth collaboration is strong communication. When CFOs can effectively communicate the ins and outs of their financial plan for the organization, that's when other departments and colleagues can provide operational and clinical insight.
CFOs must also be able to establish strong trust with their colleagues, and that flows both ways. Staff shouldn't feel like executives are hovering over their shoulders, and executives shouldn't feel the need to do so.
When CFOs demonstrate clear communication and trust, their leadership role will shine through and garner the faith and reciprocated trust of their staff.
Don't Fear the Future
The skills a CFO needed 10 or 20 years ago are not the same today. With an increasingly tense economic landscape that includes inflation, labor market woes, regulatory pressures and growing payer disputes, a modern healthcare CFO must be well-versed in leadership, (including all the soft skills that accompany it,) operational oversight, and strategic operational vision.
For more insight into what's needed to succeed as a modern CFO, check out this cover story.
What can CFOs learn from Highmark Health’s positive results?
Highmark Health has announced its consolidated financial results for the first nine months of 2024, reporting $22.1 billion in revenue, $529 million in net income, and $273 million in operating gain.
The results come from several diversified businesses within Highmark Health, including Highmark Health Plans, Highmark Health’s provider network Allegheny Health Network (AHN), United Concordia Dental and HM Insurance Group.
This positive operating performance, driven by steady membership and increased patient volumes across all delivery areas, allowed Highmark Health to maintain a strong balance sheet, with $12 billion in cash and investments and net assets of $10.5 billion by September 2024.
Highmark Health Plans: Utilization and Cost Challenges
Highmark’s 2024 financial success was driven by steady membership in both government and commercial businesses. Highmark Health Plans reported $16.6 billion in operating revenue and $275 million in operating gain year-to-date through September 2024.
Highmark Health Plans reported better-than-expected commercial membership enrollment in the southeastern Pennsylvania region following its entry in the market. Despite this, the organization faced headwinds and cost pressures from rising health care usage, continued effects of Medicaid redeterminations, and high prescription drug costs, particularly GLP-1s, according to Highmark Health CFO Carl Daley.
Allegheny Health Network (AHN)
Allegheny Health Network reported 9% total revenue growth and improved EBITDA year-over-year. During the first six months of 2024, AHN saw patient volumes rise, as they had done year-over-year. According to Allegheny Health CFO Brain Devine, a few different strategies went into this.
“We’re moving efficiently from agency staff to investing in our clinical resources,” he said in an interview with HealthLeaders. “Even with the IV shortage that's been happening, working through those types of items has allowed us to determine the right clinical protocols and standardize supplies. That's allowed us to fully maintain safety while managing our spend at a different level.”
Patient Volume Increases
Inpatient discharges and observations increased 3%
Outpatient registrations increased 6%
Physician visits increased 4%
Emergency room visits increased 7%
Diversified Businesses
Highmark Health's diversified businesses brought in $3.1 billion in consolidated operating revenue through September. 2024.
United Concordia Dental reported $1.3 billion in operating revenue and $75 million in operating gain.
enGen reported $879 million in operating revenue.
HM Insurance Group (HMIG) reported $907 million in operating revenue and $55 million in operating gain.
Executive Take
Part of Highmark’s 2024 success involved higher-than-average patient volumes stemming from increased efforts to drive access within the network.
“On the provider side, we’ve continued to drive access to locations throughout the community, to improve the health and wellbeing of the members that we serve,” said Daley.
Working with the states for appropriate reimbursements is a part of the plan, he says. Continued efforts to drive access, and technology improvements will be the two driving forces behind Highmark Health’s ‘living health strategy.’ said Devine.
Outlook and Guidance
While Highmark Health saw a positive operating gain, Daley said he expects cost pressures that affect commercial, Medicaid and Medicare Advantage customers will continue.
While some health system balance sheets are looking stronger than others, CFOs should expect more unpredictability around cost pressures in 2025. With a new administration underway, CFOs must come prepared with new, tailored strategies to protect the financial health of their organization.
Value-based care goes much further than managing cash flow differently.
As healthcare increasingly shifts toward value-based care (VBC), CFOs are facing both challenges and opportunities.
Value-based care emphasizes improved patient outcomes while managing costs, something easier said than done. The transition requires CFOs to rethink their financial strategies to not only ensure the health system’s sustainability, but also to strengthen its role as a vital community partner.
HealthLeaders spoke with HFMA Senior Vice President for Content and Professional Practice Guidance Rick Gundling to get some insight into what goes into value-based care financials and where CFOs need to focus.
Being a Community Partner
The success of value-based care is based in part on being a successful community partner. Through VBC, CFOs can help health systems invest in community-based interventions that address health disparities and improve the well-being of underserved populations. This might include partnerships with local organizations that provide resources for social services, transportation, mental health support, and preventive care initiatives.
These efforts not only benefit the community but can also result in long-term financial benefits by reducing the overall demand for acute care services and improving population health metrics.
Moreover, by being good stewards of public health, health systems foster trust within the community. This trust can translate into stronger relationships with patients and better patient retention.
Involved community partners provide not only timely primary care, but preventative care as well. CFOs can support this strategy through funding for health and wellness initiatives, such as health tracking apps and programs that encourage patients to take more control over their own health. The argument to support funding for these initiatives includes reduced urgent care, emergency and long-term chronic care costs.
Payers, Claims and Population Health
To succeed in VBC, health systems must develop strong partnerships with insurance companies and other payers. CFOs should work with payers to create contracts that incentivize quality care that aligns both parties’ goals. Examples include data sharing, setting transparent performance targets, and participating in collaborative initiatives to improve population health management.
However, it’s important to note that not every patient is going to fall in line with a health system’s VBC cost projections.
“The reality is when you're managing a population, there are going to be some patients that are outliers that are just going to be high cost,” says Gundling.
This is where reinsurance can come into the picture, Gundling says. This can give providers some peace of mind in addressing consistently high claims.
Reinsurance can help CFOs manage the financial burden of catastrophic or high-cost patient cases, such as ones that involve complex surgeries, long-term care, or rare diseases. By purchasing reinsurance, a hospital can transfer some of the financial risk of these high-cost cases to a reinsurer. Reinsurance allows CFOs to stabilize finances and avoid budgetary strain from unpredictable, large claims.
“You have that reinsurance on that 3% of the population, but then focus your efforts to manage the care on those 97% of the population,” says Gundling.
Rick Gundling, HFMA Senior Vice President for Content and Professional Practice Guidance
Aligning Financial Incentives
Under VBC, providers are typically rewarded for achieving specific quality and outcome metrics, such as reducing hospital readmissions or improving chronic disease management.
CFOs should work with payers to ensure that financial incentives are appropriately structured. Consider detailed risk-sharing agreements, where health systems are paid based on their ability to reduce costs while maintaining high-quality care.
CFOs should also focus on aligning physician compensation with quality performance to drive desired behaviors across the organization. And they can collaborate with CMOs to jumpstart physician initiatives to align with new care models.
If value-based care is designed correctly, with a focus on aligning financial incentives and population health, everybody can win, says Gundling.
Stay tuned for Part 2 to learn how CFOs can get down to the nitty-gritty of value-based care and what other tools and strategies can set a system up for success.
CFO decisions can have a big impact on staff retention.
As the CFO role grows to become more involved in every aspect of a health system, staff retention should not be overlooked. CFOs can have a big impact on staff and retention through the organizational investments they make. Whether it’s investing in new technology to reduce burnout or educational courses to improve skill sets, here are some ways CFOs can help with staff retention.
Tomorrow's healthcare finance executive will need new priorities and skills to lead a health system forward.
Future finance leaders are entering into an increasingly complex and high-stakes healthcare market. What type of skills and strategies are going to set these leaders up for success?
We have some ideas.
Let's face it, the CFO role is not what it used to be. No longer are CFOs just the financial gatekeepers of a health system. There's a lot more to the job now, like leadership and communication skills.
Leadership: Communication with Executive and Clinical Staff
Future finance leaders will need to get a good grip on effective communication across all domains of their organization, including executive staff and clinical staff. They need to build mutual trust and understanding first. Without this trust and frequent, thorough communication, CFOs will find themselves in dangerous territory, making decisions in a vacuum that may impact patient care in ways they don't fully grasp.
Finance leaders will also need to have a robust skill set in negotiation. Effectively communicating with payers in contract negotiations and vendors for products and services is crucial. Future CFOs can look into courses to improve these skills before jumping into important discussions.
"The CFOs of the future really do have to have that strategic knowledge," says Bristol Health CEO Kurt Barwis. "They may be smart, but you can't put them at the top of your organization if they have no people skills, no interpersonal skills, and, most importantly, no self-awareness skills."
The Nurse Outlook: Virtual Nursing
Virtual nursing is all the talk in healthcare right now, but leaders need to be thoughtful about integration, including understanding the financial implications. Integrating AI and virtual nursing can streamline processes and give clinicians time back with the patient, but these tools should be used as assistants, not replacements.
CFOs will need to collaborate with CNOs to figure out how virtual nursing will make the most impact for their health system. Clinical feedback from a CNO can help CFOs make the right investments. The right technology and strategies will mean the difference between a virtual nursing platform that succeeds in improving outcomes and reducing nurse workflows and one that wastes time and money.
While a virtual nursing strategy can help to retain and hire nurses, CFOs know that this alone isn't going to solve the workforce crisis. Working with clinical leaders and investing in the tools they need to do their jobs effectively and efficiently will make an impact on retention and workforce challenges.
Industry Tech
It's easy to get caught up in the excitement of new technology and the possibilities for innovation. But leaders will need to prioritize where they need to pay the most attention, i.e., the areas directly impacting patients and staff.
For CFOs, don't pounce on new tech too fast. Discuss with CTOs and CIOs the technology trajectory the organization should pursue. A CFO should be able to understand and communicate the value of IT when collaborating with CTOs. A sloppy tech integration makes it even more difficult to measure ROI.
For AI, CFOs will need close collaboration with CTOs, CIOs and other executives to examine what specific challenges AI can solve for their health system. Don't pour investments into AI just for the sake of having AI. There's much that goes into this decision, including development costs, educational costs, determining market needs, creating utilization balance, and assessing potential ROI, — not to mention governance costs, which include legal and liability concerns. CFOs need to have a full understanding of the financial risks when adopting AI into an organization.
"Our goal is not to replace our workforce with technology, but to help our workforce be more effective and efficient in doing their jobs, while also improving their experience when taking care of patients," says HealthLeaders Exchange Member and Finance Director of AdventHealth Kaitlyn Anderson.
Physician Workforce Expectations
Recruiting and retaining physicians is becoming increasingly expensive, and future CFOs will need to explore different strategies to help CMOs maintain a stable physician workforce. They'll need to collaborate with CMOs to get an understanding of where physicians' challenges lie and create a financial strategy that helps CMOs address those challenges.
CFOs can also collaborate with CMOs to create a workplace environemtn that physicians will appreciate and enjoy. This may involve a culture revamp, with more opportunities for collaboration and open discussion and investments in educational pipelines, and technology to help physicians with their workload.
Disruptors
Healthcare is a much more competitive industry now, and so-called disruptors are targeting key pain points, like cost and convenience. While some of the early primary care models from retail, disruptors have failed to show sustainability, CFOs need to understand where and how those models could affect a health system's financial stability.
The trick for CFOs is to understand where to compete with disruptors and where to stand back and let the market determine what works. They'll need to understand where a health system can invest in collaborations or other programs to improve care while reducing cost, and they'll need to understand how technology and other investments can support the patient journey and keep them from seeking care elsewhere.
Above all else, it's important for CFOs to understand that disruptors and "out of the box" ideas can be good for healthcare by exposing the industry's weaknesses and identifying what patients really want. And it will be up to the CFO to craft a financial strategy that addresses those needs and keeps the health system on firm footing.
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The key to CFO success lies in balancing cost management with a human-centered approach and a forward-thinking mindset. One tricky area for CFOs to manage is staff retention, which can have a big impact on the bottom line.
One study found that the average cost of turnover for a regular position is between six and nine months of an employee’s salary. Additionally, replacing a highly specialized healthcare professional can cost as much as 200% of the employee’s yearly salary.
HealthLeaders just wrapped up its Workforce Exchange, and here are a couple things that we learned:
-Leaders must build a culture of wellness and psychological safety, where staff feel comfortable approaching leadership with questions and concerns.
-Leaders must strategize and build better educational pipelines into the industry, for both physicians and nurses. Create strong partnerships with academic institutions and consider innovative solutions such as tuition reimbursement or assistance.
-Leaders need to integrate technology like AI and virtual nursing to streamline processes and give clinicians time back at the bedside.
The industry message is clear: Leaders must create a safe and positive working environment, with room for advancement and education, while also giving staff access to tools that help them do their daily tasks more easily and efficiently.
CFOs can play an important role in fostering a strong team and improving staff retention, and clear communication is at the top of the list.
“It is my responsibility to make sure those managers have the tools, education and resources to find their answers about their budget, about what they can do to make money,” said Kyle Wilcox, VP of finance for MercyOne Medical Group.
One part of successful staff retention is ensuring health systems are recruiting the right type of workers. CFOs can ask themselves, ‘Do the physicians being recruited for the health system actually want to work at this specific organization?’
“On the physician side, we've also become more intentional around recruiting physicians that want to work for a not-for-profit health system or want to be in some of our communities that are very rural,” said Adventist Health CFO John Beaman. “In fact, we have a rural residency program where we actually train physicians to be practitioners in a rural setting.”
A good company culture also plays a role in staff retention.
CFOs must lead by example. A CFO should demonstrate a commitment to the organization’s mission and values in their daily interactions. When team members see their leaders embodying these principles, they are more likely to adopt them. Additionally, recognizing and rewarding behaviors that align with organizational values can also reinforce an excellent culture.
Lastly, CFOs can invest in technology that specifically aligns with their organization to reduce burnout amongst staff. CFOs can collaborate with CTOs, and CIOs to examine which tech options are best to integrate into the organization for streamlined operations that keep staff happy.
Is this a step backwards in the value-based care movement?
The recent announcement that OneCare Vermont is shutting down at the end of 2025 is raising questions over whether value-based care is truly sustainable.
The Accountable Care Organization (ACO), a subsidiary of The University of Vermont Health Network, aimed to reform how health care is paid for across the state. The decision also comes as the Vermont All-Payer ACO Model (VTAPM), a state-led initiative designed specifically for Vermont, is set to finish at the end of 2025.
As a lead organization in its network, OneCare ran on the state’s all-payer model, which sought to improve how Vermont residents pay for care while decreasing costs. This type of model is part of a federal framework that allows the organization to accept both Medicare and Medicaid payments.
Programs like OneCare contract with insurers to provide lump sums to providers to keep patients healthy, instead of the traditional pay-for-procedure model. About one-third of the state’s physicians are paid under this program.
“Ultimately, this is such a pivotal point in the region’s health care reform journey,” said Abe Berman, CEO of OneCare Vermont. “It made sense, when we talked to UVM and our other board members and colleagues, that it’s the right time for us to sunset this effort and look towards what comes next (for) Vermont.”
Healthcare leaders now question whether OneCare delivered a meaningful impact. According to the Green Mountain Care Board, OneCare spent between $13 million and $15 million on operations per year, including $7 million spent on benefits and salaries. The ACO has faced criticism from the board that it consumed money but hasn’t reduced healthcare costs or quantifiably improved Vermont’s health outcomes.
While the value-based model sought to lower recurring costs for patients through more holistic, preventative care, in the decade since OneCare’s launch, healthcare costs have sky-rocketed.
Medicare and Medicaid spending per enrollee grew 40.8% and 21.7% respectively in the last 10 years, while per enrollee spending on private insurance grew by 61.6%.
OneCare was the only active ACO in Vermont. With its end in sight, the organization will join in the state effort to pursue similar goals under the AHEAD model — States Advancing All-Payer Health Equity Approaches and Development.
The CFO Playbook
Although the program is ending, it helped play a crucial role in stabilizing primary care in Vermont, and provided a step in the right direction towards implementing successful value-based care models.
There are currently more than 1,800 ACOs in the U.S, but healthcare leaders are still unsure how to financially optimize models to both improve care and lower costs. In order to get a better grip on how a VBC shift could work, healthcare leaders will need to collaborate with ACOs to focus on the strategies they know are working, and carefully manage funding to stretch each dollar as far as it can go.
CFOs will need to hone in on specific patient health-related performance measures and continuously update finance strategies where needed. Look at not only the monthly cost per patient, but also smaller metrics like drug costs per patient and surgery costs per patient. A successful value-based care model will also involve more collaboration between clinical and executive roles. CFOs can ask themselves where they can collaborate with clinical staff to work on the organization’s most budget-eating challenges within the care model.
Stay tuned for a deeper dive into how CFOs can financially optimize value-based care for their health system.
Here's how CFOs can prep for this possible reimbursement change.
Hospital leaders are fighting back against a Senate position paper advocating for site-neutral payments.
The proposal, drafted by U.S. Sens. Bill Cassidy, MD, R-La., and Maggie Hassan D-N.H., 1 advocates for site-neutral payments to reduce patient healthcare costs, reduce provider consolidation, improve Medicare financials, and aid rural hospitals in high-need areas.
Under this payment structure, Medicare would be required to pay the same rate for services carried out regardless of the care location. Medicare payment rates currently recognize fundamental differences between care in hospital outpatient departments and other settings.
As hospitals push back against the proposal, CFOs can evaluate the potential financial and strategic impacts and zoom in on a few key considerations.
Outsourcing revenue cycle management comes with controversy. Is it truly a good method for cutting costs?
The narrative isn't the same for every system. While outsourcing offers potential benefits, it also comes with its share of challenges.
At Moffitt Cancer Center, Vice President of revenue cycle management Lynn Ansley explains how she strategized to get the department where it is today and what considerations are important when deciding whether or not to outsource RCM.
Do Vendors Really Do It Better?
While it may be enticing to jump on the vendor train to cut costs, Ansley explains that health systems must be crystal clear with their expectations for vendors and thoroughly examine what the vendor can do for the specific challenges of that organization.
“Being realistic, there are times where I do think you have to outsource,” she says. “But what I have found and what I aim to do when we have a new partner is we're very, very upfront with our expectations. Because we have had partners in the past where we haven't been as upfront with those expectations, we ultimately end up parting ways, and that's just wasted effort and time for both.”
Mergers and acquisitions may be a good exception for outsourcing, Ansley explains.
“I've heard both sides of the coin when there are large organizations, especially health systems, that are merging with one another, and they have two different rev. cycles,” she says. “I think part of that comes into the conversation.”
While vendors will compare what they do for other health systems, Ansley says sometimes they can downplay the complexity of some of the RCM roles.
“I think that also weighs into the controversy… really understanding how one vendor can support health systems that are so different,” she says.
Where Does The CFO Come In?
To help make the most informed and sustainable solution, CFOs will need to collaborate with RCM teams to determine what the specific needs and challenges are in day-to-day financial operations, and how that may contrast bigger picture finances for the organization.
There are some benefits to outsourcing, like the potential for cost savings, scalability without the need for major investments in infrastructure or staffing, and allowing for a focus on core operations. But RCM leaders and CFOs should be extra choosy with vendors and make sure a well-thought-out strategy accompanies any outsourcing. Making the wrong decision could lead to a loss of control, a dependency on vendors, and data security risks.
CFOs should weigh in and determine which option best suits their organization. Additionally, CFOs should evaluate the vendor's track record, technology capabilities, and security measures to ensure they align with the health system's needs.
Also, consider the broader strategic implications of outsourcing. This includes evaluating how it aligns with the organization’s long-term goals, such as patient experience improvements, clinical outcomes, and operational efficiency.
Ultimately, the decision to outsource RCM is not just a financial one—it is a strategic move that requires careful consideration of both short-term benefits and long-term sustainability.