As healthcare has become more customer-centric, the chief financial officer (CFO) is being called upon to help ensure the organization has the procedures, policies and quality metrics in place to deliver a positive patient experience.
The way in which patient care is provided — and how consumers view that care – has been transformed dramatically in recent years. The financial burden is now increasingly in the hands of patients, and many consumers make decisions based on the impressions of the quality of care they receive. As healthcare has become more customer-centric, the chief financial officer (CFO) is being called upon to help ensure the organization has the procedures, policies and quality metrics in place to deliver a positive patient experience. Working with other members of the C-suite, today’s CFO must prepare their organization to adapt to this changing model for healthcare delivery or risk being left behind.
Changing Policies, Changing Processes
Patients today are taking more control over their healthcare than ever before, whether it is changing plans, selecting new providers, or opting for different treatment paths. But beyond adjusting to new patient expectations and attitudes, the CFO is also facing several external drivers that can have an impact on the financial performance of their organization, such as:
• The Hospital Readmissions Reduction Program, which reduces payments to acute care hospitals that have excess readmissions paid for by the Centers for Medicare and Medicaid Services (CMS) Inpatient Prospective Payment System (IPPS) as of Oct. 1, 2012.
• The Hospital Value-Based Purchasing (VBP) Program, which adjusts a portion of Medicare payments to hospitals based on how well they perform on certain quality measures.
• The Hospital-Acquired Condition (HAC) Reduction Program, which reduces Medicare payments for certain subsection (d) hospitals that rank in the bottom-performing quartile of all subsection (d) hospitals in terms of HACs.
• The Bundled Payment for Care Improvement Initiative, which provides hospitals with payments for the quantity of services offered rather than the quality of care provided in an effort to encourage closer alignment across all specialties and settings.
• Market-driven clinical care guarantees, which provide patients with guarantees, such as a 90-day warranty on certain surgical procedures, that they will not be billed for any post-operative complications that require clinical care.
Changes to fundamental processes such as these are requiring CFOs to transform how they manage many of the core financial systems of their organizations. Information technology and activity-based costing systems are one of the greatest needs for healthcare organizations as they seek to understand the true costs of delivering care according to the resources utilized. CFOs must help their organizations find a way to determine the costs of caring for groups of patients with similar conditions, as well as the cost savings for key process improvements and the benefits of better utilization of capacity. Additionally, the continued emergence of integrated health plans, along with the predictive modeling needed to estimate the cost of providing such comprehensive care, will result in further complexity for the CFO.
In addition to technology and operational logistics concerns, CFOs find themselves confronted with one of the largest changes in coding methodology for billing and reimbursement — migrating from the previous version of the International Classification of Diseases, ICD-9, to the newest version, ICD-10. With more than 14,400 different codes to classify diseases and health problems for treatment and eventual reimbursement, the move to ICD-10 poses a significant impact on healthcare providers’ billing processes and revenue streams if not implemented correctly.
5 Best Practices to Prepare CFOs for the Future
Given the tremendous changes affecting their traditional roles, CFOs must do all that they can now to prepare their organizations — and themselves – for the transformation to a customer-centric healthcare delivery model. To ensure success, CFOs should consider the following recommendations:
1. Provide clear billing information: The pricing structure for healthcare continues to change to be more patient-friendly and reflective of the quality of care patients receive. CFOs must take a leadership role in finding ways to simplify and demystify one of the most confusing aspects of care — billing. CFOs can help by ensuring that patients understand what they’re paying for and why.
2. Look beyond the tactical: Providing greater clarity for the payment process is crucial, but CFOs also must look beyond financial management and controls and explore the costs, quality and impact of patient care to guide their organizations through the required changes most effectively. Pricing should be tied back to the quality of care delivered, rather than the costs and payer rules. As such, CFOs must keep an eye on quality performance metrics as well.
3. Identify and respond to external factors: New regulations, such as those introduced through the passage of the Affordable Care Act (ACA), have created significant changes that will impact financial aspects for healthcare providers. CFOs need to ensure that their organizations are aware of and prepared for the effect of these programs on their current and future processes and revenue streams.
4. Ready teams for upcoming changes: Considering the tremendous number of recent and imminent changes for the healthcare industry — including the shift to ICD-10, implementation of activity-based costing and the rise in integrated health plans – CFOs must prepare their teams for these new policies. By clearly communicating the timelines, responsibilities and action items associated with each phase of the transition, CFOs can ensure that their teams are ready.
5. Venture outside the office and the industry: Healthcare CFOs can reach out to their CFO counterparts in other industries, such as retail and manufacturing, to gain a better understanding of cost-to-sale models, costing algorithms and other factors. Seminars and events outside the healthcare industry can provide additional insight for CFOs. In addition, it is essential that CFOs become more familiar with the patient care being delivered by their organizations, walking the floors to get a better perspective, in order to have a greater appreciation for the organization’s operations as a whole.
The dramatic changes taking place across the healthcare industry are creating added pressure on today’s CFOs to successfully guide their organizations through the financial implications of the customer-centric healthcare transformation. But CFOs can implement an innovative approaches to these challenges to better position their teams to deliver the level of healthcare that today’s patients increasingly expect.
Nick Christiano is responsible for the overall execution of the National Healthcare Practice for Tatum, a Randstad company. The Healthcare Practice provides executive leadership solutions to healthcare provider organizations, heath plans, private-equity backed bio-tech firms and affiliated organizations where subject matter expertise is critical to a successful client engagement. Christiano is recognized as a driven leader, tireless in the pursuit of optimum patient care, productivity, efficiencies, cost management and navigating the new challenges in the healthcare field. He has an MBA in MIS/Finance from the John Hagan School of Business — Iona College and a BS with a dual major in Computer Science/Electrical Engineering from NYIT. He can be reached by email at