An Expanding Role for the Healthcare Finance Team
I recently sat down (virtually speaking) with Matt Rowley from Wipfli and Tad Remington from Solver to talk about the changing nature of the healthcare finance department. The role of the finance team and the CFO at hospitals and other healthcare organizations continues to change. A lot has to do with not just reporting on what happened financially, but also helping the organization to look at what's going to happen in the future and how to mitigate or take advantage of it.
Matt relayed to me insights on the rise of Private Equity (PE) in healthcare, saying: “We're definitely seeing the nature of healthcare change. For example, we're seeing some private equity get involved in some of the middle market healthcare providers. So rather than the CFO just reporting to the board or the CEO, there's now a PE group that's involved. It's really making the CFO be more forward thinking, or forward looking, and doing even more what-if analysis and projections.”
Tad framed the finance department and healthcare CFOs as being change agents, telling me: “How we see being a change agent is really making sure they're prepared from a planning and reporting systems perspective so they can adapt quickly to all these changes regardless of whether they are at a senior living organization, a hospital, or a medical clinic. The pandemic has put a tremendous amount of stress on the planning and the reporting requirements for the office of finance, and they need to be able to be change agents in doing that. This includes planning, what-if analysis, and modeling.”
And the modeling and what-if analysis extends beyond a single clinic – to an integrated delivery network (IDN), a health system, a portfolio of entities and across multiple specialties, and more. There is the need to take a broader perspective and understand the health of the entire organization.
This requires answering questions like, "Where am I most profitable? Where am I going to grow? What other areas should I go in to?" Whereas, in the past, they might focus just on what happened at these locations.
Tad commented that, “Especially with COVID, with the loss of revenue for a lot of organizations -- whether it be workforce or just not being able to do higher revenue procedures that they typically do -- it's important to capture the revenue and understand questions like, are they going to be profitable or not? And, how much money are we losing? And, how much cash flow are we going to have? To be able to continue to sustain the business during this type of pandemic, it's just critical for these healthcare organizations to do this right now.”
Another piece of the puzzle is handling the changing nature of reimbursement. Understanding where the money is coming from (Medicare, Medicaid, private pay, direct from the patient, etc.) and maximizing that revenue is of paramount importance. Add to that the value of each clinical interaction (broken arm vs. hip replacement, etc.) and declining reimbursements, and forecasting revenue becomes integral to the future of the organization.
According to Matt, “What comes to mind here is revenue cycle management and optimizing the payment cycle. This requires data integration. Making sure systems are talking to each other, and that we're getting the right data together so that it can be reported on accurately. That's been a huge focus that we've been helping clients with. And don’t forget about price transparency.” This speaks directly to what we at Sage Intacct have described as the three-legged stool: leveraging the financial, clinical, and statistical/operations data to understand the true health of the organization.
To sum it all up, the role of the healthcare finance team has changed, as well as who they report to. The types of data that are needed to really understand the health of the business has also changed. So, having the ability to get that data, have the KPIs and dashboards and be able to then act on that data is really what's most important.
Thanks to Matt and Tad for providing their expertise! To learn more about the various ways Sage Intacct helps healthcare finance teams, please visit https://www.sageintacct.com/financial-management-industries/healthcare-accounting-software.
Brian is the Director of Healthcare Industry Marketing at Sage Intacct
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