Finance Overview

Report
The Role of the Finance Team
in Managing Hospital Operations
Eric Melchior
Executive Vice President & CFO
Greater Baltimore Medical Center
March 30, 2012
Agenda
• Finance – What Really is it Anyway?
– How we can be labeled
– Primary functions/responsibilities
• The Role of the CFO – Transcending Financial
Management into Business Operations
– Core competencies (it’s broader than we think)
– The characteristics of a successful CFO
• A Day-in-the-Life
1
Presentation Objective
To walk-away with an appreciation for the
comprehensive role that the Finance Team plays in
helping to achieve the Strategic Vision and Mission
of an organization
2
The Traditional Perspective
3
The Traditional Perspective
• Accounting & Finance department are “bean counters”,
fulfilling the required functions of financial reporting (profit &
loss statements), payroll and accounts payable
 Not actively involved in the development of the organization’s strategic
vision and plan
 Little input to daily and operational decisions…don’t really understand
how the hospital works
 Primary function is to serve as a behind-the-scenes service, tend to not
have a high-degree of visibility or interaction
 Too narrowly focused….care only about the “bottom-line”
4
The Reality
• Hospitals and other healthcare providers are complex
organizations, where financial management involves numerous
sophisticated functions and many professionals
 Operate at a relatively low-margin
 Significant employer to local economies (added political element)
– Not-for-profits often viewed as community resource/partner
 Sophisticated business alignments – joint venture, equity investments
 High degree of federal and state regulation (Medicare/Medicaid) and
potential to impact operations significantly – Healthcare Reform
 High degree of publicity – quality outcomes, malpractice litigation
 Complex relationships with government agencies, community, patient
and providers
5
Functions of the Finance Team
 Accounting – responsible for reporting of monthly and annual financial
statements, cash management, accounts payable, payroll and
tax/ERISA reporting
 Budget – develops the annual operating and capital budgets in the
context of the strategic and operating plans
 Rates & Reimbursement – manages the hospital charge structure and
reimbursement received from 3rd parties
 Patient Financial Services – generates and manages patient billing
 Admitting/Registration – collects and obtains necessary patient
information for clinical services and billing
 Business Planning & Development – models the performance of
existing services and new opportunities
 Internal Audit & Compliance
6
Functions of the Finance Team
Accounting –
 Communication with Executive Management, Board of Directors and
external parties (bond rating agencies, lenders, donors, etc.) regarding
hospital’s financial situation and associated relevant issues
 Preparation of financial statements, governmental filings, tax filings
and survey’s
 Treasury management – maintaining bank accounts and the
organization’s financial transactions
 Interpretation of new accounting pronouncements and calculation of
associated impact to organization
 Maintenance of hospital investment portfolio
7
Functions of the Finance Team
Budget –
 Routinely monitors and reports performance compared to the
established and flexible budgets
 Acts as a liaison to departmental management and executive
management to understand operational and environmental issues that
will impact hospital performance
 Educates department, as well as providers, on budget responsibilities
and the implications of operational changes to the departmental and
organization budget
 Implements and maintains productivity systems for continual
performance improvement
8
Functions of the Finance Team
Rates & Reimbursement –
 Maintains the Charge Description Master (CDM) as the basis for
generating patient charges
 Interprets and models complex reimbursement methodologies (unique
and particularly important in Maryland given the rate regulation)
 Prepares federal (Medicare/Medicaid) and State (HSCRC) cost reports
 Often acts as coordinator for community benefit related activities of the
entity
9
Functions of the Finance Team
Patient Financial Services –
 Obtains insurance authorization for numerous services to be provided
prior to patient visit to ensure payment is received for services provided
 Interacts with insurance companies in order to obtain payment for
billed services
 Tracks and responds to insurance denials (RAC audits), including
redesign and modification of operational processes as necessary
10
Functions of the Finance Team
Admitting/Registration –
 The organization’s “front-line-of-defense” for accurately obtaining
information that allows the revenue cycle to proceed efficiently
– Billing and revenue collection cannot effectively proceed without a robust
admitting/registration process
 Collects patient co-pays at time of admissions – recent practice that has
resulted in significantly more cash up-from to providers
Business Planning & Development –
 Assess the hospital’s “market” with respect to market-share and
external competitive pressures
 Negotiates with parties regarding new ventures and affiliations
11
Functions of the Finance Team
Audit & Compliance –
 Oversees Corporate Compliance and HIPPA Privacy & Security
Programs
 Develops an internal audit program designed to audit/test areas of highrisk for the purpose of ensuring that financial statements and
management reports can be relied upon
 Administers and oversees a Corporate Integrity program
12
The Role of the CFO – the Traditional View
13
Characteristics of a CFO – the Traditional
View
• Bad Cop – enforcer of the many things unpleasant (bill
collector, shrewd negotiator, savvy entrepreneur, deal/idea
killer)
• Lacks Compassion
• Introverted and not people focused
• Tunnel Vision (can be a positive or negative attribute)
• Analytical and detail oriented
• No Personality or Sense of Humor
• Unapproachable/aloof
• Boring…no fun!!
14
15
The Role of the CFO in Today’s Organization
– Core Competencies
1. Strategic Thinking – understand the long range vision
2. Systems Thinking – think of the overall system operational
effectiveness
3. Results Orientation – driven to achieve and outperform the
competition
4. Collaborative Decision-making – include “relevant” others
5. Action Orientation – act decisively and boldly
6. Champion Business Thinking – business focused outcomes
7. Coaching and Mentoring – release the potential in people
8. Influence – build support, commitment, agreement
16
The Role of the CFO in Today’s Organization
- Skills & Knowledge
–
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Product line management
Managed care contracting
Patient care & outcomes understanding
High priority on Information Systems
Higher emphasis on Income Statement than
Balance Sheet
– Superior planning and treasury skills
– Knowledge of Medical Records
– Business development
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Critical Qualifications for Today’s CFO
1. Advanced Business Acumen


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Understands the key business drivers, and can expertly maneuver in
order to further the organization’s Mission
Acutely aware of existing and emerging financial issues and the
potential impact to the organization
Ability to decipher and integrate complex analysis (including
forecasting models and budgets) in order to make business decisions
that are consistent with the organization’s Mission
–
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An ability to eliminate the superfluous
Maintains a focus on the Revenue Cycle
Expert negotiator and sales person
Fundraiser
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Critical Qualifications for Today’s CFO
2. Master Communicator with the Ability to Influence

Is a model of integrity and ethical values
–
–
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Allows trust to be instilled
Results in the creation of trusting relationships
Can effectively explain complex financial information to various
skilled audiences (Board, external interests, Executive Management,
etc.)
Can develop and build a talented Finance Team (recruitment,
retention, reward/recognition)
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Critical Qualifications for Today’s CFO
2. Master Communicator with the Ability to Influence

Decision-Maker
–
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Work with various teams and individuals of differing personalities and
points-of-view
Demonstrates compassion towards individuals and situations
Must be a good listener
–
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Involves others as part of the decision-making process
Maintains composure/provides an atmosphere of confidence/calm
Demonstrates decisiveness
Proven track-record of making the right decisions
Is frequently the principal advisor and sounding-board to CEO
Arbitrator
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Critical Qualifications for Today’s CFO
3. Strategic Orientation

Contributes to Strategic Formulation
–
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Promotes and can lead organizational change
–
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Can influence strategic development by making strong financial/business
arguments
Exercises diplomacy at all levels of the organization for the purpose of
advancing issues
Always considers strategy and Mission in decision-making process
Always looking for and evaluating opportunities that can further the
organization’s strategy and Mission
Can integrate process improvement effectively
Focus always considers long-term goals (5-year time horizon) of
organization
21
Today’s Model CFO
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A Day-in-the-Life
•
Healthcare CFO’s are different than many other industry CFO’s
in that the roles can vary widely within the industry depending
on organization size and structure. Various responsibilities I’ve
maintained have included:
–
–
–
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Corporate Finance
Physician Practices
Business Development
Managed Care
Patient Financial Services
Medical Records
Patient Access
Medical Records Coding
Facility & Support Services
Management Information Systems
Internal Audit & Compliance
Purchasing
Environmental Services
Central Sterile Supply
23
A Day-in-the-Life
–
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Human Resources
Credit Union
Telecommunications
Laundry & Linen
Radiology
Laboratory
Risk Management
Legal
Volunteer Services
Daycare
Security
Pension & Benefit Administration
Real Estate/Medical Offices
Construction of Medical Office Buildings and hospital expansion
24
A Day-in-the-Life
•
In addition to the variety of departments/services managed, I’ve
had the opportunity to manage numerous types of entities, such
as:
–
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•
Nursing Homes
Hospice Programs
Home Nursing Care (Visiting Nurse Association)
Medical Transportation Services
Blood Banks
Collection Agencies
Captive Insurance Companies
Results in CFO being integrally involved with operations
25
A Day-in-the-Life
•
Participate in Numerous Meetings
–
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Operational meetings (often to demonstrate support and understanding
of process, for example Department of Medicine and Surgical
Services monthly meetings)
Board Committees – Finance, Audit, Investment, Compensation and
Strategic Planning
Departmental meetings – CFO is responsible for the managing a
variety of departments (Accounting, Budget, Rate & Reimbursement,
Patient Financial Services, Medical Records, Coding, Business
Planning, IT, etc.)
Executive/Senior Management meetings – manage the operations of
the hospital in the context of the strategic and operating plans
26
A Day-in-the-Life
•
Respond to External Issues
–
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Manage the operation of joint ventures (Radiology/MRI/pharmacy,
etc.)
Further the organization’s Mission in light of political interests
(Medicaid budget shortfall)
Maintain investor relations (Address rating agencies & investors in
response to existing debt as well as for the purpose of accessing new
capital)
Manage unique business entities of a healthcare system (Insurance
company, physician office buildings, etc.)
27
A Day-in-the-Life
•
Other Responsibilities “As Assigned”
–
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Administrative Rounding – time spent on clinical units as a
mechanism of showing executive management support/visibility. Used
to understand the issues relevant to a specific unit and/or process.
Board Relations – critically important…the CFO doesn’t have 1
boss…he/she has numerous, including Board members and associated
interests
Fundraising – the CFO is critical to expressing the strategic goals and
Mission of the organization for philanthropy purposes
Serve as a Board Member – important to demonstrate that the CFO is
a community resource
Must be able to assume broader administrative duties if called upon
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Final Thoughts
•
•
•
•
Days often start early and can end very late
Politics can be exhausting
Tough to manage multiple interest and personalities
To allow patients to access the care we all want for our
loved ones when receiving medical care services
–
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•
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Quality outcomes
A positive service experience
Legacy – to leave behind a viable/thriving asset that can
effectively meet the needs of the community we serve
The CFO role is demanding and challenging, but exciting
and never boring
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