Top challenges of cfos

Top Challenges Of

CFOsWhile transitioning to value based care

In 2013 the healthcare costs in United States went up to 17.7% of GDP, the most than other country Projections show continued growth averaging 4.9% a year in 2014-18, increasing to 17.9 of GDP by 2018

When it comes to experience

“You need to understand the issues, test your theories, and subtly

verify your assumptions along the way,” says Tom Gibney, CFO of

St. Luke’s Cornwall Hospital of Newburgh, New York, when asked about

how experience plays a role in decision making. “The buck stops with you,”

he says. “The board is looking to you for answers”, he quoted.

Reimbursement declines, physicians shortage, healthcare reforms and other

factors have forced CFO’s to use their experience in answering how to

recoup the losses and improve the organization’s cash flow.

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Few Highlights

Demographic and economic factors that are the root cause of this situation are forecast to remain unchanged for the foreseeable future.

It is driven primarily by new mandates and legislation but there exists wide variety of additional drivers

Spending growth slowed during the recession andhas remained slower than historical averages

The Unchanged Primary Reason



Current Drivers of Healthcare Costs

Healthcare Legislation(33%) Overutilization of Prod(13%)

Misalignment of quality(8%)Labor Costs(12%)

Pharmaceuticals(5%)Patient demand for heal(6%)

New Clinical Technology(2%)Medical Devices(3%)



Organizations which faced push backs In their first quarter

Mayo Clinic NY City Health

The Mayo Clinic, which had been diligently cutting expenses over the past year, has started to see those costs creep up again

The New York City Health and Hospitals Corp. will face an operating deficit of $ 1 billion in two years and dwindling cash reserves



Top threats of CFOs – Recent Survey

Reduced Reimbursements(24.8%) Physician Shortage(20.54%)

Healthcare Reform(10.81%)Organized Labor(15.14%)

Rationalizing Financial(5.68%)Industry Consolidation(9.82%)

Personalized Machine(2.81%)Value Based Purchasing(5.41%)



Reimbursement Declines

Exchange have proven to generate lower reimbursements for hospitals when compared to conventional insurance

The number of patients who rely on Medicaid for healthcarecoverage continues to rise

Government reforms and spending cuts at both state and national levels have also negatively affected hospital reimbursements

Many states have chosen not to expand Medicaid programs evenas reimbursements for indigent patients decrease

The Budget Control Act of 2011 (“Sequestration”) have directlyimpacted Medicare and other programs funded by the federal government



Hospital in Post ACA Era

Medicare (fee-for-service Medicare, Medicare Supplement and Medicare Advantage) which constitutes 30% of patient volume, are critical for offsetting fixed costs but are not set-up to make margins

Medicaid constitutes another 15% of volume-60%-70% reimbursement of Medicare but still higher losses. Uninsured patient volume constitutes about five percent and represent large “losses” to the hospital For this hospital the average gross margin is approximately four percent.



Top Priorities Of CFOs

Top Priorities Finding Capitals

Merger, Acquisition Clinical Technology

Funding for pensionNew Facilities

No Capital Investment plannedCompliance with safety codes



Beyond Bonds and Commercial Loans

Bonds and commercial loans have certain limitations and are notalways the best

Solutions to improve financial metrics and performance should be a better option

New technologies are available to improve healthcare services and quality and safety analyses, ultimately improving hospital performance and value

CFOs must seriously reconsider the requirement to “own” certain Technologies

Having the right device, at the right place, at the right time acquired via an operating expense model



Conclusions

The state of flux in reimbursement and required changes in healthcare delivery make planning capital expenditures a challenge.

Many hospitals and healthcare systems spend significant time analyzing market projections and feasibility studies before committing to capital programs.

Navigating through this chaotic environment requires the right financial partner, with proven expertise, flexibility and experience.

What is stopping the organization from tacking challenges?

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