A healthcare chief financial officer (CFO),just like in any other industry or business, oversees all financial operations of the healthcare organization. From preparing financial statements and creating budgets to forecasting and formulating strategies for boosting revenue, a CFO’s role typically incorporates a wide range of finance management activities to help the organization maintain financial stability. .
However, the role of a CFO in the healthcare organization goes beyond budgeting and reporting. There is more to a healthcare CFO’s multi-faceted responsibilities than just accounting, billing, and collection. As financial decisions have a direct bearing on patient care and medical staff, there is an increased need for a CFO healthcare function to help lead organizations into the future rather than merely record what has happened in the past.
Also to be taken into account is how much the healthcare industry’s dynamics have changed, especially in the last three decades expanding the scope of a CFO. It has undergone a complete facelift to keep up. What could have achieved through a mere accountant in the past is no more manageable without having a CFO healthcare services in place.
Earlier, in large medical setups, the corporate would control the cash flows, determining how much cash to hold back and how much to invest. Now, the CFO healthcare function is required to see the back and the front end of the revenue cycle. Apart from managing the hospital’s finances as controller, treasurer, and economic forecaster, today’s CFO is a strategic partner, change-maker, coach, and facilitator who is steering the hospitals’ direction to achieve shared objectives. Their influence now extends beyond the finance department up to strategic roles and to an extent where they can impact the quality of patient care provided by the healthcare facility.
Let’s have a deeper look at the growing scope and role of the CFO in a healthcare organization:
The role of the CFO in a healthcare organization is evolving from being reactive to proactive. The external forces that disrupt the healthcare ecosystem require healthcare CFOs to be agile and adaptable in their functions. They must keep an eye on the changing healthcare patterns such as the changing behavior of patients and their rising expectations, increasing competition, technological advancement, new government policies and regulations, health reforms, increasing complexities in the billing cycle etc. Having to respond to such risks, threats, or opportunities that may have implications on the hospital as an organization, the healthcare CFOs are needed to work alongside other executives and plan direction. The CFO healthcare function tackles the changes with sound financial strategies and planning, optimizing existing processes, and tapping on new opportunities.
The internal stakeholders, including the clinical and operational leaders, need to develop an understanding of using financial data and analytics for making informed decisions. That leads to the growing importance of the role of the CFO in a healthcare organization as coaches who can leverage their knowledge and expertise to help guide the department heads on the nitty-gritty of financial management, including budgeting, managing productivity, and controlling costs to pursue a common organizational goal. Their data-driven perspective is looked upon for guidance in decision-making.
With a recent shift in the paradigm of the Medicare system of reimbursements moving from the fee-for-service model to the models such as the pay-per-value model emphasizing quality of care and patient outcomes, there are significant new covenants for health providers who were accustomed to the former model. In the free-for-service model, hospital revenue was directly proportional to the number of services offered, while the Capitation model involves a fixed amount of money per patient per unit of time paid in advance to the physician to deliver healthcare services, whether or not that person seeks care.
However, with the move from volume to value and the search for revenues outside of patient care, hospitals’ gross revenue risk has increased between -17 percent and +35 percent, much higher than ever. Managing the costs against a fixed payment and providing a high-quality service at a lower cost is difficult to be managed by many hospitals.
As the government continuously comes up with new policies and programs, Healthcare CFOs are expected to manage funds and financial risks. They need to find a middle ground between generating revenue and controlling costs to ensure the organization’s financial viability. The CFO healthcare function joins heads with the internal and external stakeholders and comes up with sound strategies and financial planning to ensure that the hospital can deliver high-quality patient care while remaining financially sound.
Healthcare facilities are adopting automation and other digital technologies like artificial intelligence to bring greater efficiency to their functions. However, it’s a costly affair. Hence, the need for healthcare CFOs comes in to drive down costs and improve the revenue cycle and bring in operational efficiencies.
The abrupt financial needs and outcome of the COVID-19 crisis have increased the importance of the healthcare CFOs more than ever. The healthcare CFOs are very much needed to find ways to close significant budget gaps, develop sophisticated financial recovery plans, and build liquidity resources amid the high costs of providing care to COVID patients.
In recent years, health providers have revamped their finance functions to recognize the significant changes taking place in the health services field. As coordinated clinical care is what hospital revenues rely on at present, the finance department is shifting its function from traditional billing and payment towards making it more strategic and collaborative in nature. This increases the importance of having a healthcare CFO whose role goes beyond financial oversight. Now, the healthcare CFO is especially needed to support cost-containment efforts, manage care and other payer contract negotiations, as well as mergers, acquisitions, and joint venture decisions.
The dramatic changes occurring across the healthcare industry desperately need healthcare CFOs to guide their organizations through the financial outcomes of a range of patient-centric initiatives and prepare them to adapt to this changing model of healthcare delivery.