Connecting quality care to the bottom line

Warren Forgey, former CFO at Schneck Medical Center in Seymour, Ind., says the CFO's role is focused increasingly on the move from volume to value.

Charles Santangelo has been a CFO long enough to appreciate the extraordinary changes in his responsibilities in the aftermath of the Patient Protection and Affordable Care Act and other healthcare reforms.

Where once he and other CFOs were essentially entrusted with overseeing the nuts and bolts of finance and accounting, today their roles have been dramatically transformed. “The healthcare model I came up in from a provider standpoint obviously is no longer,” says Santangelo, CFO at not-for-profit Susquehanna Health, a four-hospital integrated health system based in Williamsport, Penn.

“It had always been a fee-for-service model, whether this involved hospital services, outpatient services, home care services or services by physicians in their offices,” he explains. “There really wasn't much of a connection to the total care of the patient, although we always had utilization reviews to make sure there was no overutilization. However, these were measured on a micro-basis, as opposed to today’s all-encompassing basis.”

Other elements of the previous paradigm also have perished. “Senior citizens on Medicare would receive their cards and enjoy the fact that they had no restrictions on the use of it,” he adds. “It was not uncommon for a senior to stay in the hospital until he or she felt better or right.

[See also: The new CFO.]

And it was even more common for seniors to see half a dozen specialists, depending on their particular health condition, with no overall manager of their care.”

Before long in the former model, healthcare costs catapulted by double digits year after year after year. “Obviously, something had to give,” says Santangelo.

New paradigm for finance
And give it did. And with it changed the CFO’s role. Pre-reform (and still today), the CFO’s task was to forecast patient volume for budget allocation purposes. If budgets were off, it was because patient volumes were off, and vice versa. “It was a more static and defined role for finance in the past, without the variability we now have,” Santangelo explains.

With the movement toward financially managing hospitals based on patient outcomes and the overall need for greater efficiency and higher quality, today’s CFO is more involved in a hospital’s clinical services.

“My prior role as CFO was to maximize revenue and control expenses, which is something I still do,” says Warren Forgey, former CFO and chief administrative and operations officer at Schneck Medical Center, a one-hospital healthcare provider in Seymour, Ind., “But, now the role is more focused on the move from volume to value, creating more of a strategic partnership with payers and employers, while always keeping the patient first and foremost in my mind.”

We have to ensure we have the right partnerships in place to provide the accountable care model to our community.

Like Santangelo, Forgey says there is more collaboration between the CFO and clinical leaders and physicians at Schneck. As he put it, “We have become the bridge between healthcare quality and finance.”

This bridge is still in the process of being built. Forgey’s successor as CFO, Debbie Ridlen, says Schneck is working hard to make the transition from a fee-for-service model to the modern paradigm. “With revenues impinged by reduced hospital stays, we need to reexamine our overall cost structure to be positioned for this new era,” she says. “We also have to look closely and ensure we have the right partnerships in place with other entities to provide the accountable care model to our community.”

Accountable Care Organizations (ACOs), which tie provider reimbursements to quality metrics and reductions in the total cost of patient care, are fueling a surge in mergers and consolidations.

As an example of this activity at Schneck, the new CFO points to a clinically integrated network, inSPIRE Health Partners, that the hospital formed earlier this year with Columbus Regional Health, a hospital about 25 miles away. “By combining our resources and having a more coordinated approach to healthcare, we believe we can improve overall healthcare in our local communities,” Ridlen says. “There will be more of these kinds of alliances as we move forward.”

[See also: Relieving the Pressure.]

Mark Bogen, senior vice president and CFO at South Nassau Communities Hospital (SNCH) in Oceanside, N.Y., shares this view.

“Pursuing strategic partnerships, mergers and acquisitions with all the due diligence this entails is a new role for many CFOs,” says Bogen, who has negotiated deals to acquire an ambulatory surgery center through a joint venture and, in October, closed on an asset purchase agreement to acquire the assets of the 162-bed Long Beach Medical Center, which closed in October 2012 after sustaining heavy flooding damage from Hurricane Sandy.

Santangelo is also further engaged in M&A due diligence than in the past. “The board is in the thick of trying to determine how best to provide the services needed by the community, not just define them but to do this with the right organizations in the right context,” he explains. “Change is difficult and costly, and the typical community hospital has it tougher to change or do it fast enough. Large organizations actually change systems, policies and procedures faster because they have the resources to implement it.”

Plans afoot
The three CFOs also say they are more involved in their hospital’s strategic planning. “I’m in the midst of developing a long-range strategic plan right now,” Bogen says.

So is Santangelo. “From a strategic standpoint, I am more a part of the team than ever before,” he says. “Right now much of our focus is medium-term planning, trying to get through this extraordinary period of change in the healthcare environment. Long-term, the board and senior management are evaluating how best to continue to provide services—insofar as do we do what we do with our own experts or link up with a larger organization to provide greater resources. That’s the key strategic question.”

It’s also one that Santangelo won’t have to answer for much longer. After an entire career spent in hospital finance, the veteran CFO steps down at the end of the year. Happy retirement, Charlie!