CFOs name cost reduction a top priority for 2019
Chief financial officers in healthcare are increasingly facing pressures as the broader U.S. system shifts toward a value-based environment. Evolving care delivery and payment models, coupled with new competitors and changing consumer preferences, have shaped the roles of healthcare leaders today.
For CFOs, whose roles have changed and expanded, these challenges have led to a greater need for coordination across financial, clinical and operational stakeholders, according to a recent CFO outlook report from Kaufman Hall. The report analyzed responses from executives representing more than 160 hospitals, health systems and other healthcare organizations, noting top priorities for 2019, readiness to manage performance in the current environment and enterprise performance management.
2019 priorities
Compared to 2018, CFOs named the same top three priorities for 2019:
- Cost-reduction initiatives
- Management of changing payment models
- Improved performance management and reporting
The findings also back up a 2018 study with the same top priority among a broader set of healthcare executives. Still, cost-cutting measures are challenging. While automation and other payment tools could help CFOs, this gives rise to a need for better understanding care costs and simulating new payment methodologies.
“CFOs recognize the urgency of generating cost improvements, but are struggling with the structure, transparency and accuracy of cost data and, hence, data credibility,” the report read.
Furthermore, budgeting processes may need to be adjusted to reflect shorter cycles that can reduce the drain on organizational resources and energy and integrate with financial and strategic planning efforts.
Current environment
As the healthcare transformation charges on, the challenging environment has left CFOs less confident about how their organization will perform––a “red flag” to stakeholders, according to the report.
Just 13 percent of CFOs said their organizations are very prepared to manage evolving payment and delivery models with current financial planning processes and tools––a slight drop of 2 percent from the previous survey. Similarly, those who were very confident in their team’s ability to quickly and easily make adjustments to strategies and plans dropped from 25 percent in the previous survey to 23 percent.
While CFOs are less optimistic about performance under the current environment, they are measuring and monitoring transformation progress across a larger set of dimensions and initiatives than ever before.
“A comprehensive view of performance requires the integration of relevant data from disparate sources and the identification of a manageable number of metrics to track for each initiative within and across dimensions,” the report read.
Leveraging that data has also become more important to meet “the current demand for actionable business insights.” Overwhelmingly, CFOs thought their organizations should be doing more to leverage financial and operational data in strategic decisions (96 percent). At the same time, 94 percent have experienced increased pressure to understand how financial results impact business strategy.
Performance management
Above all, CFOs need to make strategic, financial and tactical planning decisions, with the right data to inform those decisions. For financial reporting, at least half of CFOs cited several challenges related to data and analytics:
- Creating better dashboards and visuals (67 percent)
- Pulling data from multiple sources in a single report (64 percent)
- Accessing clean, consistent, trusted data (52 percent)
- Understanding underlying data in reports (50 percent)
Fewer CFOs also reported they were satisfied with the performance management reporting at their organizations––7 percent, compared to the previous low of 8 percent in 2018. Financial benchmarks were widely used by 83 percent of CFOs, but 41 percent were not satisfied with how they helped inform decision making.
Ultimately, these handicaps are not helping CFOs make decisions that can improve performance management.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."