Executive Interview


When Nashville-based HCA was founded in 1968, it was one of the nation's first hospital companies. Today the company, led by chairman and CEO Richard M. Bracken, includes 163 hospitals and 107 surgery centers in 20 states and Great Britain. Nearly 5 percent of all inpatient care delivered in the country today is provided in HCA facilities. In a recent internal reorganization at HCA, R. Milton Johnson assumed the position of president while continuing to serve on the company's board of directors and retaining his title and responsibilities as CFO. Johnson's role is an example of how finance leaders are becoming increasingly involved in operations, strategic planning, and, most important, quality of care and services. "The goal is primarily to improve the quality experience for our patients," Johnson told hfm.

hfm: Tell us about your role as president and CFO at HCA.

Johnson: Assuming the title of president and CFO reflects my role and responsibilities in the company since Richard Bracken became the CEO in 2009. I did assume some new responsibility with the recent reorganization with oversight of the development of a new subsidiary, Parallon Business Solutions, that will sell hospital business services to third parties, primarily around revenue cycle, supply chain, and staffing. Creation of this subsidiary is a significant growth opportunity for HCA. Since 1998, I've had the opportunity to work closely with our operating teams, which has afforded me a chance to learn a great deal about our operations and the markets in which we compete. And in the CFO role, I've had the opportunity to be involved in all areas of the company over the past several years, including the quality agenda, the operating agenda, strategic planning, and, of course, the finance area.

hfm: To what extent is your role different from a typical finance executive's role?

Johnson: I wouldn't say my responsibilities are unusual. Many finance executives today are taking broader roles in their organizations. Over the past several years, it has become more common to see the finance person having a broader responsibility with respect to operations and strategic planning than a couple decades ago, especially in health care. The model of a finance executive moving into operations, for example, is one that we see often at HCA.

hfm: Looking more generally at the role of healthcare finance leaders, how do you see that the role is changing, especially under the pressures of healthcare reform and delivery system change?

Johnson: The CFO should be a strategic partner with the CEO and the board. Providers-whether they are hospital systems or large physician organizations-will be assuming more risk in the future models that are contemplated under healthcare reform. Financial results will be tied more closely to clinical outcomes. Revenue models are changing today, and there will be an acceleration of change over the next decade. There will be fewer fee-for-service revenue models and more risk sharing, and the risk associated with outcomes will be tied to financial results.

hfm: Do you recommend that finance professionals learn more about clinical processes?

Johnson: The patient experience is number one. We won't have a sustainable business model without high-quality service. Clinical outcomes are tied to financial performance today, and thus, clinical outcomes will become increasingly important going forward. The whole idea around understanding clinical variation or the reduction of what I call unjustified clinical variation is going to be the future of the healthcare delivery model. It will, of course, improve the quality, but also reduce the cost of health care.

To be an effective CFO in a healthcare delivery system, you have to understand the quality agenda. At HCA, I've spent a lot of time with Dr. Jon Perlin, who is our chief medical officer, to understand the areas for opportunity, the data, and how we apply the financial opportunity to the clinical data. Of course, I'm not a clinician, but he walks me through those opportunities and helps me better understand, for example, how we can use benchmarks to drive results. Again, the goal is primarily to improve the quality experience for our patients. But we know that if we do that, we can also manage costs better. As I said earlier, the key to having a sustainable business model is to have high-quality products, so I've spent time learning about the quality agenda. That is something more CFOs will need to do to effectively manage the revenue model going forward.

hfm: We also hear a lot about finance leaders as synthesizers of information from across a healthcare organization. Do you see that as part of the finance role?

Johnson: That role in the company could be played by a number of different individuals, depending on their communications skills. But one thing that is important not just for the CFO, but also for any executive who wants to have more influence over the organization, is to get out of the office and spend time with others across the organization. Of course, every executive has to take care of his or her primary responsibilities. That's key. But finance executives have to think beyond reporting the financial results, and they have to understand why the numbers are trending the way that they are. CFOs need to be aware that they can have an impact on the culture of the organization. If they can communicate well, demonstrate the ability to remain calm when pressure is on, and bring leadership skills to the organization-and the CFO certainly has an opportunity to demonstrate those skills-that will enhance the organization and enhance the finance role in the organization.

hfm: Could you share with us some of HCA's key strategic objectives?

Johnson: The first key strategic objective is clinical quality improvement, which is the reduction of clinical variation. Some examples are reducing the number of hospital-acquired infections, implementation of an electronic health record, and improving the patient experience.

Launching our new subsidiary to sell our services to third parties is also a key objective for the coming year. Other objectives are growth through improved physician integration and execution of our service line strategies. We're also seeing more acquisition opportunities in the current environment, and we'll probably be more active there.

The last objective is to continue to develop the competencies needed to compete effectively in an environment based on risk-sharing models.

Publication Date: Wednesday, June 01, 2011

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