How healthcare CFOs can best communicate financial results to boards

Every healthcare CFO may eventually find themselves in the position of having to relay disappointing or surprising financial results to the CEO, board of directors, finance committee and others. While the numbers may tell the story, in healthcare, the reasons behind them are rarely simple.

And because many board members built their careers outside healthcare, translating those financial realities can pose a challenge, too. The temptation may be to hide behind jargon, oversimplify the message or stick to the numbers. But none of those approaches serves the board or the organization.

The CFOs who are the most adept presenters use difficult financial conversations to build understanding and trust, giving board members and other leaders the context they need to make better decisions when it matters most.

The process for effectively communicating financial news to board and finance committee members — whether the news is good or bad — can be distilled into seven lessons learned from our conversations over the years with successful CFOs at leading hospitals, health systems and medical practices.

7 best practices for healthcare board communications

To communicate effectively with their organization’s boards, healthcare CFOs should adopt a process that encompasses the following best practices.

1 Translate what’s happening in the healthcare industry. It is unlikely that board members will be unaware of the larger issues affecting healthcare. But the CFO needs to be able to explain how those issues apply to their specific organization. Board and committee members aren’t operating in a vacuum — they’re hearing about healthcare trends in the media, through their own organizations and in conversations with friends, family and colleagues. They need the CFO to connect the dots.

2 Identify root causes behind the numbers. When addressing the trends, CFOs should avoid becoming bogged down in the data regarding what’s happening and focus instead on explaining the “why” behind the numbers — and the root causes, in particular. For example, instead of saying that reimbursement is worse due to unfavorable shifts in payer mix, the CFO could say that the organization’s customer base is shifting toward retirees as more residents become Medicare eligible and that specializing in cardiology, orthopedic surgery, oncology and other specialty services is a way to naturally attract more seniors.

3 Ask staff for the story behind the numbers. The CFO should look to the finance team to provide information required to deliver a compelling story to the board. CFOs who communicate effectively know to ask their team not only for the numbers but also for the story that clarifies their meaning.

4 Embrace the numbers for what they are. To be effective communicators, CFOs also need to be realists, telling the story not only when the numbers are good, but also when they are not. This is why understanding the root causes of the numbers is critical. CFOs should not gloss over the numbers to avoid difficult conversations.

5 Focus on the right thing. Conversely, providing too much data and too many explanations isn’t good either. It shouldn’t be up to the audience to analyze the explanation to eliminate the unimportant information. The CFO should make the essential point clear from the start.

Understanding the audience is key to doing this effectively (see point 7 below). Moreover, leading with the conclusion, whether that be with a single attention-grabbing statistic or a declarative statement, sets the stage for the conversation and establishes a clear end goal.

For example, a CFO might lead with the following statement: “Today I’d like to discuss why our revenue per patient has decreased 5% even though patient volumes remain stable. The primary driver is a change in the types of payers covering our patients, which affects how much we are paid for the same services.”

6 Speak in common terms, not in technical accounting. Healthcare and accounting nomenclatures are complex, as are healthcare transactions. It’s imperative for CFOs to avoid jargon and instead clearly communicate what’s happening to ensure the board and committee members will understand.

For example, instead of saying net patient revenue declined 3% this quarter because the payer mix shifted toward Medicare and Medicaid, the CFO could say that revenue per customer decreased because a larger portion of the health system’s customers are buying at discounted contract prices rather than full market rates.

7 Know what the board and committee want to know. A CFO who effectively communicates to the board knows what information they want and how often they need the information. Unless the board and committee members prefer otherwise, they will want to know at least on a quarterly basis whether the organization is on budget, whether budget variances are material and, if they are, why?

Healthcare CFOs should adopt these practices because healthcare finance is so much more complex than finance in most other industries. That very complexity can tempt CFOs to make their communications with their boards and finance committees either too complex or too simplistic. Resist these temptations.

4 essential goals for CFOs who aspire to be good communicators

The following four points highlight the primary aspirations for CFOs seeking to perfect their strategic communications with their organizations’ boards and the actions they need to take to achieve them.

1 Develop strong relationships with individual board members. Three areas of focus are core to this effort:

• Transparency. CFOs committed to transparency always share relevant updates, including wins and challenges, to build trust and show accountability. They are comfortable being themselves, and they acknowledge what they know and what they don’t know. 
• Strategic communication. CFOs should align their messaging with the board’s priorities by framing decisions and progress in the context of long-term value and organizational goals. They should engage board members as strategic partners by seeking their input on major initiatives and being responsive to their feedback. 
• Mutual respect. Effective CFO communicators consistently show up prepared. They respect time commitments, and work to build a rapport with individual board members where appropriate to foster stronger, more personal connections. Ultimately, treating the board as an ally rather than an audience cultivates a collaborative dynamic that drives stronger governance and better business outcomes. 

2 Understand points and frequency of communication. Healthcare CFOs who communicate effectively work hard at it but make it look easy. They know how frequently to share information, as well as which points need to be addressed, and which do not. Required communications include:

• Audit findings, including comments 
• Compliance failures 
• Conflicts of interest 
• Fraud or suspected fraud 
• Ongoing issues of concern
• Major budget deviations or financial instability 
• Material financial misstatements 

Additional but nonessential communications include:

• Compliance updates 
• Forecasting and trends 
• Investment and reserve performance 
• Monthly or quarterly financial statements 
• Strategic financial planning 

3 Demonstrate technical acumen. CFOs with technical acumen can translate complex financial and operational issues into clear business implications and answer questions with confidence, helping the board or committee members make informed decisions. Hallmarks of such acumen include the following:

• Proficiency in providing clean, accurate and insight-driven data. These CFOs go beyond just presenting numbers to provide insight into what the data means, which shows they understand cause and effect in business. 
• Command of metrics and methodology. CFOs with technical acumen are always ready to explain how they calculate metrics or call out limitations of data or models. It shows they are not just technically skilled but also thoughtful. 
• Skill in incorporating tools and technology. The CFOs are always prepared to mention or showcase automation, dashboards or tools used.
• Readiness to showcase financial models and forecasts. CFOs who are strong communicators use sensitivity tables or charts to communicate risk and assumptions. They explain the “why” behind the model and the assumptions that drive outcomes. 
• Ability to tailor the message to the audience. Boards are interested in outcomes, strategy and decisions, and the CFOs know it. They use precise terminology but don’t overcomplicate things. And in all their communications, they use visuals to simplify complexity. Clarity shows mastery. 

4 Deliver an effective presentation. CFOs who deliver effective presentations routinely focus on the following capabilities:

• Knowing their audience. They are meticulous and strategically minded, and they make sure they tailor their content and tone to the audience’s interests, priorities and knowledge level. They anticipate probing questions and are prepared to answer them. 
• Demonstrating subject matter expertise. Effective CFO board presentations are data driven. They present clear and accurate financial data. They always link to strategy, focusing on how results support or challenge strategic goals. And they present solutions, not just problems. 
• Refining presentation and delivery. CFOs who are strong communicators are clear and concise. They are comfortable being themselves and use plain language, not jargon, while avoiding acronyms and terms that may be confusing. They exhibit executive presence, using confident body language and speech with enthusiasm. They engage the room, telling stories that connect logically and emotionally to their intended narrative.

A communication mandate for healthcare CFOs

The seven best practices described in this article are not merely optional, “nice-to-have” practices for healthcare CFOs. These practices are essential skills that CFOs have a responsibility to embrace. And their ability to do so should not be left simply to talent or a gift for improvisation. Their commitment to accomplish these four goals should reflect time-tested techniques for making effective board presentations.

In doing so, healthcare CFOs must be prepared to explain concerns about financial topics such as net revenue, reimbursement and the revenue cycle not only to the most business-savvy members of their organizations’ boards but also to board members not well-versed in arcane  healthcare business concerns. Simply put, it’s the CFO’s duty to communicate those topics effectively to ensure the board can make informed, data-driven decisions for their organization.