2017 CFO Outlook Performance Management Trends and Priorities
From our sponsor Kaufman, Hall & Associates
A survey of CFOs and finance leaders found that only 14 percent believe their financial planning processes are adequate to manage the financial impact of changing healthcare policies.
The role of healthcare finance professionals is evolving as hospitals and health systems navigate a rapidly changing healthcare industry. In addition to their traditional responsibilities of aggregating and reporting organizational data, finance teams increasingly must analyze data and provide recommendations to leadership that support strategic and operational decision making.
As such, modern finance professionals serve as “trusted advisors,” vital to setting and tracking strategic priorities for the organization. They are being called upon to spearhead analyses of, and progress with, a range of initiatives, such as technology enhancements, risk management, mergers and acquisitions, and new business expansions.
To drive effective strategies, healthcare leaders need the capabilities and tools to support sound, data-driven decision making. Yet, a recent survey of more than 350 CFOs and senior finance professionals indicated that only 14 percent believe their organizations are very prepared to manage the financial impact of changing healthcare policies with their current financial planning processes and tools (2017 CFO Outlook: Performance Management Trends & Priorities in Healthcare , Kaufman Hall, survey conducted between Oct. 3 and Oct. 14, 2016). Ninety-one percent of respondents believe their organizations should be doing more to leverage financial and operational data to inform strategic decisions.
One goal typical of finance professionals is to bolster their organizations’ capabilities to support data-driven strategic and financial planning. In the area of performance management, financial professionals identified the following top four financial planning and analysis initiatives as areas for improvement:
- Reporting and analysis to support decision making
- Operational budgeting and forecasting
- Cost containment and efficiency
- Capital planning and tracking
In terms of the most crucial reporting improvement areas, 83 percent of respondents identified operational reporting, 75 percent management reporting, and 65 percent benchmarking industry data (respondents were able to select multiple answers). Most organizations have significant work in these critical reporting areas. Only 3 percent of respondents indicated that they are very satisfied with the current quality of performance management reporting in their organizations.
Challenges and Solutions
Survey respondents identified a number of challenges to achieving meaningful improvements in priority areas. The top challenge to effective financial planning and analysis named by 55 percent of respondents was “resource constraints.” Nearly 50 percent of respondents listed “outdated processes” and 40 percent cited “insufficient tools” as other barriers.
In terms of reporting, for example, 72 percent of respondents said they do not have sufficient tools to easily integrate data from multiple sources, and 65 percent said they face difficulties trying to drill into reports to better understand the underlying data. Cost containment is another example. While 62 percent of respondents cited enhancing cost containment and efficiencies as critical initiatives, 65 percent said they either have no cost measurement tools in place or the cost measurement tools they do have are too simplistic to meet their needs.
Finance departments are uniquely positioned to identify and monitor leading indicators, model alternative scenarios, and implement rolling forecasts to allow for nimble course adjustments and ensure a smooth path toward long-term success. However, only 19 percent of survey respondents felt confident about their teams’ abilities to quickly and easily respond to sudden changes in business circumstances. Twenty-two percent of respondents are currently using enabling processes—such as scenario modeling—on a regular basis.
Finance Departments’ Strategic Value
To succeed in today’s changing healthcare environment, finance teams must be able to quickly and accurately distill complex data and translate the data into meaningful insights for stakeholders. CFOs need a rich set of trusted, accurate data that can be used to make timely, informed decisions. Information required for effective decisions often includes not only financial data, but operational and transactional datasets for a 360-degree view of the organization.
In many cases, the difference for finance leaders between making progress toward a trusted advisor role across the business, or not, depends on whether organizations leverage modern tools and processes that enable them to efficiently access and analyze data, dramatically shorten planning cycles, and improve timely reporting, and thereby inform strategic decisions. Modern performance management practices, such as scenario modeling and rolling forecasts, an increased emphasis on data analysis, and accurate and actionable reporting, will solidify finance departments’ strategic value across organizations.
Jay Spence is vice president of solutions marketing, Kaufman, Hall & Associates, LLC, Skokie, Ill..