- Addressing the transformation taking place in healthcare means embracing the changing nature of historically transactional roles.
- The roles of the CFO and supply chain management (SCM) are evolving to become more strategic.
- The CFO and SCM must collaborate to advance the strategic goals of the organization.
Historically, the functions of finance and supply chain in the healthcare industry have centered on management: financial reporting and cost containment for the CFO, and sourcing, contracting, procurement, data management, inventory and logistics for supply chain management (SCM).
However, new payment and care delivery models are prompting new leadership models that employ a holistic approach. Consequently, the CFO and SCM need to work together as business partners, planning and executing strategies that create and deliver value. Recognizing and acting on these changes can be challenging for those accustomed to only the transactional and operational aspects of the roles. But finance and supply chain leaders must realize that their roles are evolving or risk missing opportunities for improved efficiency, cost savings and containment, revenue and profitability.
The CFO and SCM can capitalize on these opportunities and support the value-based goals of their organization using three approaches: advocating for necessary resources to support advanced technology and robust data analytics, understanding the value each role brings and collaborating with each other and clinicians.
1. Integrating and sharing data
Integration of data enables the CFO and SCM to develop a holistic view of the organization and make more-informed decisions to support value-based care. Data sources should encompass financial (payment), supply chain (cost/utilization) and clinical (outcomes) sources.
To obtain strategic data, the CFO and SCM should collaborate to support integration between the electronic health record and enterprise resource planning system. For example, by marrying historical purchasing data with payment/billing data, the cost per patient case can be determined. Such data can be used in cost discussions with physicians or to analyze the profitability or feasibility of a procedure or an entire service line. Without the appropriate data, it can be challenging to obtain a valid evaluation or provide sound recommendations supported by the business case.
The CFO and SCM also should advocate for information systems that integrate internal data, such as historical purchasing patterns, with market intelligence (e.g., population demographics or benchmarking statistics on the average price for a specific procedure). Such assimilation allows for strategic planning and forecasting of “what-if” scenarios, including:
- How will changing care partners, suppliers and/or products affect quality, costs, utilization and margins?
- Can developing a strategic business relationship with a supplier lead to efficiency and cost savings?
- How will a bundled payment contract affect payment?
To integrate the various data, the CFO and SCM should advocate for the use of internal data analysts who understand how the financial and operational aspects of a service line interrelate and who can analyze opportunities for improvement.
2. Recognizing the value of each role
As part of the executive team, the CFO has a direct channel to the CEO and therefore can influence strategic planning and decision-making in areas such as cost efficiency, new business lines and new partnerships. The finance department also has revenue cycle data (e.g., billing, payment) that can be used in strategic decision-making.
The strategic strengths of SCM lie in the areas of relationships, data access and cross-functional collaboration. SCM builds relationships across disciplines — administrative, operational and clinical — through the value-analysis process and with suppliers through the procurement process. SCM thus has a wide perspective on cost and quality data across the organization and the ability to bridge any gaps in understanding among departments, fostering greater collaboration on organizational strategies such as physician alignment (co-management, gainsharing) and value-based payment models.
SCM also has access to data on supply costs and utilization, an increasingly valuable tool in the age of pay-for-performance and at-risk payment models.
3. Working together on strategic planning
The CFO and SCM must become collaborative change agents in bringing about transformation and innovation. To gain a more extensive understanding of a service line — beyond the bottom line — the CFO and SCM should meet on issues such as:
- Required capital investments in patient care
- The need for a marketing budget
- Opportunities for growth
The CFO and SCM also should advocate for a reporting structure — such as one that includes the position of vice president of supply chain — that enables them to significantly contribute to organizational strategy through closer collaboration with the CEO and the board of governors, particularly the finance committee. Using analysis spanning both functions allows for better business intelligence and strategic recommendations, in addition to consideration of quality, patient safety and consumer-driven concerns.
Likewise, teaming up to leverage robust internal data analytics helps the organization negotiate more competitive pricing in contracting, whether with suppliers for products and services or with managed care companies for rates. Such negotiations exemplify how synergy and collaboration across the spectrum lead to better overall decision-making and the continued viability of the organization.
Partnering to deliver value
Healthcare systems need more than transactional functionality to manage change and address industrywide challenges. By working together as partners, the CFO and SCM can develop strategies that will help the organization better navigate changing business and care delivery models, secure profitability and support the mission to deliver outstanding quality and service.