Patrick Reilly

Four healthcare finance leaders share their strategies for creating a road map for change that leads to cost efficiencies and accountability as cornerstones of a new culture.

At a Glance

To drive the major organizational changes needed in a reform era, healthcare finance leaders should:

  • Establish a vision of where the change in strategy affects their organizations' direction and gain acceptance from staff about shared goals  
  • Create partnerships with fellow executives to understand the metrics of the organization and promote a team approach for change  
  • Define clear measures of success so staffers can understand business goals and their roles in organization  
  • Communicate the progress that has been made in meeting goals and provide guidance when milestones have been missed  

Unsustainable healthcare costs and concerns about quality require hospitals to undertake major system change that requires more than traditional healthcare management.

From developing new partnerships with physicians, payers, and purchasers to reengineering cost structures, achieving success in the post-reform era will require healthcare leadership that embraces change, sets strategic direction and infuses staff with a sense of accountability. Setting strategic direction that could include physician integration, new pilot programs and cost reengineering will be top priorities for healthcare finance executives leading the charge. 


"It boils down to the most efficient way to deliver high-quality clinical care in a cost-effective manner," says Peter Markell, CFO and treasurer at Partners HealthCare in Boston. "People intellectually get that premise, but there's the challenge of what that means to our revenues, the payment system, and everything else we do."

Transformational change will revolve around the concept of value: delivering the best quality at the best cost to purchasers of care. Achieving value will require the people and culture to embrace change, enhanced IT to capture data and transform them into actionable information, rigorous performance improvement to improve quality and drive out cost, and the ability to contract for risk under value-based payment. It's a shift in philosophy that requires new thinking and a movement from a traditional volume-based context.

"One of the huge challenges that I face is having a foot in both worlds," says Marvin Eichorn, senior vice president and CFO at Mountain States Health Alliance, a 13-hospital system with headquarters in Johnson City, Tenn. "We have a fee-for-service model that generates profits, yet we're investing a lot of time and cash in trying to develop a new model for what we think is going to happen in the future. It's one of the biggest juggling acts you have to manage." 

HFMA recently spoke with these and other healthcare finance leaders about how they are leading their systems through payment and delivery reform, the leadership techniques they used to make sure staff accepted the new culture, and what they learned guiding their systems through these significant changes. 


Delivering Quality at a Low Cost

Although many providers agree that payment for services will decline significantly, health systems should take a step above simple cost management and look at operating cost structures in a different view. Establishing new cost metrics and eliminating inefficiencies will be on the top of the agenda, while planning and analysis become the first step in laying the foundation for change.

Like many health systems around the country, Spectrum Health, Grand Rapids, Mich., is placing an emphasis on eliminating avoidable costs, optimizing clinical outcomes, improving the patient experience and reducing per capita spending.

"We felt we needed to lead in the creation of a consumer health market because we saw that was where things were going," says Michael Freed, executive vice president and CFO at Spectrum Health. "Figuring out how to be successful with Medicare was a critical success factor for us."

During leadership sessions with senior executives across the system, Freed and his colleagues acknowledged that eliminating those costs might mean fewer patients. "The Medicare population was never managed before, so now you take the population and are putting them in a managed environment and you're seeing fewer admissions," Freed says. "We've tried to anticipate some of this change and make sure that we are ahead of it."

With an emphasis on driving down per capita spending and holding staff accountable, Freed approached clinical staff to reduce unnecessary utilization and perform appropriate case management on patients to avoid emergency department visits or admissions.


"The toughest sell when you have an integrated healthcare system is being responsible for the financing of care and the delivery of care because they are naturally at odds with one another," Freed says. "Suddenly there's always one more thing that you can potentially do for your patient. The biggest thing is getting staff to understand the vision and how do we expect to achieve it," Freed says. "One of the biggest challenges we have is trying to show people why what they do matters and where they fit into this equation."

As hospitals change their focus from acute care to the management of patient health across different care settings, hospital executives should set the tone for making institutional changes, says Todd Nelson, technical director at HFMA.

"The CFO needs to lead by example and set the tone for the change," Nelson says. "Without buy-in from the staff, the change will either never happen or it will only be short-lived. The CFO needs to be a cheerleader for the approach."

CFOs can make several efforts to ensure that staff members understand and are comfortable with the organizational changes. Executives should meet with staff and ask for input and ideas. They should also monitor progress of the systemwide change, measure it against intended goals and then hold employees accountable for results. Most important, Nelson says, is "to communicate, communicate and communicate throughout the process."

Eliminating avoidable costs at Catholic Health Partners, Cincinnati, was embedded in the organization's five-year planning process in which executives discussed operating and balance sheet flexibility, says James Gravell, senior vice president and CFO.

"There has been a significant maturing in the understanding of the role of the balance sheet and what it means to an organization's flexibility," Gravell says. "It was as much out of necessity as anything else. Once we realized it took 'X' amount of financial performance, then a lot of metrics were issued and put in place."

Establishing a culture in which Catholic Health Partners expected to be a 75th-percentile company-where only 25 percent of hospitals perform better on metrics-proved to be a reasonable goal to help drive change at the 34-hospital system, Gravell says. It was a concept that employees understood and they were quick to accept the system's goals.

"No matter how much we've been blessed with volume, reimbursement rates or a lower cost in your market, our responsibility as a steward of these resources required that we run the organization reasonably efficiently," Gravell says.

"It's become a disciplined process," he says. "That discipline is something we refer to as 'subject matter experts.' There's about six or eight people who weigh in on the process." These subject matter experts analyze and determine opportunities for efficiencies throughout the system. "It's also their responsibility to convince and coach operators that this is doable and possible," he says.

HFMA's Nelson says that changes in cost containment strategies do not necessarily mean that quality will suffer during the process. "In fact, many times quality will improve while costs decrease, improving value to the patient and the organization," Nelson says. "The magic point to get across to physicians and staff is that quality does not have to suffer while going through cost containment change."

At Mountain States Health Alliance, senior executives use leadership forums and an annual state-of-the-system session to introduce cost efficiencies, different care models and overall strategies to all staff members.

More than 500 directors, managers, and executives met three times to measure progress against six strategies for 2011. In early fall, more than 10,000 employees listened and learned about the system's strategies at state-of-the-system meetings held at hospitals throughout the system. Achieving operational cost efficiencies and managing fixed costs are core strategies for the system, says Mountain States' Eichorn.

"We go to where the folks are, where they work, and where they live," Eichorn says. "Those strategies are the core thing that is communicated. Our goal in those meetings is that everybody in the company understands our strategies. They can take that and integrate it into what they do every day to take care of our patients."

"We are extraordinarily persistent about things and we have a strategy and we stick to it," he says. "We've done a pretty effective job getting folks to understand the strategies to some level."

Aligning Physicians in the New Model

With focus on improving clinical quality and lowering clinical cost, physician integration is often in the middle of the new cultures being adopted by systems. Although most systems acknowledge that physician-hospital integration is critical, implementing the change and bringing physicians on board into a new strategic direction takes time and patience.

Several factors play a role in successful physician integration, says Nelson. In addition to recruitment and negotiation of employment agreements, system executives can provide information and data for the physician to make sound clinical decisions. They also can create a committee structure that allows for input and involvement from physicians in operational and budgetary decisions.

Nelson also stresses involvement in quality committees and clinical transformation meetings, which allow CFOs and physicians to share financial information paired with patient outcome, patient satisfaction, and resource option decisions.


"The key is to understand and foster a mutual respect by focusing on collaboration and patient care, and not financial measures," Nelson says.

Bringing together piecemeal payment mechanisms and various silos into an integrated model takes time, effort, and a departure from the status quo. The knowledge that healthcare delivery in the future will involve accountable care organizations (ACOs) and bundled payments has helped with integration efforts, Markell says.

"We're saying to the clinical leaders, the physicians, and nurses, 'If you looked at all of the conditions we treat and the different things we do, what is the best way to deliver that care?'" Markell says. "We will worry about working with the payers to make sure we get paid in a manner that rewards the effort."

"The fact that they see the world of reimbursement is changing and there is some support behind rewarding those that deliver the best and most efficient care has helped a lot," he says. "For example, we have a stroke team and we have taken some of our leading cardiac or stroke physicians, gotten them together, and asked them to work through this design. The clinicians debate what they think will be the best care model and then they are finalizing a protocol. From there we hope to develop a bundled payment plan for the condition."

Mountain States employs about 400 out of approximately 1,200 physicians that are on the system's active staff, Eichorn says. Integrating physicians continues to be one of the system's top strategies.

"Obviously their first responsibility is taking care of their patients, so you've got at most eight or 10 hours in a week to get them involved with you and get them engaged," Eichorn says. "It's a real challenge."

The system has found success in integrating physicians by paying for their service on committees. The culture of paying for time and providing leadership roles within the system has increased as Mountain States continues with plans to implement an ACO model.

"We're going to be offering physicians both substantial roles in governance of the ACO as well as ownership in the organization," Eichorn says. "They're going to have to both improve quality and patient experience as well as reduce cost. They have been engaged with us in governance and leadership roles."

Spectrum Health created a physician alliance to promote integration, expand services and share goals among independent physicians. The Spectrum Health Physician Alliance aims to promote opportunities for independent physicians to collaborate with the system, Freed says.

"I don't know that it's easy to achieve, but we strive to just be focused," Freed says. "You have to focus people and say 'OK, what's my role and what do I need to be doing?' We get better buy-in when we can do that. Is it simple to do? Not in a large organization."

Ultimately, Freed and his team continue to focus on how physicians and clinical staff can improve the patient experience.

"Part of our role is to make sure that we are helping people see where it is that we are trying to go," Freed says. "It's getting people to see where they fit into the picture and what they can do to make a contribution to make that better."

Leading Through Change

Leading during a time of significant change requires healthcare finance executives to model excellence, communicate clearly and develop strong teamwork throughout the organization.

"Focus on modeling the behavior within finance," Gravell suggests. "Surround yourself with top-notch people and realize you can't do it all. Become a partner with your COOs and your CEOs in understanding the metrics of the organization. It's about a partnership with people."

"cf_reilly_photo5Although most staff realizes the need to institute change is necessary to succeed, being consistent with your message and responsive to staff needs is crucial," Markell says.

"In your message, be crisp about what you're really trying to get at," Markell says. "If you put too much on the table at once, people really can't digest that. You should also finish what you start before you get too deep into the next set of changes."

"You run the risk that the people at the top get it, so they think everybody else must get it," he says. "You need to drive down the change effort through the organization so it becomes part of the day-to-day discussion."

Freed has also made sure he has focused on objectives for change in his system, such as establishing certain goals for days' cash on hand and debt-to-capitalization rates. "You've got to really define these simple measures of success," he says. "You've got to keep a fairly simple objective in front of people with a relatively simple focus, otherwise it can be difficult for them to understand when and where success is achieved."

It is also important to communicate a clear vision of where the organization is headed with the change, Nelson says. "You should consistently provide praise for achieving milestones and guidance and course correction as needed when milestones are missed," he says. "Sharing successes and challenges with the team will help you learn from them the next time your organization is going through a major change."

While letting staff know about a new vision, system leaders must realize they are creating a new model that includes ACOs, bundled payments, and valued-based purchasing, Eichorn says.

"It's always a challenge with making sure everybody in the company understands our strategies," Eichorn says. "We need to make sure that they can take the strategies and integrate them into what they do every day. That is our goal."

"The world is changing and to sit still is not going to put us in a good position," Markell says. "Having clinical leaders and operating leaders on board so it's a team effort is absolutely critical to making it work."

Patrick Reilly is a senior writer at HFMA's Westchester, IL office.

Publication Date: Monday, January 02, 2012

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