3 tips for effective financial leadership during the coronavirus crisis
- During a crisis, CFO leadership becomes even more critical.
- Financial reporting of lost revenue and increased costs should be a priority.
- Managing finances during and after the crisis will be key.
“Clinical issues and patient and staff safety are the top priority during a crisis like the COVID-19 pandemic,” said Lawrence E. McManus, FHFMA, CPA, managing director with Integrity Management Advisors in Hopkinton, Massachusetts. “CFOs can work with leadership and develop strategies unique to their circumstances. At the same time, they are responsible for the finances of their organization and need to be especially diligent during these difficult times.”
McManus should know: Back in 2012, he was CEO of Catholic Health Services of Long Island when Superstorm Sandy swept through the region.
McManus, who has more than 20 years of experience as a CFO and worked closely with the CFO and other finance leaders during Sandy, offers the following suggestions for leading during a crisis.
1. During a crisis, CFO leadership becomes even more critical
The CFO is a major player in the strategy and execution of activities across a medical center or system. During a crisis, this involvement is particularly important given the integrated nature of healthcare delivery.
“The CFO can lead multidisciplinary teams, coordinating the supply chain with hospital emergency room and ambulatory services — in conjunction with the CMO, CNO and other clinical leaders, maximizing the services delivered to patients in critical need,” McManus said.
“Leadership will require initiating changes in hospital practice, such as converting private to semi-private rooms, reducing length of stay when possible and managing a true seven-day operation. Non-clinicians like financial staff will be asked to assist the clinical staff as appropriate.”
The nature of the current crisis requires leaders to consider unprecedented strategies. “The insights and knowledge of the CFO as part of this team are critical in developing strategies that are in the best interests of patients and healthcare staff. All of this is moving at record speed,” McManus said.
2. Financial reporting of lost revenue and increased costs should be a priority
During the COVID-19 crisis, the stock market declines and requirements to eliminate elective surgery, along with incremental costs related to major changes in capacity and staff, pose an existential challenge to some hospitals, McManus said.
“During this time, the CFO should be the point person to coordinate all financial activity and reporting, which should be stepped up from monthly to weekly to ensure recognition of lost revenue and increased costs,” McManus said.
“Compared with Superstorm Sandy, this situation is so much more significant in terms of mortality, time, impact and resources that it is particularly important now that finance track financial activity every week. It will be very difficult to look back and capture lost revenues and extraordinary expenses over an extended period of time,” he added.
Keeping track of these revenue losses and incremental expenses is essential in case hospitals need to file claims for business interruption insurance or apply for federal and state subsidies, McManus said.
3. Managing finances during and after the crisis will be key
During Superstorm Sandy, the key staffing challenges were logistical, such as dealing with transportation and weather issues that made it difficult to care for patients and get staff to work.
“With the current crisis, major challenges of canceling elective surgeries, increasing bed capacity, ramping up staffing and working the supply chain all put a strain on hospital finances,” McManus said. “The focus always has to be on patient and staff health and safety. That said, this pandemic is also hitting hospital finances very hard.”
The ability of the CFO and finance team to manage the hospital’s financial resources during and after this pandemic will put everyone to task, McManus said. “Hospitals and healthcare systems have historically had thin margins and are not structured in a manner to respond to a health crisis of this magnitude. Surely the state and federal governments will need to step in. Even with this help, hospital leadership will be even more challenged to manage the finances of their organizations over the next months and years.”
Interviewed for this article: Lawrence E. McManus, FHFMA, CPA, managing director, Integrity Management Advisors, Hopkinton, Massachusetts ([email protected]).