Saturday, January 28, 2012
Like every management position in health and human services, the chief financial officer (CFO) role has been “refocused” in recent years. It’s not that the traditional financial management tasks have gone away – they remain as important as ever. Your CFO still needs to manage cash and collections, optimize purchasing and payroll, lead insurance risk management initiatives, and deal with taxes. But with the increasing changes to how the U.S. payers (both employers and government) finance service systems and how service provider organizations are paid, most organizations need new business models for continued organizational sustainability. And, these new business models aren’t possible without the increased involvement of the CFO.
It’s a matter of math and margins. First, the math – many system changes have moved provider reimbursement from one cost-based system to another. Once, clinical leadership could change the service model and the money would follow without many audits. That is no longer the case. We are looking at fixed fees, bundled rates, competitive bidding, P4P, and more – all with great attention to the rules of reimbursement. The door is closing on a health and human service era of “build it and the money will follow.”
And now for the margins. There is no end of debate about rates in the field. Insurance companies complain that the new medical loss ratio regulations and limitations to insurance rate increases cuts into their profits. Managed care organizations complain that the recent recalibration of Medicare Advantage plan rates cut into their profits. Provider organization service rates are the subject of great contention (see Who Should Set Rates – and How? all members and Medicare Demonstration Project Results Are In – Only Winner Was Bundled Payments all members). What we do know about rates is that cost pressure in the health and human service field is going to force changes in reimbursement at every level (no matter the politics) – and that any new service or business model will need thorough financial vetting to be successful.
Now, back to the CFO. Your financial executive’s job will be to integrate the correct financial strategy into your organization’s culture (one with management teams that often lack financial knowledge) to take best advantage of the shifting models, shrinking rates and business models that will not be, “business as usual.” I invite you to learn more on this topic at the rapidly approaching OPEN MINDS Best Management Practices Institute as I present “Reinventing The CFO: The Enhanced Role Financial Officers Play In A Shifting Market.”
Rejean Carlson, MBA
President, OPEN MINDS
For another free resource, see: Think Obstacle Course (Not Footrace) all members
This is free for the next sixty days to all registered OPEN MINDS Circle members.