With value based model, the most unpredictable payment reform, in their list of financial challenges, CFOs point out their threats and decision making factors.

1. Top Challenges Of
CFOs
While transitioning to value
based care
In 2013 the healthcare costs in United States went up to 17.7% of
GDP, the most than other country Projections show continued
growth averaging 4.9% a year in 2014-18, increasing to 17.9 of
GDP by 2018

2. When it comes to experience
“You need to understand the issues, test your theories, and subtly
verify your assumptions along the way,” says Tom Gibney, CFO of
St. Luke’s Cornwall Hospital of Newburgh, New York, when asked about
how experience plays a role in decision making. “The buck stops with you,”
he says. “The board is looking to you for answers”, he quoted.
Reimbursement declines, physicians shortage, healthcare reforms and other
factors have forced CFO’s to use their experience in answering how to
recoup the losses and improve the organization’s cash flow.

3. Few Highlights
Demographic and economic factors
that are the root cause of this
situation are forecast to remain un-
changed for the foreseeable future.
It is driven primarily by new
mandates and legislation but
there exists wide variety of
additional drivers
Spending growth slowed during the recession and
has remained slower than historical averages
The Unchanged Primary Reason

4. Current Drivers of Healthcare Costs
Healthcare Legislation(33%) Overutilization of Prod(13%)
Misalignment of quality(8%)Labor Costs(12%)
Pharmaceuticals(5%)Patient demand for heal(6%)
New Clinical Technology(2%)Medical Devices(3%)

5. Organizations which faced push backs
In their first quarter
Mayo Clinic NY City Health
The Mayo Clinic, which had been
diligently cutting expenses over the
past year, has started to see those
costs creep up again
The New York City Health and
Hospitals Corp. will face an
operating deficit of $ 1 billion
in two years and dwindling cash
reserves

6. Top threats of CFOs – Recent Survey
Reduced Reimbursements(24.8%) Physician Shortage(20.54%)
Healthcare Reform(10.81%)Organized Labor(15.14%)
Rationalizing Financial(5.68%)Industry Consolidation(9.82%)
Personalized Machine(2.81%)Value Based Purchasing(5.41%)

7. Reimbursement Declines
Exchange have proven to generate lower reimbursements for
hospitals when compared to conventional insurance
The number of patients who rely on Medicaid for healthcare
coverage continues to rise
Government reforms and spending cuts at both state and national
levels have also negatively affected hospital reimbursements
Many states have chosen not to expand Medicaid programs even
as reimbursements for indigent patients decrease
The Budget Control Act of 2011 (“Sequestration”) have directly
impacted Medicare and other programs funded by the federal
government

8. Hospital in Post ACA Era
Medicare (fee-for-service Medicare, Medicare Supplement and
Medicare Advantage) which constitutes 30% of patient volume,
are critical for offsetting fixed costs but are not set-up to make
margins
Medicaid constitutes another 15% of volume-60%-70%
reimbursement of Medicare but still higher losses.
Uninsured patient volume constitutes about five percent and
represent large “losses” to the hospital For this hospital the
average gross margin is approximately four percent.

9. Top Priorities Of CFOs
Top Priorities Finding Capitals
Merger, Acquisition Clinical Technology
Funding for pensionNew Facilities
No Capital Investment plannedCompliance with safety codes

10. Beyond Bonds and Commercial Loans
Bonds and commercial loans have certain limitations and are not
always the best
Solutions to improve financial metrics and performance should be
a better option
New technologies are available to improve healthcare services and
quality and safety analyses, ultimately improving hospital performance
and value
CFOs must seriously reconsider the requirement to “own” certain
Technologies
Having the right device, at the right place, at the right time acquired
via an operating expense model

11. Conclusions
The state of flux in reimbursement and required changes
in healthcare delivery make planning capital expenditures
a challenge.
Many hospitals and healthcare systems spend significant
time analyzing market projections and feasibility studies
before committing to capital programs.
Navigating through this chaotic environment requires the
right financial partner, with proven expertise, flexibility
and experience.
What is stopping the organization from tacking challenges?
$

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