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Eric Melchior
Executive Vice President & CFO
Greater Baltimore Medical Center
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Presentation Objective
To walk-away with an appreciation for the
comprehensive role that the Finance Team plays in
helping to achieve the Strategic Vision and Mission
of an organization
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The Traditional Perspective
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The Traditional Perspective
• Accounting & Finance department are “bean counters”,
fulfilling the required functions of financial reporting (profit &
loss statements), payroll and accounts payable
Not actively involved in the development of the organization’s strategic
vision and plan
Little input to daily and operational decisions…don’t really understand
how the hospital works
Primary function is to serve as a behind-the-scenes service, tend to not
have a high-degree of visibility or interaction
Too narrowly focused….care only about the “bottom-line”
4
The Reality
• Hospitals and other healthcare providers are complex
organizations, where financial management involves numerous
sophisticated functions and many professionals
Operate at a relatively low-margin
Significant employer to local economies (added political element)
– Not-for-profits often viewed as community resource/partner
Sophisticated business alignments – joint venture, equity investments
High degree of federal and state regulation (Medicare/Medicaid) and
potential to impact operations significantly – Healthcare Reform
High degree of publicity – quality outcomes, malpractice litigation
Complex relationships with government agencies, community, patient
and providers
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Functions of the Finance Team
Accounting – responsible for reporting of monthly and annual financial
statements, cash management, accounts payable, payroll and
tax/ERISA reporting
Budget – develops the annual operating and capital budgets in the
context of the strategic and operating plans
Rates & Reimbursement – manages the hospital charge structure and
reimbursement received from 3rd parties
Patient Financial Services – generates and manages patient billing
Admitting/Registration – collects and obtains necessary patient
information for clinical services and billing
Business Planning & Development – models the performance of
existing services and new opportunities
Internal Audit & Compliance
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Functions of the Finance Team
Accounting –
Communication with Executive Management, Board of Directors and
external parties (bond rating agencies, lenders, donors, etc.) regarding
hospital’s financial situation and associated relevant issues
Preparation of financial statements, governmental filings, tax filings
and survey’s
Treasury management – maintaining bank accounts and the
organization’s financial transactions
Interpretation of new accounting pronouncements and calculation of
associated impact to organization
Maintenance of hospital investment portfolio
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Functions of the Finance Team
Budget –
Routinely monitors and reports performance compared to the
established and flexible budgets
Acts as a liaison to departmental management and executive
management to understand operational and environmental issues that
will impact hospital performance
Educates department, as well as providers, on budget responsibilities
and the implications of operational changes to the departmental and
organization budget
Implements and maintains productivity systems for continual
performance improvement
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Functions of the Finance Team
Rates & Reimbursement –
Maintains the Charge Description Master (CDM) as the basis for
generating patient charges
Interprets and models complex reimbursement methodologies (unique
and particularly important in Maryland given the rate regulation)
Prepares federal (Medicare/Medicaid) and State (HSCRC) cost reports
Often acts as coordinator for community benefit related activities of the
entity
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Functions of the Finance Team
Patient Financial Services –
Obtains insurance authorization for numerous services to be provided
prior to patient visit to ensure payment is received for services provided
Interacts with insurance companies in order to obtain payment for
billed services
Tracks and responds to insurance denials (RAC audits), including
redesign and modification of operational processes as necessary
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Functions of the Finance Team
Admitting/Registration –
The organization’s “front-line-of-defense” for accurately obtaining
information that allows the revenue cycle to proceed efficiently
– Billing and revenue collection cannot effectively proceed without a robust
admitting/registration process
Collects patient co-pays at time of admissions – recent practice that has
resulted in significantly more cash up-from to providers
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Functions of the Finance Team
Audit & Compliance –
Oversees Corporate Compliance and HIPPA Privacy & Security
Programs
Develops an internal audit program designed to audit/test areas of high-
risk for the purpose of ensuring that financial statements and
management reports can be relied upon
Administers and oversees a Corporate Integrity program
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The Role of the CFO – the Traditional View
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Characteristics of a CFO – the Traditional
View
• Bad Cop – enforcer of the many things unpleasant (bill
collector, shrewd negotiator, savvy entrepreneur, deal/idea
killer)
• Lacks Compassion
• Introverted and not people focused
• Tunnel Vision (can be a positive or negative attribute)
• Analytical and detail oriented
• No Personality or Sense of Humor
• Unapproachable/aloof
• Boring…no fun!!
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The Role of the CFO in Today’s Organization
– Core Competencies
1. Strategic Thinking – understand the long range vision
2. Systems Thinking – think of the overall system operational
effectiveness
3. Results Orientation – driven to achieve and outperform the
competition
4. Collaborative Decision-making – include “relevant” others
5. Action Orientation – act decisively and boldly
6. Champion Business Thinking – business focused outcomes
7. Coaching and Mentoring – release the potential in people
8. Influence – build support, commitment, agreement
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The Role of the CFO in Today’s Organization
- Skills & Knowledge
– Product line management
– Managed care contracting
– Patient care & outcomes understanding
– High priority on Information Systems
– Higher emphasis on Income Statement than
Balance Sheet
– Superior planning and treasury skills
– Knowledge of Medical Records
– Business development
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Critical Qualifications for Today’s CFO
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Critical Qualifications for Today’s CFO
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Critical Qualifications for Today’s CFO
2. Master Communicator with the Ability to Influence
Decision-Maker
– Involves others as part of the decision-making process
– Maintains composure/provides an atmosphere of confidence/calm
– Demonstrates decisiveness
– Proven track-record of making the right decisions
Work with various teams and individuals of differing personalities and
points-of-view
Demonstrates compassion towards individuals and situations
Must be a good listener
– Is frequently the principal advisor and sounding-board to CEO
Arbitrator
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Critical Qualifications for Today’s CFO
3. Strategic Orientation
Contributes to Strategic Formulation
– Can influence strategic development by making strong financial/business
arguments
– Exercises diplomacy at all levels of the organization for the purpose of
advancing issues
– Always considers strategy and Mission in decision-making process
Promotes and can lead organizational change
– Always looking for and evaluating opportunities that can further the
organization’s strategy and Mission
– Can integrate process improvement effectively
Focus always considers long-term goals (5-year time horizon) of
organization
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Today’s Model CFO
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A Day-in-the-Life
• Healthcare CFO’s are different than many other industry CFO’s
in that the roles can vary widely within the industry depending
on organization size and structure. Various responsibilities I’ve
maintained have included:
– Corporate Finance Medical Records Coding
– Physician Practices Facility & Support Services
– Business Development Management Information Systems
– Managed Care Internal Audit & Compliance
– Patient Financial Services Purchasing
– Medical Records Environmental Services
– Patient Access Central Sterile Supply
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A Day-in-the-Life
– Human Resources Credit Union
– Telecommunications Laundry & Linen
– Radiology Laboratory
– Risk Management Legal
– Volunteer Services Daycare
– Security Pension & Benefit Administration
– Real Estate/Medical Offices
– Construction of Medical Office Buildings and hospital expansion
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A Day-in-the-Life
• In addition to the variety of departments/services managed, I’ve
had the opportunity to manage numerous types of entities, such
as:
– Nursing Homes
– Hospice Programs
– Home Nursing Care (Visiting Nurse Association)
– Medical Transportation Services
– Blood Banks
– Collection Agencies
– Captive Insurance Companies
• Results in CFO being integrally involved with operations
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A Day-in-the-Life
• Participate in Numerous Meetings
– Operational meetings (often to demonstrate support and understanding
of process, for example Department of Medicine and Surgical
Services monthly meetings)
– Board Committees – Finance, Audit, Investment, Compensation and
Strategic Planning
– Departmental meetings – CFO is responsible for the managing a
variety of departments (Accounting, Budget, Rate & Reimbursement,
Patient Financial Services, Medical Records, Coding, Business
Planning, IT, etc.)
– Executive/Senior Management meetings – manage the operations of
the hospital in the context of the strategic and operating plans
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A Day-in-the-Life
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A Day-in-the-Life
• Other Responsibilities “As Assigned”
– Administrative Rounding – time spent on clinical units as a
mechanism of showing executive management support/visibility. Used
to understand the issues relevant to a specific unit and/or process.
– Board Relations – critically important…the CFO doesn’t have 1
boss…he/she has numerous, including Board members and associated
interests
– Fundraising – the CFO is critical to expressing the strategic goals and
Mission of the organization for philanthropy purposes
– Serve as a Board Member – important to demonstrate that the CFO is
a community resource
– Must be able to assume broader administrative duties if called upon
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Final Thoughts
• Days often start early and can end very late
• Politics can be exhausting
• Tough to manage multiple interest and personalities
• To allow patients to access the care we all want for our
loved ones when receiving medical care services
– Quality outcomes
– A positive service experience
• Legacy – to leave behind a viable/thriving asset that can
effectively meet the needs of the community we serve
• The CFO role is demanding and challenging, but exciting
and never boring
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