How Healthcare CFOs Adapt to the Changing Economic Landscape

CFOs serve as both fiduciary and strategic leaders and can be uniquely positioned to lead healthcare companies through the next period of economic transformation, including finding new paths for growth.

Although deals were down across the healthcare industry between 15 to 40 percent in 2022, KPMG’s 2023 Healthcare and Life Sciences Investment Outlook shows optimism. Looking ahead, CFOs can adapt to changes in the economic landscape when they balance financial safety nets and set the stage for growth plans to positively impact their organization's forecast.

These five key areas could help CFOs transform today's uncertainty into an opportunity, and help them develop strategies to face a myriad of challenges: financial resilience, digital transformation, strategic partnerships, talent retention, and embracing data. 

Build Financial Resilience

Building a solid financial foundation for your healthcare organization can be possible even if the market trembles. 

CFOs can start with a focus on strategic growth. If executives do not invest in growth – even in times of uncertainty – leaders could risk losing relevance as a company, explains Ben Taylor, CFO and Chief Strategy Officer of Exscientia, a global pharmatech company.

From there, CFOs can audit their revenue cycle. According to Deloitte, half of finance leaders in the healthcare system identified enhancing the revenue cycle as the primary factor for improving profitability. CFOs could also facilitate billing and collection processes, reduce expenses and liabilities, and maintain a hefty reserve fund.  

Another effective strategy for growth is to diversify revenue streams. Telehealth and remote patient monitoring, value-based services, and ambulatory surgical centers can be top growth opportunities for health systems.

Finally, one underrated path to financial resilience can be having a backup plan. Finance leaders can create robust contingency plans through scenario planning and establish clear communication protocols to increase organizational stability. 

Embrace Digital Transformation

Operational efficiency can be a chief concern for many CFOs. It can be achieved through a higher emphasis on digital strategies. As Deloitte notes in The Wall Street Journal, CFOs can be crucial in redirecting investments toward a comprehensive digital strategy. 

Investing in digital solutions like scheduling software, document management systems, electronic health records (EHR), and telemedicine platforms to increase efficiency and reduce expenses could be one place to start. Organizations can focus on emerging technologies that support the workforce, diminish inefficiencies, and enhance patient care.

At Exscientia, Taylor and his team lean on software solutions that seamlessly integrate with their existing workflows to help them solve complex problems. Doing so also enables employees' roles to become more strategic by automating as much of their daily work as possible. 

Automation, in particular, is top of mind for many healthcare CFOs. It's no wonder, given that 30% of administrative tasks for nurses can be automated or reassigned, according to a 2023 Accenture report.

Create Strategic Partnerships

Strategic collaborations can be a boon for business growth. The right partnerships could provide healthcare companies with access to new capabilities, increase speed to market, and achieve capital, scale, and operational efficiencies.

Of course, a partnership may not feel instinctual.

"There is often a desire among leaders to solve every problem we run up against," says Taylor.

However, CFOs can be central to reminding teams that some problems are better solved by or with partners, he notes.

"As CFOs, we know that when economic uncertainty hits, it will become clear that most of our company’s value creation comes from a small set of things we do well and not from recreating infrastructure others already have," Taylor says. 

Taylor, in particular, points to Exscientia's partnerships with several large pharmaceutical companies as methods to bring enormous, diverse resources to their joint projects. These partnerships allow Exscientia to focus on the areas where they can have the most impact while maintaining a lean infrastructure.

There can be many opportunities, whether you look for partnerships that can help you reach new geographic markets, create a new offering, or execute specific challenges. One such opportunity can be within cybersecurity and privacy. In a 2022 Deloitte survey of 61 finance leaders of U.S. health systems and health plans, 35% of CFOs of health systems noted cyber threats as their top concern.

Nurture a Resilient Workforce

Talent retention during uncertain times is essential, especially in healthcare. Deloitte data found attracting and retaining talent as a top concern for healthcare CFOs. Nearly half of health system finance leaders noted addressing talent issues as the most significant driver to improve profitability. To make that a reality, CFOs can invest in reducing employees’ burdens.

One burden CFOs could offset for employees is childcare. Addressing this issue is not only essential for improving the mental health and wellbeing of healthcare workers but also for safeguarding the healthcare system’s resilience. Healthcare companies might develop and implement supportive measures tailored to the unique needs and challenges faced by healthcare workers with children, like easier shift scheduling and increased support for female employees.

Another employee burden is student debt. The average medical school graduate owes $250,995 in total student loan debt, and there are additionally 43.6 million borrowers with federal student loan debt in the U.S., many of whom work in the healthcare industry. 

Healthcare businesses might also consider expanding employees' mental health resources and skills development. CFOs might work to build a roadmap that strengthens critical skills in the use of health data and digital technologies, preparing doctors and nurses for the changes expected in the future. 

Alternatively, for some companies, resiliency might involve a creative approach to staffing and resources. Healthcare companies can utilize external service providers, contractors, and fractional support to access crucial expertise from skilled and high-performing professionals. This approach may allow them to avoid the management complexities and substantial fixed costs of adding full-time staff.

Make Data-Driven Decisions

Data can help CFOs extract valuable insights to facilitate decision-making, control costs, and identify revenue optimization opportunities. CFOs can focus on acquiring data with predictive value for future performance.

CFOs can consider questions fellow executives and the board might ask and always be one step ahead by having data handy. For instance, if you see a reduction in market share, you can assess whether industry indexes show a similar trend. 

Data analysis can also help CFOs mitigate risk. You can look at your available data to spot financial and operational problem areas during risk and forecasting assessments and use that insight to react strategically. A 2023 article by Deloitte, published in The Wall Street Journal, suggests you make the most of your data with these steps: 

• Define your needs 
• Establish a data model 
• Create common standards 
• Align data 
• Adopt robust governance and maintain data quality 
• Match information requests 

Data insights can also support a healthcare company's primary mission to facilitate patient care and outcomes when they're used to identify patterns, build predictive models, and allow for appropriate reactions in real time.

The Takeaway

Healthcare CFOs can hold a crucial role during economic uncertainty. To adapt their businesses, they're tasked with everything from leading digital transformation and strategic partnerships to shepherding supportive workplace policies for burned-out employees. Taylor says CFOs can best guide their teams to stay true to the company’s purpose and to know where to cut back so the company can continue to invest in focused growth. Whether it's the current period of economic transformation or the next, the methods discussed here can help support a healthcare organization's growth.