Many healthcare organizations don't achieve the full benefits possible from their technology investments.

Technology must play a significant role as hospitals and health systems work to streamline operations, reduce costs, bolster revenues, and improve the quality of patient care.

Today’s healthcare CFO needs a strong understanding of the role, benefits, and limitations of the technology they are investing in to be sure these tools are properly aligned with their business and patient experience goals. In short, these organizations need a digital-first CFO who will automate processes that used to be done manually.

"I've been on a mission to do that for a long time as my role and responsibilities have evolved in the organization," says Garrick Stoldt, CFO of Saint Peter's University Hospital, a New Brunswick, New Jersey-based 478-bed hospital with $650 million in net patient revenue. "In addition to being CFO, I'm also part of the hospital’s planning process and am involved in all of the strategy decisions."

Stoldt sees investments in technology as a key part of the organization's growth strategy and has enhanced this digital strategy in several ways. This was partly to just maximize operations and enable the organization to become more efficient. But Stoldt says the need increased for him personally as he assumed new roles, such as two years ago when he was assigned to take over the health system's supply chain.

"Although many areas of the hospital have advanced in a lot of ways from a digital process perspective, that particular area was well behind, " Stoldt says. "So we are more heavily integrating new systems to operate at a much higher level."

Getting the full benefits from technology investments

"The first goal is to obviously get it up and running, at least in a rudimentary fashion," he says. "It takes a long time for institutions to get from basic use to a much higher level where you are actually getting value from the functionality that different technology brings you."

"One of the other things I've done in the areas that report to me is to take what we have, and really expand it in terms of its capability," he adds. "Whatever software, digital work area, or technology we're working on, we want to become a high-end user."

While this might seem like a logical goal, Stoldt says many healthcare organizations don’t achieve the full benefits possible from their technology investments.

"For years the healthcare industry has lagged the commercial world in terms of technology use," he says. "If you look at look at the finance industry, and you look at Wall Street, they're using high end technologies and they have been using them for a much longer period of time than the healthcare field."

As a result, Stoldt says the healthcare industry is still lagging behind many others when it comes to the effective use of technology.

"We've really been lagging. We keep adding new components," he says. "But our integration of services with technology has really lacked. The applications we have don't do what they're supposed to do. The purpose of technology is to take burdens off of employees. But we never really get that far, because the software we're using doesn't meet all of the needs."

As disappointing as this news is, it's even more disappointing to recognize this has been the case for some time.

"I've seen this every place I've been in my career, and I've been in healthcare over 40 years," Stoldt says. "We get new technologies in. We get rudimentary stuff done. We move up a little bit in terms of efficiency. But we don't take it to the next level. There's no one driving the train to get to really be high-end users."

Using technology to better serve needy populations

Although Saint Peter's Healthcare is doing well from a financial perspective, any gains in efficiency are really more about better serving the local community than driving up the bottom line.

"I'm in my 18th year here at Saint Peter's, and we have a special mission," Stoldt explains. "We are sponsored by the Archdiocese, and we take that mission very seriously. We've never made huge margins. Although we're doing better now than we've ever done. In fact, 2021 was our best year ever by multiples."

"We're also doing quite well in 2022, while the rest of the industry is basically down about 3% in revenues," Stoldt says. "As to our revenue for the first quarter, we were actually up about five-and-a-half percent. So, we're bucking the trend from that perspective."

To keep revenues in line, Stoldt says Saint Peter’s has a unique payer mix.

"We're about 50% commercial, 25% Medicare, and 25% Medicaid based," Stoldt explains. "We also have a substantial footprint on taking care of the youngest population in New Brunswick. Where we are located has the fourth highest percentage of population below the poverty guidelines. So, we have a very large footprint on taking care of underserved populations."

Saint Peter's is expanding its services in that area as well.

"Because we are doing better financially, we are able to allocate resources to take care of a higher percentage of the population that doesn't have easy access to care, " he says. "That would be Medicaid, Charity care, and self-pay patients. So, while our margins are good, we're still putting more in to take care of the underserved population, which is part of our mission."

How a CFO can better embrace technology

Although Stoldt confirms that he has championed technology investments for a few years, he insists that he is very pragmatic regarding what he advocates investing in, and for what end game.

"Yes, I embrace technology. And if I embrace change, and technology brings change from that perspective, I would say yes, okay," Stoldt says. "But at the same time, there's so much technology being thrown at us as an industry, that I am very skeptical. There are a lot of snake oil salesmen out there that give you products that they say will do certain things, but they don't."

As to his level of understanding of technology tools, Stoldt confirms that he is "not a coder I don't want to know what the technological aspects are that make things work. But I need to know the architecture of it as to how it's going to integrate into what we have."

Stoldt sees his role as understanding what tools are out there, what they can do to improve business processes, operational efficiencies, revenue generation, and patient engagement and care. That has meant a significant investment in automation technologies.

"We just installed a brand-new technology that went live this month (June) in the area of what we call resource advisors. These are the people who take patients that come in that have nothing, get them registered on Charity Care, or Medicaid, or even on the exchanges," Stoldt says. "This software is an automation process. It allows every registration that has the designation of not having insurance, but otherwise has what it needs to qualify for Charity Care or for Medicaid."

This investment is typical of where Saint Peter’s places its priorities for technology investments – ones that directly impact the community it serves, and which have special circumstances.

"My responsibility is to make sure the institution is going in the right direction," Stoldt says. "Looking out five years from now, where do we have to be as an organization?"

"There are two types of managers and directors in healthcare," Stoldt says. "There are the ones that want to go to the next level, and others that just want to maintain the business. Every organization has both types. What you really need to do is get rid of the people that are maintainers and change them to people who have vision to advance the organization."

Hospitals must weigh several factors, including staff needs and overall risk appetite.

The healthcare sector continues to be a favorite target for cybercriminals, who place great value on patient data. Information about a person's identity, medical conditions, treatments, and procedures enable threat actors to attempt all sorts of fraud, including fake medical billings and insurance claims.

The dark web, the global underground marketplace for stolen data, is rife with the sale of personally identifiable information (PII) and medical information. There are a host of compliance regulations that hospitals and healthcare systems must meet to protect data privacy.

This places pressure on hospitals to get their information security funding right. But paying for information security is like buying insurance. You need it, but you don't want to overspend on it. The challenge for hospitals is knowing how much security spending is enough and where it should be invested. To get to the heart of those questions, HealthLeaders spoke to several experts about their security spending strategies.

The percentage of IT budgets typically spent on security

Organizations typically spend anywhere from 5% to 15% of their IT budgets on information security, says Philip Harris, an information security analyst and research director with International Data Corp (IDC). Exactly where a hospital falls in that range is typically due to the cyber risk awareness level of an organization. When it comes to protecting data, it is more the devices, systems, and business practices that present the greatest vulnerabilities.

"There is no one formulaic answer for how much you should spend," Harris says. "It comes down to figuring out what your top risks are, and what is it going to take to remediate those risks. There will be spikes in spending, and there are also fixed costs. From there, you can derive what the ongoing run rate will look like in the long term."

One significant spending spike is caused by the hiring of new information security professionals at a hospital or healthcare system. That was the case at El Camino Health in Mountain View, California, says CFO Carlos Bohorquez.

"Information security is top-of-mind for our CIO, our compliance committee, the board, and the executive team,” Bohorquez says. "Despite the financial challenges presented by the pandemic, we believe that having a comprehensive IT security platform is not an option, it is a requirement. We have made a significant investment in our IT security resources over the last 24 months. This includes creating a new chief information security officer (CISO) position, recruiting a CISO, and adding dedicated resources to his team." 

What top security professionals will cost

New hires can quickly add to an information security budget, says Peter Tsai, head of technology insights at Spiceworks Ziff Davis, a professional network for IT pros based in Austin. IT jobs have enjoyed high pay for several years, and security professionals are among the highest-paid and most in-demand.

Accordingly, hospitals can expect to shell out large salaries for the top information security professionals. Salary tracker GlassDoor lists the salaries shown below as national pay rates for several top information security jobs, as of May 2022. Exact salary figures for any individual would depend on location, industry experience, competition in the market, and years of experience for the individual.

• Chief information security officer = $205,120
• Information security director = $191,801
• IT security architect = $153,751
• Information security manager = $134,108
• Information security engineer = $107,446
• Information security analyst = $99,275
• Information security specialist = $97,273
• Security consultant = $94,745

Another factor in what a hospital may have to pay to acquire or retain these skills depends on whether it can find the right talent in the marketplace, if it must bring in consultants to fill certain roles, or whether it outsources the effort.

Conduct a total security risk assessment

There are challenges to finding and hiring the right skilled information security professionals. But a bigger challenge for hospitals can be determining where its security vulnerabilities lie. This includes every system, every device, and every end user.

"Cybersecurity risk management is probably the most critical topic for organizations to address," Harris says. "What that means is, you've got to assess the environment, you've got to do a complete controls and maturity assessment, and you've got to figure out what your overall current security state is."

That assessment could evaluate any combination of things, between people, processes, tools, and even philosophy, Harris explains. "So, conducting a thorough enterprise-wide risk assessment from a cybersecurity perspective is critical."

That attitude has been adopted at Emory Healthcare in Atlanta, says CFO Brad Haws.

"To beef up security readiness, we've had to beef up our security reviews," Haws says. "That obviously comes with recommendations that each institution has to make about the risk and reward balance.”

In other words, how great a potential risk is there in the first place, and what is the return on investment to protect it? But the challenge gets harder because health systems keep adding more patients, more data, and potentially more vulnerabilities.

"How do you stay on top of that? How do you keep current?" Haws says. "I don't know the right answer or mix here in terms of how much coverage you need, or how much you should spend on it as a percentage of IT budget? I think those things are constantly evolving."

Prioritize risk appetite

Despite potential changes in security vulnerabilities, one thing remains constant—the need for a hospital to determine its risk appetite. In simple terms, risk appetite refers to the degree to which an organization can accept risk with each element of its systems and data sources.

Some data must be protected at all costs, while other data should be protected. Still, for some data, it would be nice to protect it if possible. While some information can be left at greater risk if necessary, or not protected at all, what determines where a system, process, device, or data source falls in these categories depends on healthcare compliance requirements and business loss impacts.

Because of that, a hospital or healthcare organization needs to evaluate what a security incident could do to disrupt essential operations, Haws says.

In the event of an incident, "Can you still run your OR? Can you still run your clinical systems, or keep patient records? Those become primary concerns," Haws says.

"The other thing, too, is that you've got to tie all this back to a business strategy," Harris says. "The business leaders need to see why these investments are important, and why these are real threats."

Hospitals must think outside the box if they hope to survive the challenges caused by labor shortages, rising payroll costs, and supply chain disruptions.

It is no secret that to retain workers many hospitals and healthcare systems have had to increase pay rates for different employees. Those same organizations struggled during the pandemic to maintain revenues as elective procedures were delayed and low-reimbursement COVID-19 care dominated—resulting in a significant threat to profit margins.  

This threat is forcing many healthcare finance executives to rethink how they do profit forecasting, and what can be included in daily operating costs—as is the case at Emory Healthcare in Atlanta. Emory has been hit hard in two key areas because of raising payroll.

"The bigger impact is coming through temporary or contract labor," says Emory CFO Bradley Haws. "We read data that says, nationally, the southeast has been more severely impacted by the temporary labor trend than other areas. But I see the impact in other places as well."

The rate Emory Healthcare is paying nurses has essentially tripled on an average basis, and quadrupled in some cases, Haws says. While a nurse in the Emory market would typically earn somewhere between $40 and $43 per hour, pay rates rose to around $170 or $180 per hour. Haws says he has even seen rates go as high as $250 per hour.

The rise of agency hiring hits hospital payrolls hard

It's a similar tale at El Camino Health in Mountain View, California, where rising pay rates are being driven by the need to hire contract labor to fill staffing shortages. Much of that trend has been due to professional nurses leaving their full-time jobs to join agencies, where they are then placed back into a healthcare setting as a contractor. Hospitals then pay the nurse's needed wages, plus the agency's fee.

"We're all competing for a limited pool of employees, which is significantly driving up our labor expenses," says Carlos Bohorquez, CFO at El Camino Health. "Despite our success in recruiting and retaining employees, our use of contract labor has increased threefold over the past 18 to 24 months. Over the past 12 months, the average rate we pay for contract RNs has almost doubled."  

The story is the same at Northern Arizona Healthcare, which has also seen labor costs rise dramatically.

"We have increased pay ranges and rates significantly in recent times for both clinical and non-clinical staff in an attempt to stay reasonably competitive in the market," says Cliff Loader, CFO at Northern Arizona Healthcare in Flagstaff, Arizona. "But so have our competitors, setting up a continuous cycle of competition for staff. The most impacted jobs have been primarily bedside nursing roles, for which we've roughly tripled our normal pace of pay increases."

The rapid rise in contract nursing labor has created a tough financial dilemma for hospitals. Should they knuckle under and pay the higher rates needed to retain staff? Or should they let employees walk, and then hire contract labor to fill needed job roles? On the one hand, the organization sets precedent for higher pay rates going forward. On the other, it begrudgingly spends extra money to line an agency's pockets.

Complicating the matter is a state of "supply and demand run amok, during a time of a diminished national qualified candidate pool, particularly in rural areas," Loader says. Still, he explains that Northern Arizona Healthcare has "taken the pragmatic position that we'd rather pay premium rates for nurses who work for us rather than [temporary] traveling nurses. Keeping up with contract rates is economically impossible for us."

Salaries for nurses have risen 300% to 400% in many regions

To put this payroll pain in perspective, Loader explains that Northern Arizona Healthcare typically pays out approximately 40% to 45% of net revenue in labor costs.

"This year, we can expect labor costs to run 10% to 15% higher, which for most systems is not sustainable in the long run," Loader says.

The same thing is happening at Emory Healthcare, Haws says.

"It's devastating," Haws notes the impact on the organization's ability to do accurate profit forecasting. "About 14% to 15% of our workforce has become contract labor. When you talk about the change in the labor rate over six months, it's hundreds of millions of dollars. In healthcare, economic systems are not built to sustain that kind of labor increase. Most places are budgeting and have a 3% to 4% operating margin. That's being more than eaten up by this labor increase. So, a lot of places have negative operating costs."

Those operating margin percentages, and the impact on them by rising labor rates, are confirmed by Loader.

"Many nonprofit hospital systems run at a margin in the range of 3% to 3.5%, meaning for every dollar collected there is about 3-cents of profit after paying staff and bills," Loader says. "Even with patients who have good insurance, systems are finding themselves with negative monthly margins."

Hospitals need higher payments, less costly operations, and new staffing models

Solutions to this problem won't come easy.

"I don't think after the pandemic it will return to the old cost structure," Haws continues. "If that assumption is true, then there will be costs that are going to get passed on, ultimately, to the public. So, whether that comes through tax revenue, or whether it's a commercial payer and it is eventually passed on through by premium, we're going to have higher healthcare costs."

While it is not uncommon for hospitals to have negative operating margins now, some may be staying afloat using non-operating or investment income.

"They may be using reserves at some level, but that's not sustainable," Haws points out. "So, the question is, how long can this continue? When do we start cutting back services to compensate for what's going to go on here? We've got to curtail capital spending. We've got to modify other operations. Weak hospitals have already started to curtail services, and some are closing."

In terms of steps that hospitals and healthcare systems can take now to buck these trends, "I think the first thing to look at is how can we find more supply of nurses and create more school training programs," Haws says. "Also, could we use alternative staff to get some of that work done?"

Fortunately, schools are starting to respond with accelerated nursing programs, Haws says. That will help put more nurses into the field sooner, and ease some of the payroll pressure.

More immediately, hospitals should look for ways to cut costs everywhere they can, Loader says.

"We are searching for any opportunities to reduce costs, specifically targeting medical supplies and contracted services," Loader says of Northern Arizona Healthcare.

"We don't see the national shortage of available nurses resolving in the near term," he continues.  "Therefore, we'll need to augment them with lower-skilled and less expensive labor to help them take a larger patient load. On the other side of the equation, we'll need to seek increases from government and third-party payers to help cover the cost of providing care in this environment."

In the short term, higher payments from governmental and third-party payers are needed, Loader says.

"Longer-term, we need to develop a different staffing model that allows nurses to perform higher-level work and let lower-skilled staff do tasks currently done by nurses," he says. "There could also be technology developed, such as artificial intelligence, which can help nurses be more targeted and productive in their work. We certainly can't ask them to simply work harder."

A new study finds that the pandemic has given healthcare finance execs confidence their organizations have the agility to meet unforeseen challenges.

Battling the COVID-19 pandemic over the past two years has taken a tremendous toll on the healthcare industry. However, according to a new study, it also has given healthcare CFOs confidence in the operational agility and flexibility of their organizations.

That was among the key findings from "2022 CFO Outlook for Healthcare: Finance Leaders' Priorities for Addressing Workforce, Data, and Costing Challenges," from Syntellis Performance Solutions. Syntellis polled 420 healthcare finance leaders on how they view the financial outlook for their organizations in 2022 and the ability to meet top challenges.

The good news: More than 90% of respondents say they are confident in the ability of their hospital or healthcare system to adapt and quickly react to a changing environment.

"At the start of 2022, healthcare finance leaders faced an uncertain future fueled by many hospitals still reeling from Omicron while also having concerns about the next inevitable variant," says Flint Brenton, CEO of Syntellis. "Fortunately, many of these organizations have learned over the past few years the value of flexibility and agility in the wake of unforeseen challenges."

"Adversity from the COVID-19 pandemic has built confidence in many healthcare leaders to meet future curveballs head on," Brenton continues. "This is evident through survey respondents' ability to implement more efficient budgeting. Ongoing evolution of budgeting processes will continue this year, as survey respondents indicated a focus on rolling forecasting. The volatility of the pandemic forced organizations to shorten the length of budget cycles, encouraging budgeting practices to become more innovative, timely, and strategic. This is something I expect to see continue across the industry in 2022."

But dampening that enthusiasm is the fact that too many hospitals and healthcare systems lack advanced data management tools to drive intelligent decision-making. A vast majority of respondents (82%) say that, while they have greater access to data, they need to do more with that data to help drive business decisions and improve the quality of care. The diagnosis here is simple: the use of outdated tools such as spreadsheets is hampering those efforts, according to nearly two-thirds (61%) of respondents.

"We were surprised to see just how high the numbers were around those hospitals and healthcare providers who are still relying on outmoded processes and insufficient technologies to address financial and operational challenges," says Brenton. "Yes, many health organizations have been burdened over the past year between juggling widespread supply chain shortages, staffing issues, and skyrocketing expenses. But without taking a hard look internally to identify the gaps caused by outdated systems, these healthcare finance teams will continue to struggle until they implement optimal tools and robust solutions to boost the financial health of their organization."

Other key findings of the report include:

• Lack of confidence in benchmarking: One-third report being unhappy with the data submission process for financial benchmarking and a quarter are not using any financial benchmarks.
• Cost management and reductions are top of mind: Behind addressing workforce issues, cost management and reductions are another priority for healthcare leaders, with 69% agreeing these are very important to fiscal health.
• Agility gets a boost from efficient budgeting: Evolving budgeting practices reduced the length of budget cycles; the proportion of organizations with budgeting cycles lasting six months or more dropped to 29%, down from 50% in 2019, before the pandemic. Almost all organizations (92%) now are confident in their teams' ability to quickly adjust strategies and plans in response to sudden changes, up from 83% in late 2020.
• Institutions work to plan for the future: Organizations are seeking better ways to anticipate the future with nearly half (46%) planning to increase use of predictive analytics technology. And more than half (55%) of organizations using some form of rolling forecasting.

Brenton says that procuring accurate data—and using that data to drive decision-making—is the key to healthcare organizations bouncing back after a few tumultuous years.

"Despite having greater access to an abundance of data than ever before, many healthcare finance executives still struggle to utilize this data," Brenton says. "Most respondents said their decision support systems gather data from across the enterprise, inside and outside of hospital walls. Less than half (44%) have visibility across the entire enterprise, while 34% capture data from hospitals and outpatient facilities."

But this data isn't optimized for planning and forecasting, Brenton says. This lack of data visibility hinders many healthcare leaders from understanding what departments may require in terms of more support and resources, and where to invest in the future—ultimately trickling down to the quality of care.

While many hospitals and healthcare systems have been burned by time and resources spent on simply getting through day-to-day operations, Brenton says that this approach is not sustainable in the long run. Healthcare finance executives need to break this cycle by focusing on their overall 2022 priorities and taking on initiatives that directly map back to those areas.

"Scenario modeling and rolling forecasting capabilities give healthcare leaders a better understanding about how to manage similar crises going forward and maintain financial stability in the long-term. Additionally, taking advantage of available benchmarking data can help healthcare executives pinpoint areas where they are thriving and opportunities for improvement."

Looking ahead, Brenton says the survey reveals that more healthcare finance executives want to use predictive analytics to better determine the best path forward for patients and providers.

Nearly half (46%) of respondents want to tap into this functionality, Brenton says. This indicates a strong need for insights to guide decision-making based on previous outcomes.

"Using predictive analytics accompanied by technologies such as artificial intelligence and machine learning can help forecast clinical, operational, and financial needs from historical data," Brenton says.

In terms of other trends impacting the industry, Brenton says that across industries, the Great Resignation has shown that organizations need to do a better job of prioritizing one of their most important assets: their staff.

"As healthcare labor costs continue to rise, leaders must get creative to retain and attract new staff, while also managing costs," Brenton says. "In addition to listening to employee feedback and nurturing a positive, supporting workplace culture, hospitals should streamline workforce productivity insights to optimize staffing plans, identify gaps, and anticipate challenges before they become unmanageable."