December 2008 FEATURE ARTICLES
The Healthcare CFO
Chrissy Yamada, CFO, CPA
Senior Vice President, Finance, Evergreen Healthcare
Chrissy Yamada came to Evergreen after 15 years at Northwest Hospital, located in Seattle. Yamada started at Northwest in the role of Controller and was later promoted to Chief Financial Officer. Prior to joining Northwest, Yamada spent several years in the local office of the national accounting firm of KPMG.
Yamada earned her Bachelor of Science degree in Accounting from Central Washington University and has been a Certified Public Accountant since 1985.
Q HMT: What is it like to be a healthcare CFO today?
"I have responsibilities for all the fiscal matters over the organization; fiscal policies which include monthly financials, audit work and bank relationships, and I also oversee the risk management area. Some challenges as a CFO that I face include rising healthcare costs to hospitals. This puts substantial pressure on CFOs to find solutions to increase or maintain an operating margin, so that infrastructure investments and providing quality healthcare can continue. Additionally, Medicare and Medicaid aren’t increasing our reimbursement nearly as fast as healthcare costs are climbing. Also, the number of unfunded mandates continues to increase each year.
"These are several challenges facing healthcare CFOs. We are constantly asked to report additional data, more quality indicators and more benchmarks — this additional reporting produces increased infrastructure investment and costs. As the government continues this trend, we find more commercial payers wanting the same information. Meeting these increasing expectations is very challenging."
Q HMT: What tactics are you employing to meet these challenges?
"We are being more selective about what services we provide. We examine what areas where we excel and focus on those. Others, where we might be losing money, we ask ‘Is it a core part of our business?’ If so, we implement solutions to make it break even. We made tough decisions in the past to terminate unprofitable services because we didn’t consider them a core service. Many hospitals in previous years attempted to operate as all things to all patients, but in this business climate, I don’t think hospitals can fulfill this and are being more selective about what services they are providing as well.
"When we are compelled to provide data to external parties, we must discover how to do that most efficiently, whether we utilize people or IT systems to manage the task. IT systems improve reporting accuracy — provided the billing is accurate, but they often result in increased costs. This, in turn, requires the organization to identify strengths and weaknesses.
"Hospitals like Evergreen are being forced to streamline operations and processes constantly. We are taking a hard look at these kinds of things and going beyond identifying where we do better in certain service lines than others in order to operate more efficiently."
Q HMT: What technologies are you currently employing?
"In 2009, we budgeted to automate our manual payer denials process. This is one of the issues that our revenue cycle committee prioritized during our capital budgeting cycle. We also manage payment variance through a back-end financial reporting system used for many of our service lines analysis, an annual exercise to re-validate all of our costing statistics and our cost accounting. We also use People Software Financials and its budgeting module. When I came to Evergreen, budgeting was done manually on 200 linked Excel spreadsheets. We built out the budgeting module three years ago, giving us the ability to upload completed worksheets into our financial system. It makes our work so much simpler and definitely more accurate."
Q HMT: How do you feel about the volatility the markets have been showing?
"It is a little disturbing as a CFO. It makes me question the safety of our own investments and our financial relationships. As a public district hospital, we took certain measures a few years ago to avoid this. Without any foresight into the current state of the economy, we took our bond portfolio and switched to fixed-rate debt. We also removed the auction rate securities that we had in place two years ago when we did a bond measure or issued bonds. One of the reasons we did that was because the rates were going up in a variable rate portfolio.
"In retrospect, it was a wise decision because when the auctions market started to fail earlier this year we avoided exposure. As a public hospital, we are prohibited from investing in many of the equity markets; consequently, we avoided any significant exposure to the sub-prime mortgage meltdown because much of our investment portfolio is held in government agencies and treasuries.
"It is disturbing to observe this incredible volatility the markets are undergoing and everywhere I turn, in the news I read, there is a tie-in somewhere to Evergreen, so I won’t let my guard down or fail to be proactive. It is making me examine all of our relationships; banking, investments and insurance, as well as our bonds and bond insurers, our leasing arrangements and leasing vendors, to make sure that everybody is safe."
Q HMT: What are you doing to prepare for the future?
"Our goal is to maintain financial viability and keep the hospital from any financial risk, even as our focus remains on expansion and growth. In the last few years we have added substantial infrastructure to the hospital and this is placing significant demands for building out this new infrastructure. With these demands come high price tags, so our challenge remains to decide how to spend our capital dollars the next three years and meet the needs of a growing organization."
Q HMT: Any advice for your fellow healthcare CFOs?
"Many CFOs are in the same situation that we are, in which government reimbursement is shrinking and the number of unfunded mandates is increasing. We have to find ways to make it work. We have to learn to be more efficient at what we do to maintain a positive operating margin.
It’s been a challenge and it will continue to be one going forward."