"Tech isn't just the pure solution," says CFO Mark Flakne.
Last month Mark Flakne became the new chief financial officer of Included Health, a provider of healthcare navigation and virtual care. With the implementation of more advanced care technology, Flakne says new tech tools, regardless of the challenge they're brought in to solve, must focus on the patient experience above all else. But with pressures to reduce costs while bettering clinical outcomes, telehealth and virtual care implementation can get complicated.
Telehealth 2.0
There's no doubt healthcare has come a long way in regards to technology, particularly with the adoption of telehealth and virtual care. More and more health systems are implementing automation, A.I. and other tools that can help clinicians focus on direct patient care instead of administrative tasks.
While these advancements have been helpful, there is still a long way to go in order for the industry to begin implementing them in the most beneficial way. Health systems cannot focus on them as a one-stop solution, says Flakne. CFOs must make strategic decisions when deciding which type of tech they need to invest in to overcome the specific challenges in their organizations.
"Tech isn't just the pure solution, and I think that part is key, being very selective on what tech solutions do you deploy to really have a seamless experience for the member." says Flakne. "Because [patients] shouldn't realize they're using the technology. They should just get the outcomes and the experience that they want."
Aiming for seamless integration with a patient focus is what allows health systems to be able to provide whole-person care, a chief focus for Included Health.
"That integration of this system is to be able to provide holistic care to the members," says Flakne. "To me, this really gets back to what a lot of people may refer to as ‘telehealth 2.0,' but it's really bringing that navigation with the virtual primary care together and all the other services and wrapping the patient around delivering care as they need it, when they need it, where they need it."
"I wanted to see how technology could transform the patient experience," Dr. Ami Parekh, chief health officer of Included Health, previously told HealthLeaders. "While we have used a lot of technology in healthcare, I don't think we've really pushed the limits on how transformative it can be from a member experience perspective, as well as from the outcomes it can deliver."
Sustaining Trust
While technology holds immense power to transform the patient experience, health systems shouldn't be too hasty, says Flakne. The proper implementation of technology isn't simply shelling out the funds to acquire it. This process comes with education, governance, and practice. Each of these components plays into a greater, seamless patient experience.
"People have somewhat jumped on the tech bandwagon, I'm sure we've used chat bots that don't work and can't understand you, and so I think technology is really cool and there's a great opportunity, but it's not just jumping into it. It's thinking through ‘how does it become seamless?'"
While it may be an exciting time for healthcare tech, health systems must be careful of how they step into it in order to sustain the trust of their patients.
"How does it happen behind the scenes?" says Flakne. "Because when it doesn't work, I think we've also seen people lose trust in it."
While the operating margins of some hospitals have improved this year, others are facing a different reality.
Five hospitals have permanently shut their doors in the last month, painting a bleak picture of the financial struggles interwoven in the U.S. healthcare system. The closures highlight the financial, economic, and workforce challenges many health systems are struggling with, but also offer critical lessons for hospital CFOs.
The five hospitals that are closing:
Community Memorial Hospital in Hicksville Ohio. After getting caught up in a fraudulent laboratory agreement, facing two cyberattacks and being unable to secure a bankruptcy filing, the rural hospital permanently closed on Aug. 31 after temporarily closing in May due to financial challenges.
Nashoba Valley Medical Center in Ayer, Massachusetts. Nashoba Valley Medical Center also closed on Aug. 31, laying off almost 500 employees.
MercyOne in Des Moines, Iowa. MercyOne Primghar Medical Center will close on Sept. 30 due to economic and workforce challenges. It will also be closing its family medicine clinic in Urbandale.
Stanislaus Surgical Hospital in Modesto, California. Stanislaus Surgical Hospital will be permanently suspending its operations on Sept. 14. The closure will lay off 160 employees and comes after CMS ended the provider’s agreement due to noncompliance with various participation conditions in the agency's MediCal and Medicare programs.
Carney Hospital in Boston, Massachusetts. The hospital, owned by Steward Health Care, closed on Aug, 31, totaling in 753 employee terminations. After seeking Chapter 11 protection in May the health system is still trying to offload its 31 hospitals in a crisis that has shook the Massachusetts community.
The CFO Takeaway
For CFOs, these closures underscore the importance of strategic financial management and adaptability. Careful financial planning, diversifying revenue streams, and proactively addressing workforce shortages are crucial steps to mitigate risks that could result in closures. Moreover, CFOs must ensure their organization is maintaining compliance with evolving regulations and staying ahead of economic trends can help hospitals navigate these turbulent waters.
Cybersecurity is another issue, particularly for rural health systems. With the rising number of cyberattacks, CFOs should look to invest in high quality cybersecurity measures to lower their risk. Though without proper funding, this strategy can be strenuous for rural hospitals. A call for targeted funding for rural hospital cybersecurity may need to be heard, and policymakers will need to act.
Leaders must also advocate for policies that address the systemic issues contributing to these closures, like improved reimbursement rates and more general targeted funding for rural and underserved areas. As the industry continues to face these challenges, a strategic approach and collaborative effort will be essential for ensuring that hospitals can continue to provide essential services to their communities.
Three simple steps make up CFO Mark Flakne’s revenue growth strategy.
Mark Flakne, the new CFO of Included Health, recently shared with HealthLeaders his expertise in revenue growth strategy. Formerly OptumHealth’s CFO, during his eleven years there, Flakne played a pivotal role in transforming the organization’s financial landscape. Under his leadership, the company achieved a 28% increase in annual revenue growth taking it from $21 billion to more than $70 billion.
Flakne’s strategy to sustain revenue growth is broken down into three steps.
“The first and probably the most important is you need to have an experience that the member loves,” he said. “So if you do have a product, you know that people don't like, we all know what happens.“So for us, it's about having that experience that a member loves to use and be part of.”
The second part of this strategy is examining the question: “how can I reach more members?”
“Whether that be reaching them in more services and products in the ways that they're interacting with the healthcare system. But it's also reaching more members from other avenues. So think of the public sector or think of other market spaces, seniors, those sort of different groups of populations.”
Lastly, Flakne says, develop an appreciation and understanding of value-based care.
“I think it's about how you can participate in their arrangements to drive the right outcomes but also benefit from a financial perspective. And so it also goes to how you structure your financial arrangements.”
John Beaman, CFO of Adventist Health, knows where to focus strategies for his health system’s success.
In the increasingly competitive landscape of healthcare, Adventist Health CFO John Beaman stands out in navigating the challenges posed by private equity firms and maintaining physician satisfaction.
His strategic approach sheds light on how his organization addresses these critical challenges.
Private Equity
Private equity firms have become major players in healthcare, often acquiring practices and facilities with the promise of streamlined operations and enhanced profitability. For nonprofit health systems like Adventist Health, this trend can pose a significant threat. These firms can offer attractive financial incentives to physicians, potentially drawing them away from organizations focused on patient care rather than profit margins.
So how does Beaman fight off private equity investors and compete with their tactics? Well, he doesn’t. Beaman stressed that private equity firms are only interested in primary care or pieces of the healthcare journey. His strategy involves proving to the surrounding community that his health system can be their trusted care provider.
“We've taken the strategy and approach that our value proposition is more the integration and connectedness of all pieces of health care,” Beaman said. “And [the community] sees us as someone that's their partner and empowering them and their health journey. And to me, that's where I see our differentiation is because we're able to connect those dots.”
That’s not to say, he clarifies, that a quick clinic or a certain technology that a private equity firm provides to give the community quick access to care isn’t helpful. He just doesn’t see the need to compete there.
“I think us trying to compete at that level is probably not in our best interest,” he said. “Our best interest will be more the holistic, integrated approach for the people in our communities.”
Retaining Physicians
A second tier to the challenge of private equity competition has to do with physicians. Often private equity firms are gunning for specialty care physician groups, and many health systems feel the need to implement physician attraction and retention strategies.
Beaman's advice here is to search for physicians that would be interested in your particular health system. What can your health system offer them?
“On the physician side, we've also become more intentional around recruiting physicians that want to work for a not-for-profit health system or want to be in some of our communities that are that are very rural,” Beaman said. “In fact, we have a rural residency program where we actually train physicians to be practitioners in a rural setting.”
Adventist Health, Beaman shares, has been able to retain about 75% of its physicians within their network/communities post-completion of their residency.
“I think those strategies are going to be the ones that pay off in the long term for us as a not-for-profit health system because it gets to finding people who want to be a part of our mission, who want to be in the areas that we serve,” he said.
Beaman said that this longevity is a characteristic that speaks to the community and underscores the strong presence of a trusted community provider.
“At the end of the day, I think that's better for the people in our communities because now they've got a partner that's, you know, we've been in many of our communities for over 100 years, and hopefully we'll be in them for another hundred.”
CFOs of rural hospitals must be diligent and creative with their financial strategies.
Ohio-based Community Memorial Hospital (CMH) permanently closed its doors on August 31 due to financial challenges. The closure will have a major impact on the surrounding community, but it did not come as a big surprise.
In May of this year the hospital temporarily suspended its services. When its Chapter 9 bankruptcy application was rejected, the health system found no viable options to remain operable and was forced to shut down.
The root of these challenges, according to reports, stemmed from a fraudulent laboratory agreement in 2016 which ordered the hospital to pay $25 million back to insurance companies.
The hospital also faced issues related to its new electronic health system in 2021, and changes to Ohio’s Medicaid payment system in February 2023 exacerbated finances further.
In another blow, the hospital was hit with two cyber-attacks, leaving it with liabilities and security issues.
In a statement, CEO Bill Cherry said the majority of hospital staff have lost their jobs, and that the building and the equipment will be sold.
As a critical access hospital (CAH), the impact of this closure cannot be understated, and much of the community in Northwest Ohio and Northeast Indiana will now struggle to find care nearby.
"They are going to have to drive 30 miles or more to receive care," Cherry said. "There are a lot of elderly people within the community and a lot of them don't drive or don't like to drive, so it makes it a challenge to go and get their healthcare services."
Regulatory Environment & Strategic Response
CMH’s closure underscores a persistent issue in the healthcare sector: the financial sustainability of small and rural hospitals.
Calls will need to be heard for systemic reforms to support the financial stability of small and rural hospitals. Some viable solutions include adjusting reimbursement rates, providing targeted financial assistance, and investing in technology and telemedicine to improve access and efficiency.
The CFO Takeaway
Rural hospitals have seen a pattern of closures over the last decade, with 192 rural hospitals closing since 2005. CFOs of rural organizations must employ strict strategies for financial profitability to stay operational. They may also need to strategize more aggressively than urban health systems to avoid financial issues.
The most unique hurdle in the case of CMH was its fraudulent laboratory agreement. While it may have been a rare occurrence, executives of rural health systems must carefully consider third party agreements to avoid similar mishaps.
Cybersecurity is another issue, for all health systems as well as rural. It’s well known by now that cyberattacks are becoming increasingly more common in healthcare, and health systems must be prepared with solid cybersecurity measures in place. Without them, a cyberattack could be the final straw when coupled with other challenges. Rural health system CFOs should look to invest in high quality cybersecurity measures to lower their risk.
How should CFOs decide whether or not to move forward with M&A deals?
Former OptumHealth CFO, Mark Flakne was with the company for 11 years. Now, he’s bringing his expertise to a new health system: Included Health. Founded in 2020, Included Health provides a combination of virtual care, navigation, and communities-based healthcare.
As Flakne settles into his new role, he’s channeling his finance and business expertise into opportunities for the system, including expanding patient reach and strategizing M&A and partnership avenues.
One of the most important aspects to consider while examining M&A, Flakne says, is ensuring the industry knowledge is there.
“The expertise and the kind of industry knowledge, it can't be understated,” he said. “It's just a really important part because the healthcare system is complex, it's dynamic and there's a lot of rigidity to it.”
Too often mergers and acquisitions take place for the wrong reasons and CFOs ensure all options are explored before stepping into M&A. Flakne’s advice when deciding whether or not to pursue an M&A deal? Focus on the original goal.
“I think the focus, when you think about M&A, is what we are working to create. And for us, we're creating that all in one destination for personalized care,” he said. “It's the process of assessing really continuing to keep in mind what was the original goal that we're trying to do. What are we trying to create and build, and therefore is M&A one of the better tools or are there other ways to do it?”
The key to this, Flakne says, is deep industry knowledge and expertise; something that market disruptors in retail and other industries don’t often have.
“The one important part is having that deep expertise and knowledge within the healthcare space as you do these acquisitions,” Flakne said. “I think we've seen companies jump in who are in different industries like retail and tech and I think one of the key attributes of being successful in M&A is really having a deep understanding of the industry, how it works. And again, back to that original goal: ‘What are we trying to create?’”
For CFOs navigating the intricate landscape of mergers and acquisitions, Flakne’s insights offer a roadmap. His emphasis on deep industry knowledge underscores the necessity of understanding the unique complexities of healthcare to drive successful M&A strategies.
As you evaluate potential deals, keep the original strategic objectives at the forefront, ensuring that each move aligns with your long-term vision for integrated, patient-centered care. Flakne’s experience highlights that in a field as dynamic and regulated as healthcare, thoughtful, informed decision-making is key to achieving transformative growth and sustainable success.
With the right strategies, CFOs can have a big impact on physicians and retention.
Physician shortages, especially in specialty care, are a big pain point with CFOs, and retention is more important than ever. But what strategies can CFOS use to help physicians in their organization?
Look into loan removal/forgiveness to draw in physicians to your organization. Private equity has moved into healthcare fast, and they have their eye on physician groups. Brainstorm strategies to draw physicians away from private equity competition.
Work with CMOs to foster fortitude to combat burnout. Burnout is a massive issue amongst physicians and healthcare workers in general, and while it may seem inevitable, it can be mitigated. Studies show that organizations who implemented programs for physicians that focused on fostering fortitude had lower rates of burnout. Ensure the organization is giving physicians the tools they need to thrive in their roles.
Include physicians in decision making. Too often healthcare executives don’t work directly with their staff on the ground level. The staff with medical degrees are going to understand ground level care challenges more than higher level executives.
CFOs need to ask themselves: how do you make your physicians part of the organization? How can they be more involved in decision making and how can that affect retention and recruitment?
Sanford Health is the latest system to drop its MA plan with Humana. Why the trend?
Across the country, more providers are opting to drop Medicare Advantage (MA) plans creating a new trend within the healthcare landscape.
Sanford Health, one of the largest health systems in the Midwest, recently announced it would no longer accept Humana’s Medicare Advantage plans as of January 1, 2025. This decision will have a considerable impact, considering Sanford Health’s numerous facilities—including 48 medical centers and 211 clinics—and substantial patient population.
The system’s decision reverberates beyond just the affected patients, reflecting broader systemic issues within the Medicare Advantage landscape.
This time last year Scripps announced it was dropping its MA plan, Samaritan Health did the same, as did St. Charles Health System, and Memorial Hermann Health System terminated its MA contracts at the beginning of 2024.
A survey conducted by the Healthcare Financial Management Association reported that:
16% of systems are planning to stop accepting one or more MA plans in the next two years.
45% said they are considering the same but have not made a final decision.
62% of CFOs believe collecting from MA is "significantly more difficult" than it was two years ago.
Providers often argue that Medicare Advantage plans impose restrictions that can hinder patient care. Low reimbursement rates, complicated billing recesses and stringent pre-authorization requirements have pushed CFOs to their boiling point. The administrative burden and financial strain associated with MA plans is simply not worth it for many health systems.
Sanford’s Impact
According to Sanford Health officials, the administrative and financial struggles have made it increasingly difficult to maintain a partnership that supports both quality patient care and financial viability.
“We have attempted to work with Humana for several years, but unfortunately, we have continued to experience delays in patient care, barriers to scheduling and denials of coverage causing financial burden and undue stress to our patients,” said Martha Leclerc, vice president of corporate contracting for Sanford Health.
The impact of Sanford Health's decision goes beyond the immediate loss of coverage for beneficiaries, it signals a shift in how healthcare systems may approach their relationships with Medicare Advantage plans going forward. As more health systems reassess the viability of maintaining these plans, beneficiaries may face disruptions in their care, which could lead to broader implications for access and continuity of care.
Moreover, this trend could lead to even more scrutiny and potential reforms in Medicare Advantage policies. Stakeholders, including policymakers, may need to address the concerns raised by providers to ensure that MA plans can fulfill their promise of comprehensive, accessible care without imposing undue burdens on healthcare systems.
CFOs are taking on more organizational responsibility as their role evolves, but where are their top concerns as they move forward?
CFOs are fighting battles in different areas of healthcare, but there are three areas that continuously top the list: private equity competition, payer strategy and the struggle holding departments financially accountable for outcomes. The HealthLeaders CFO Exchange illuminated how CFOs are dealing with these top three concerning topics and what strategies are most viable.
Private Equity Competition
Private equity has been a major concern in healthcare for some time now, and PE firms have now turned their attention to going after specialty care physician groups. These firms see lucrative opportunities and high margins in specialty care services and often enter the market to make a quick profit and then swiftly exit. For health systems, this can spell trouble.
PE practices are usually able to proceed with lower operational costs because of streamlined and focused management on the one specific area, something hospitals can struggle with when focused on larger operations.
Some CFOs agree that one of the best strategies to compete with PE firms in this area is partnering with technology companies that can add vital tech to help boost service lines. Adding automation that can help physicians with their day-to-day workload can be a big attraction for physician groups. Another tactic is loan removal/forgiveness, which can be a huge driver of physicians to a health system.
Another less popular strategy that CFOs also discussed is operating at a minor loss in some services, just enough to scare private equity away.
Holding Departments Accountable
The CFO role is evolving to include more strategic decision making around the entire organization. To do this, CFOs will need to reexamine where they currently stand in the hierarchy of their health system and how they can lead in areas they may not have thought they would have to.
During the Exchange, CFOs shared their struggles of holding each of their departments financially accountable. One key challenge here is trying to determine who exactly is responsible for outcomes within an organization, whether it’s managers or leaders. Clarifying this throughout the health system can help CFOs maintain organizational structure and trace financial challenges to the root issue.
Combatting Payers with Specialty Drugs
Lastly, CFOs are having issues with payers regarding specialty drugs and their soaring popularity. Specialty care drugs for weight loss and diabetes have seen a huge surge and health systems are feeling the pressure to cover them. CFOs need a strong adoption plan for these drugs and must strategize to beat payers to adoption where they can.
CFOS at the exchange discussed using ASP+ plans to help with initial costs, along with using a 340B plan to help with margins.
With challenges swooping in from every corner, CFOs will need to determine where is best to strategize and spend time on solutions to come to sustainable positive outcomes for their health system.
Service line performance and the role of local communities were challenges highlighted during HealthLeaders CFO Exchange.
The relationship between community engagement and financial sustainability were the focus of this year’s HealthLeaders CFO Exchange.
CFOs from leading health systems gathered to discuss how nurturing community connections can not only enhance patient care but also drive profitability through strategic service line development.
The Community-Centric Model
One of the key themes emerging from the discussions was the growing recognition of the community-centric model. CFOs are realizing that integrating healthcare services with community needs goes beyond just providing care—it involves actively participating in and investing in the local ecosystem. Hospitals are not just healthcare providers but vital community partners and their role extends to improving overall community health.
Just as the CFO role is evolving to envelop more strategic business decisions dependent on stable organizational relationships across all departments, health systems must recognize the evolution of community impact on their services, especially the bottom line.
Exchange members discussed situations when they took away an unprofitable service that didn’t see much use and how that decision often backfired. Sometimes CFOs saw a large portion of their patient volumes reduced across all other services due to the absence of that singular service.
The advice here? Don't be too hasty with service line decisions. Consider partnerships and other options before deciding to cut a service line. If a service is not highly profitable, consider having it at one center to drive patients to that location. Also, continually evaluate service lines so the profitability or losses are clear before it grows into a larger challenge.
CFOs encouraged each other to think about how each service interacts with other service lines, they are often not completely standalone services. They also advised against diving into full programs for additions to service offerings. Simply making additions to existing programs can become a draw.
Driving Productivity
The CFOs also addressed decisions around outsourcing functions. CFOs must understand the impact of the organizations in their community and why building those relationships is crucial. By outsourcing some functions that a health system performs well, it may help to alleviate some of the stress in managing that extra program.
But even with outsourcing, CFOs said, be sure to fight to keep top staff in place so there is less of a pain period, and they understand the basic levels of your health system.
The underlying question in this discussion was: how can CFOs drive productivity? The consensus was it’s not so much about shutting down services but examining how they can become more efficient. A key component to this is having community partners in place to ensure there is no lapse in care.
As the discussion wrapped up, it was clear that the relationship between community and profitability is both complex and promising. By focusing on community-centric models and strategic service line development, hospitals can achieve a dual goal: enhancing patient care while ensuring financial health.
The discussions underscored a future where healthcare systems are deeply embedded in their communities, with financial strategies aligned to support both public health and organizational sustainability.
The HealthLeaders Exchange is an exclusive, executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
To inquire about attending a HealthLeaders CFO Exchange event and becoming a member, email us at exchange@healthleadersmedia.com.
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