The CFO Outsourcing Option for Hospitals + Why it May Make Sense for You

Outsourcing of Chief Financial Services (CFO) services is gaining traction in a broad spectrum of industries, but specifically, it is expanding within the healthcare profession. There are two prevailing reasons why it makes sense to outsource CFO services.

First, for many hospitals, it is simply cost-effective.  Median compensation for Critical Access Hospitals (CAH)/Rural Hospitals with NPR (net patient revenues) under $20 million is $92,123¹.  For CAH/Rural Hospitals with NPR of $20M-$50M, that number jumps to $123,698¹. When evaluating total facility costs, organizations must also consider the rising cost of benefits in their determinations. 

Another potential advantage of outsourcing CFO services is the continuity of personnel and expertise.  For many hospitals, it can be a struggle to find the right candidate for the organization. Upon finding the right candidate, it can be an even greater struggle to retain this talent. Outsourcing the CFO function in healthcare organizations alleviates these struggles.

The traditional role of a CFO has been more bottom-line focused, with an emphasis on revenues and expenses. Today’s CFO needs to be much more. The hospital model has shifted in recent years, making it necessary for the CFO of today to facilitate physician employment arrangements, address care coordination, assess the multitude of performance measurements required in an environment of increased reporting, and address the changing demographics and needs of their respective healthcare communities.

The healthcare CFOs of today face an increasing workload to keep their facilities afloat. In many instances, the training they possess is inadequate to prepare them for the multitude of decisions they are facing. These decisions, in an ever-changing healthcare environment, can make the difference in a facility being successful and growing or becoming stagnant and failing. 

The expertise provided by an outsourced CFO (whether full-time or simply as a trusted advisor to the current CFO) is customizable to your facility’s needs. These services can range from the monthly accounting/finance services of simply compiling the facility's monthly financial statements to the more complex issues of completing cost report interim settlements, balance sheet estimates, revenue cycle benchmarks, DSH (disproportionate share hospital) surveys, assessing high-risk areas, compensation studies and organizational strategic planning.

The same benefits of outsourcing the entire CFO function apply to those healthcare facilities that prefer a CFO within the staffing of the hospital.  Eventually, the search for a CFO will become a need for every healthcare facility, whether due to promotions, relocations, retirements, or the like.  Interim CFO services can be crucial to the ongoing operations and financial viability of your hospital. The best candidate to succeed the departing CFO will not simply fall into your lap. The search for a proper replacement can take an extensive amount of time, energy, and money.

Another common problem within healthcare facilities (as well as many other industries) occurs when organizational personnel simply cannot identify the solutions to facility and industry problems like specialized healthcare consultants can. The healthcare industry faces an increasing burden of growing and changing laws and regulations. Outsourcing these services or even simply partnering with an organization with a broad spectrum of healthcare expertise can provide a completely new viewpoint, unburdened by previous problems, procedures, or expectations. This expertise comes from an independent source with a broader range of experiences. 

A fresh perspective can often diagnose solutions to problems quickly, enabling the facility to make agile decisions for the betterment of operations. The fresh perspective and/or confirmation of current organizational determinations can be of significant importance to a Board of Directors facing strategic decisions that determine the future of your facility.

¹ Source: Yaffe & Company, Inc. 2012 Executive Compensation Survey for CAH/Rural Hospitals