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Technology Survival Guide for CFOs

February 1, 1998
by Alan Joch
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Are CFOs losing influence? As recently as two or three years ago, financial managers were the undisputed purse-string masters of finance and technology departments at healthcare organizations across the country. The technology focus was expedient: The first round of automation in many hospitals centered on bottom-line systems such as accounting and billing. But healthcare organizations are now entering a second generation of automation, with a focus on clinical applications.

With this new technology emphasis, some CFOs are finding themselves only one voice among many as other executives, business managers, doctors, and nurses help decide the fate of technology initiatives. "In one hospital I know, an RN reports to the CEO about software applications," says Susan Labow, a healthcare industry consultant with Ernst & Young, Hacienda Heights, Calif.Second-generation computer applications are shuffling reporting structures and threatening some of the old-line power CFOs enjoyed. But some healthcare financial chiefs say technological change presents opportunities if CFOs become leaders of change rather than losing out to it. Here’s advice from CFOs, healthcare consultants, and IS managers across the country for making the transition easier.

New ideas
"The industry is at an important juncture, where it must mesh clinical and financial needs," says Joseph E. Becht, Jr., principal with Ernst & Young’s Healthcare Consulting Practice in Richmond, Va. Becht sees CFOs losing control over technology decisions particularly at healthcare facilities associated with academic institutions. The CIO often reports directly to the CEO because there’s an attitude that automating financials has already been completed, he says. The result: IS is being asked to solve new problems, which is elevating the IS manager’s influence. "Finance will always have responsibility for cash flow and receivables, so there’s often a dual reporting structure for IS: finance and clinical care," Becht says.

In the past, when hospitals dedicated computers primarily for billing systems, any benefits for clinical jobs were fine--but not a primary goal. Then managed care practices came along. Today, technology goals have flip-flopped, with clinical efficiencies often becoming the primary concern. This shift toward clinical-oriented applications represents maturity in hospital computer systems: The business side is already automated and now that personnel are more familiar with computers, new areas for automation are being considered.

How does this shift manifest itself in the real world? One way is in an ambitious diagnostic application that Sentara (Norfolk, Va.) created to standardize treatment for 26 common diseases seen at the sprawling four-hospital facility--with associated nursing homes, naval outpatient clinics, home-health practices, urgent-care centers, and private physician practices. For example, once senior physicians hammer out agreement for how to treat one of the target diseases--say pneumonia--the technical staff develops an interactive application that presents a series of questions to help attending physicians determine a hospital-approved treatment. The new system even recommends tests to identify the specific strain of pneumonia so a specific antibiotic known to be effective against that strain can be prescribed. In the past, a physician would have administered an antibiotic that took a shotgun approach; one that battled a wide variety of strains, but took longer to work and consequently was more expensive to use.

In four years, the hospital has automated treatment for nine of the target diseases. According to Bert Reese, corporate director of information systems for Sentara, physicians need to become comfortable with the suggested treatments and the notion of standardization, which in some cases forces physicians to either ignore treatments they learned in med school or justify why these methods are better than what the treatment system outlined. These adjustments are some of the reasons why the automation process has taken so long, Reese says. "Physicians need to be convinced that the data is accurate," he explains, adding that a group of senior doctors at the facility is in charge of determining best practices for each disease.

Financial fundamentals
Doctors aren’t the only ones seeking new ways of working. For financial managers, a system like Sentara’s presents fundamental changes in how they perform their jobs. Financial managers must understand the full scope of the clinical problem the software is trying to solve, and investigate how the software will affect business operations. In particular, CFOs should make sure a new clinical information system doesn’t ignore the realities of managed care, "Some of these systems give wonderful clinical information, but after a facility spends the 18 months installing them it finds the financial reports needed for collecting money aren’t any better than what was already in place," Labow warns.

If a new application is overly biased toward clinical needs, there’s a danger that services may be scheduled without payment authorization from the patient’s HMO or insurance company, which increases costs for the facility. So, financial managers can’t only look at potential ROI, they must evaluate clinical software to determine if authorization numbers are in place to assure that every scheduled procedure suggested by the application is within each patient’s medical coverage.