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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.

During the evaluation process for a new application, the financial staff should also probe vendors and the IS staff to see how easily a new clinical system can be integrated with existing billing and registration procedures. For example, Becht suggests CFOs make sure new systems don’t force patients to register multiple times during one hospital visit if, for example, they go from the emergency room to radiology and then to orthopedics.

Finally, CFOs should take the lead in clinical application development by asking doctors and nurses what new automation they’d like to see in the future--and use their responses to solicit technology ideas from the IS department.

Turf wars
Healthcare consultant Allan DeKaye (Oceanside, N.Y.) expects to see more CFOs battling to consolidate redundant computer systems as healthcare organizations consolidate or form partnerships with other hospitals. "CFOs are concerned with blending hospital systems and deciding what to pare," he says. In this consolidation process, the CIO is emerging as a decision-making equal with the CFO.

But the rising influence of the CIO needn’t cause conflict. In fact, some CFOs are winning influence by actively discouraging such battles. "If CFOs and CIOs respect each other, there can be a blending of skills," DeKaye points out. He adds that as computer systems become more service oriented for clinical areas, no clear line exists between service and financial benefits. "If a new system improves diagnostic capabilities, it will have a major financial component," DeKaye says.

How do you eliminate turf wars? CFOs suggest three tactics. First, link technology initiatives to an overall business plan. For example, Alexian Brothers Hospital (San Jose, Calif.) hired First Consulting Group (Chicago) to help it develop a technology-oriented four-year game plan. The work with the consultants forced the hospital to decide what its overall strategic objectives were and what types of computer systems could help it achieve its goals. "The game plan gave us a high-level picture of the systems we wanted. Now our IS manager brings implementation ideas forward," explains Charles J. Hirt, vice president of finance and CFO for Alexian Brothers. "New technology projects must be part of a well-choreographed strategy. If IT is driving the project, it probably won’t be successful," adds Bert Reese, corporate director of information systems for Sentara.

Second, rely on a committee to make technology decisions. CFOs can more easily push for success when they create committees made up of senior managers from IS, business units and practitioners. In this way, a CFO isn’t seen as forcing systems on the IS department or clinicians. When Doctors Hospital, a 170-bed facility in Springfield, Ill., was investigating new clinical-care systems, Robert Ramsey, Jr., vice president and CFO, let his IS staff propose ideas that a committee of users then evaluated. Similarly, when hospital pharmacists wanted their department to continue using an existing program that had more features than a new system’s pharmacy module, the hospital didn’t veto the idea, which was later scrapped when the technical staff decided the old program couldn’t be economically woven into the new system.

When Doctors Hospital began its upgrade discussions, it considered significantly expanding the IS department and installing new hardware and software or contracting computing work. To make the final decision, Ramsey formed a committee staffed with managers from seven business and clinical departments within the hospital. Ramsey acted in an oversight role to steer proposals, which received final approval from one of the hospital’s general partners.

The group chose a remote processing solution, with a large mainframe computer located hundreds of miles away in Charlotte, N.C. Remote processing meant the hospital didn’t need to hire staff to handle data backups or damage control if hardware crashed. Connecting to the remote mainframe are approximately 70 PCs that run accounting, order entry, radiology, pharmacy, laboratory, and medical records modules within the First Data medical software family. The system has been running for six months. "Our biggest problem is that a lot of people here are not computer literate," says Ramsey, who has a working knowledge of hardware and software thanks to a college minor in computer science and previous jobs where he worked closely with MIS departments.

Because a senior-management committee represents a number of disciplines, CFOs feel the decisions are better than if they came from one department. "We evaluate the merits of an idea by asking, Does it make sense economically? Will it improve customer service? Will the quality of the care we provide be better?" says Hirt.

The committee process sometimes results in a go ahead, other times, it forces IS to find less glamorous solutions. For example, for a time Alexian Brothers was considering a results reporting system where physicians would use terminals to connect to a central computer system. The management committee decided that this was an elegant solution from a purely technological standpoint but questioned whether physicians would actually use it. In the end, the hospital settled for a simpler approach: Physicians now send their reports via fax.

A third way to break down turf barriers is to garner support from users. Some CFOs insist that new technology proposals must be supported by users before a committee will consider them. At Sentara, a clinical or business department manager becomes an advocate for a new application and champions the idea before the executive committee.

Stay current
The pace of technological change makes it harder than ever for financial experts to act in an oversight role--even one that’s shared with other committee members. How do financial managers stay up to date with technology? Like others we spoke to, Ramsey says he relies on healthcare periodicals, computer trade magazines and seminars conducted by software companies. In addition, the Healthcare Financial Management Association (www.hfma.com) offers some general computer classes.

Consultant DeKaye sees training budgets shrinking at some healthcare organizations. He advises hospitals to find new, lower-cost ways of keeping staff technologically informed, including on-site training, teleconferencing, and telemedicine, which often require fewer classroom hours with no travel costs for conferences and seminars.

Increased influence
Clinically oriented applications and broader influence by CIOs needn’t dilute the influence of CFOs. The challenge is for financial managers to accept change and act as facilitators to bring disparate departments together. In the process, CFOs may have to adjust how they measure personal success. Even if raw power is diminishing in technology decisions, innovative CFOs can pride themselves on increased influence.


Wanted: IS Innovators

Second-generation healthcare automation is changing what makes a good CIO. Understanding technology and the ability to get results from a technical staff remain key responsibilities. But hospitals today are looking for more from their technology managers.

For example, when Charles J. Hirt became vice president of finance and CFO for Alexian Brothers Hospital, San Jose, Calif., one of his first duties was to fill the IS director vacancy. His strategy: Find someone who not only knew technology, but who was also comfortable acting as an IS advocate. "I wanted someone who would keep us current with new technologies."

Today, innovation is becoming part of an IT professional’s job description. Sentara’s Bert Reese, corporate director of information systems, challenges his staff to develop "killer apps" for the healthcare organization. "I say, ’bring me something creative.’" To open up idea-generating discussions, Reese schedules a weekly meeting with the entire IT staff to consider new proposals. He also holds individual, biweekly meetings with staff members to discuss ideas. A disease-management system now being implemented was first proposed in one of these sessions.

According to Reese, more of IS’s job is to execute the ideas of others. "Three years ago, 60 percent of technology proposals came from us. Today, [users] generate about 70 percent of the new ideas."


Alan Joch is a contributing editor to Healthcare Informatics.



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