Healthcare Funding, Defense Spending, and the CFO’s Role in Advocacy

Change management and adoption of changes in policy or directions tend to come through operations, and so it's really a matter of partnering with operational leaders at multiple levels to help foster and support change. Welcome back to CFO Weekly, where we're talking with financial leaders about how to build efficiency in their teams, create time for strategy, and ultimately get results. This podcast is brought to you by personiv, the trusted leader in finance and accounting outsourcing for over 30 years. See how Personiv's customized solutions can help you streamline your operations with teams that start as small as one. Visit the website@personiv.com to learn more. I'm your host, Megan Wiese. Let's jump right in. Welcome back to CFO Weekly. Today I'm joined by Ed Blger, Chief financial officer at St Christopher's Hospital for Children, a leading pediatric hospital with a long standing legacy of delivering high quality patient centered care. Ed is a seasoned healthcare finance executive with deep expertise across financial management, revenue cycle strategy and healthcare operations, and a track record of driving both financial performance and improved clinical outcomes in complex health systems. In this episode we'll explore the broader conversation around healthcare versus defense spending, how resource allocation decisions at a national level impact providers on the ground, and what finance leaders in healthcare are seeing as they balance cost, access and quality of care. Welcome to the show today, Ed. Thank you Megan. It's great to be here. Yeah, I'm excited about this topic. So as you think back to early in your career, was there a specific moment where you first became aware of how large scale funding decisions, whether in healthcare or elsewhere, directly influence the care patients ultimately receive? And it's an interesting topic, interesting question. And I've been at this for more than 30 years and I can say probably in my early years I really wasn't thinking much about it. I think there may not have been defining moment or individual epiphany of realization, but over time I think as I matured and it became clear that the care of patients in rural America or inner city America might be different from locations with extensive funding. I think as I think about motivations for profit or private equity and how those may be different and still somewhat localized issues in the context of federal and state spending structures seek to balance budgets across categories. The federal politics push for cuts in Medicare and Medicaid spending. They don't influence the demand for health care though at the end of the day, Americans are still in need of the same amount of care, but at times with less government support to provide it. And while health systems push for higher levels of productivity and efficiencies. There's an inflection point at which funding cuts go beyond individual efforts. Mergers and acquisitions pick that up further, I think, to push economies of scale. But eventually services cannot continue and service levels cannot be the same and systems fail. All of these dynamics create inconsistency in care for patients. And I think just broadly, as we look at the dichotomy between federal budgets, in particular defense spending and healthcare spending, I think over time we've seen what feels like a real growth, a real focus from the defense side of things, and certainly an important part of our country. But I think it's taken some of the light off of healthcare as an industry and the good that it does for America at the end of the day. And before we go any further, let's just take a step back. Can you just walk us through your background? Very interesting. Again, I've been at it for a little more than 30 years. I started out as a healthcare auditor for a bit, and then I spent a little more than 20 years working at Children's Hospital Philadelphia in various financial roles. From there worked over to Cooper University Healthcare, great system in New Jersey, and most recently a little more than five years at St. Christopher's Hospital for Children in Philadelphia. I've been in and around the industry, both sort of directly working in provider roles in terms of provider settings, I should say in the financial suite and all things that go into managing the financial ins and outs of healthcare systems, hospitals, physician practices practices, managed care arrangements and rev cycle and the like. But also worked my way through the Healthcare Financial Management association for the Philadelphia region, through the presidency and leadership roles there as well. So I've been at it for quite some time in a number of different roles and relationships. That's an amazing career. So from where you sit today, how do you frame the conversation around healthcare spending compared to other major areas like defense? I believe we all need to consider the federal budget allocations to best support the needs of America. Broadly, it appears as though stronger lobbies and contractors, campaign support and other support structures drive decision making that pushes funding self interest rather than the common welfare. We've not succeeded in making America healthy through major policies that mandate clean and healthy drinking water for all citizens, cleaner air for all Americans, much less tackle food security, pe control, substantially improve the level of poverty at large, and so on. I think we must focus on everyday root cause systemic issues that drive health and reduce the overall demand for healthcare as a higher priority in our country. And I don't think that's a socialism centric issue. And I know a lot of political folks may think that this is akin to socialism or socialistic programs, but I do believe that there's a path there that allows us to become a more fully functioning country. Improve improved health tends to lead to improved economics, improved worker base, improved tax bases and more. It's all tied together. So again, when we think about the spending of those areas in the federal budget, like defense versus healthcare, I think that it's important for us to look at it in the greater good. So it's not to say that defense doesn't have a tremendous value to America. Certainly our ability to defend our shores, defend our country, and support our allies across international landscapes. It's important for us to be in a position that again allows us to do those things. However, I think it is equally important, if not more so, that we focus on domestic issues on an everyday basis as well. And again, outside of the rest of the issues of our economics, there are fundamental components of healthcare that support that, whether it's as an employer base in terms of jobs, job growth, job sustainability in terms of driving economics and driving the value that the healthcare industry brings at large, or whether it is again in supporting the engines that drive economic stability within America. There is some of that certainly within defense as well. Certainly defense contractors, our employers as well, Certainly building and constructing defense mechanisms and systems and equipment are part of that. And I think there's a balance there. But I don't know, don't feel I'll say that I'm probably biased given my history, in terms of where I've worked and been in the trenches here, that healthcare provides a stronger and more compelling argument for investment in America and certainly in how it touches Americans on a day to day basis. Whereas defense is certainly part of that, but certainly seems to be more outward facing in terms of the values that it brings to the American nation. And what are some of the most common misconceptions that people have when comparing health care and defense spending? That's an interesting topic. It's difficult for me to say what everyone's misconceptions are. I feel like for myself, when I think about the pictures of a pie chart, I often equate to conversations as to the budget, budget gets balanced, or how it gets allocated out. I feel like they're two dimensional and some respects they're presented as if they're just slices of the pie and they're interchangeable at the end of the day, as if more for one means there's less of a Need for the other. And as we contemplate proposal a trillion plus dollars in defense, the question has to be, as it eats up more of the federal dollars available, does that mean that there is less of a need for. I can't find in my understanding or in literature that would suggest that, hey, if we spend more in defense, that we need less in healthcare, or that we can just take the money from healthcare, the country won't be affected by that. And I think that's part of the lost conversation, part of the misconception. However you want to look at it, at the end of the day, spending more on defense or spending more on healthcare doesn't mean at the end of the day that we don't need the same or more dollars in the other direct. I think each of those have to be evaluated independently in terms of what is actually needed and what the value is for spending those dollars. I mean, arguably, maybe you need more when you spend more on defense, you need more on health care because of mental health care. And you know, those soldiers come home and need health care. So it is an interesting topic and I'm sure not an easy balancing act. Correct? Within the framework, the Veterans association healthcare program and the healthcare programs within the military are also part of the equation. So there's often a handoff between private healthcare and military health care that goes without being talked about as well, but definitely dovetails into the other to some extent. And we forget that the private healthcare per se, if you will, predominantly provides the vast educational components that train the next generation of nurses and doctors that also find their way into military treatment facilities and things of that nature. So again, if we forget the cost of investment in terms of training, we're going to have a real shortage of providers in a very short time. And from a CFO's perspective, where do you see the biggest inefficiency or opportunities within healthcare spending today? I see it in the fragmentation of components in such a way that each part seems to profit, to maintain growth, and in some cases to reward shareholders or top executives. At the end of the day, healthcare has a lot of pieces to it. It has insurance providers that provide insurance coverage. It has pharmaceutical companies, it has hospitals, it has physician practices, it has rehab facilities, skilled nursing and hospice. And all the way through in terms of each of the engagement components within that longitudinal cycle, oftentimes those entities are independent of one another. And that means that they are at times, more often than not, I should say, competing with one another for the same dollars. And that creates a friction and it creates in some cases, redundancies in service that could be consolidated creates redundancies in counter efforts, so efforts to from one entity to try to maximize dollars from another entity and efforts from those entities to maximize dollars from the other entities. And so all of that creates inefficiencies and creates redundancies. I think those are areas that some organizations that have fully integrated models have been able to reduce. I think those are areas that at times through mergers and acquisitions get reduced remaining models where you've got multiple systems that are competing against each other, or long term, if you will, development of say, new drugs and things like that creates a need for profit and drives profit into places that are not reinvested, reinvested in better health, but rather distributed to individuals or groups of individuals for more personal wealth. And I think at the end of the day we would be better served reducing some of those inefficiencies and driving more of that dollars back into health improvements. And as we were talking about a few minutes ago, healthcare systems are often asked to do more with less. Like I guess almost any business these days. So how do finance leaders prioritize investments? When resources are constrained, it's a struggle. And you know, this is not something that's certainly done in a vacuum. From a long term financial planning process through annual budgeting and even really more nimble decision making, things happen on a much more everyday basis and I think boils down to hard decisions at the end of the day. But you know, the, the current system really does push prioritization of investments into projects and programs that ultimately provide higher return on that investment. Because at the end of the day, money tends to go where you can make more money. It is a reward mechanism that's generally in place. It's not often centric to root cause issues or systemic long term health improvement because many times the individual entities involved are only part of the full cycle and don't reap the rewards of longitudinal health. I think those are areas where again, as I've mentioned, the fully integrated models do much better, where they can really think about how to lower the overall cost. Integrating insurance platforms with care delivery platforms I think is perhaps again and more akin to more mature models, but at an individual basis. Where we see health systems looking in isolated platforms, you know, their effort to grow and really proliferate their ability to provide more care, they've got to maintain current levels of profit, they've got to maintain the ability to have excess dollars to reinvest in aged capital equipment or capital bricks and mortar for the service Delivery of service in the the hospitals and practice platforms that they operate in. And that's got to be done in some way that is sustainable over time. I think right now that has been the fundamental mechanism for prioritization. And how do reimbursement models and government funding structure shape the financial realities of hospitals like St. Christopher? The first thing I would say for those that don't know St. Christopher's it is what I would consider a government dependent organization or a super safety net. One that has roughly 80% plus Medicaid business. And so as a platform that funding typically base rates at less than cost. And so even if you are incredibly efficient, you're not covering your costs with baseline reimbursement. And so funding mechanisms from the government that include supplemental dollars are essential. They essentially cover the gap in terms of cost versus bas baseline reimbursement. And to the extent that those are disrupted, the reality of high Medicaid regions in need of quality health care, it's really an economic model that has its struggles. And so if those are disrupted, it is difficult to make decisions, it's difficult to function at the end of the day. And it doesn't look like, as mentioned earlier, the need for healthcare is changing. The demand for healthcare remains consistent over time. And that base reimbursement has been no match for pandemic and war related cost inflation which has caused continued stress across the healthcare industry. So as we talked earlier about finding those stronger efficiencies, I think that's something that most healthcare organizations have been doing and have ramped up efforts in recent years, really ahead of the headwinds of looming deep Medicaid cuts. But they all mean further change if they're not repealed or offset for real safety net hospitals like Christophers. And when you think about long term sustainability, what changes would need to happen in healthcare funding to improve both the cost efficiency and patient outcomes? I mean, these are difficult questions. I think at the end of the day sustainability comes with a real continuity of care, real assurance of no business interruption or the notion to the neighborhoods that you're in place and you're there and you're going to provide the, the quality of care for all the services that they've come to depend upon. I think funding at the end of the day to enable that is really something that has to be multi year, has to be somewhat set up in a way that is reliable and that folks that are doing multi year planning for service delivery have reliance in. The reality is that program development or gaps in care sometimes take months and Months to restore because of cycles of recruitment and how providers graduate from educational platforms and become ready to actually provide care as new entrants. Or again, if you're in the market, you're talking about relocating folks. These things take time. And so if you're talking about long term sustainability, we need health care funding to be in place that is known, that is steady, that has again, reasonable cost coverage and allows for the sustainability of equipment and again the buildings and infrastructure at a reasonable way. And you mentioned the need for funding. So how can healthcare finance leaders better communicate the value of healthcare investment to policymakers and the broader public? Well, I think for most they do leverage and we do leverage our government relations, individuals, I think, and connect with policymakers within our city, within our state and federally, and leverage consortiums that represent hospitals in our state, hospitals in our pediatrics class, things of that nature. I think those are voices to leverage when you're talking about getting out in political space to make your voice heard and certainly to help people understand what is a real risk of service interruption to the people in their city, their state and abroad. Abroad. I think beyond that, there are certain mechanisms, whether it's economic impact analysis or whether it is really just helping to sketch out what the disruption of life would be like in these neighborhoods and communities if you were not there, if you were not able to provide the high quality care that you do today for in our case, children and families in our region that are most in need of this care. Ultimately, I think it's those types of levers that folks need to do to take advantage of, to get their voice heard. And I think there's certainly strength in numbers. And so certainly to the extent that we can work together would help. I think what we don't do in, in a vast way is really, is really think about it longitudinally. Like I said, all the pieces, from insurance companies to pharmaceutical companies to healthcare hospitals and provider of things, we often don't work collectively to have our voices heard. I think we can do more of that. And before we get to the last question, I'm just curious about technology. Like, are you excited about the use of technology and maybe its ability to help increase efficiencies? And how is AI playing into healthcare? It's still a bit of an enigma. I am extremely excited about the opportunity to leverage anything that is a tool that we can use to automate and to really reduce the overall cost of administrative functions and the speed to which we can gather information and even the ability to personalize medicine. I think all those Things would be tremendously valuable for the industry. I don't know and I can't speak for all of the components of the industry because again, there are still varying levels of have and have nots within the industry. In terms of the ability to invest in artificial intelligence versus not. And whether that comes through vendor relationships, whether that comes through individual large scale organizations that have the resources to invest directly or not, I think remains to be seen. I do think that it will play a significant role. I'm going to give it over the next decade. I think there certainly could be a much faster path for it, but I think that it remains to be seen. So looking ahead, how do you see the role of the CFO evolving over the next five to 10 years, whether that be specifically in healthcare or maybe just in general. And what skills and mindsets are going to be crucial for the CFO of tomorrow? Well, I think the Chief Financial Officer post has certainly blended into a much deeper understanding of operations than traditionally. It is not your typical accountant. It is not somebody that also just has financial meetings or presents financial information. The understanding and context of which the information is now sort of put together is vital. And further, the ability to bridge partnerships and motivate and influence how the financials are changed for the better is crucial. I think we've come to the realization ultimately that finance is great function for gathering information, crunching numbers and putting together forecasts and things of that nature. However, you know, change management and adoption of changes in policy or directions or gaining efficiencies or process improvement or even lean and Six Sigma adoption, things of that nature tend to come through operations. And so it's really a matter of, of partnering with operational leaders at multiple parts and levels and layers within your organization to help foster and support change and show the value of why the change is helpful. And if the change has been ultimately achieved. And beyond that, it's creating relationships outside of your organization through purchasing organizations or other peer providers or or other integration points that can lead to partnerships and lower cost points and, or economies of scope or economies of scale, whatever that may be. And so those types of relationship building skill sets, finding common ground, mutual benefit, things of that nature are skill sets that are needed today and well into the future future. Ed, thank you so much for taking the time to be on the show today. This conversation has been both interesting and enlightening. Well, it was my pleasure and thank you so much for having me. Yep. And to all of our listeners, please tune in next week. And until then, take care. You've been listening to CFO Weekly, presented by Personiv. Please subscribe wherever you get your podcast to hear all of our episodes. Want to learn more? Check out personiv.com com thanks for listening.