The role of the healthcare CFO has reached a breaking point. No longer just the financial gatekeepers, today's CFOs are thrust into an unforgiving landscape where the stakes couldn’t be higher. With the entire fiscal health of their organization resting on their shoulders, they must make critical decisions in the face of economic turmoil, shrinking margins, and escalating labor costs. In this high-pressure environment, failure is an option. In the rare cases when hospitals do fail, the CFO will be in the conversation about why.
This begs the question: is this responsibility too immense for one individual? Many healthcare CFOs are burning out, crushed by the weight of these ever-expanding expectations. On top of this, CEOs are now asking themselves if it’s too risky for the entire financial wellbeing of a healthcare organization to hinge on one person?
As the job description continues to grow, CFOs are now required to oversee everything from operational strategy to technology investments—all while navigating the daily pressures of shrinking margins, labor shortages, and payer disputes.
In this high-stakes environment, where every misstep can be costly, is the modern CFO’s role becoming unmanageable?
14.2%
The healthcare industry's CFO turnover rate in the first half of 2024, a three-year high.
Source: Crist Kolder Associates
What’s happening to the CFOs?
According to a recent report from Crist Kolder Associates, the average healthcare CFO's tenure is 4.7 years, the fourth highest compared to other industries. The healthcare industry's CFO turnover rate was 14.2% in the first half of 2024, which is a three-year high. Hospital CEO turnover is also trending high, but seems to be remaining steady since summer. The average healthcare CEO tenure is 7.6 years, and hospitals have announced 68 CEO exits this year.
Many CFOs are retiring, while others are leaving or being forced out due to market performance issues, which have been trending downwards over the past two years. Another trend in turnover has been the number of CFOs moving into CEO positions. About 6% of healthcare CEOs were once CFOs, according to a report from Crist Kolder Associates.
Tom Quinn
Senior Partner,
WittKieffer
Factors like the pandemic, inflation, and regulatory pressures all contributed to a highly uncertain economic and financial landscape, making the CFO role, especially financially preparing an organization for long-term stability, more difficult to carry out. Because of this economic instability, the CFO role has expanded to include more operational oversight and strategic vision–tasks traditionally associated with CEOs–to make informed decisions. Now, CFOs are becoming more qualified to take on CEO responsibilities.
“Most CFOs I speak with welcome these added responsibilities, though it can push them out of their comfort zone and challenge them to use new skills.”
Quinn says that several items contribute to the stress that may be keeping CFOs up at night namely payer denials, a tough labor market, and struggles to regenerate the flow of cash that many systems saw throughout the pandemic.
“They're clearly under a lot of pressure. And labor costs is the other big piece that's contributing to a lot of the pressures and the operational challenge. It's hard to create an operating margin,” Quinn says.
So how do CFOs balance all of this?
CFO Challenges
What is your biggest chanllenge as CFO (select up to 3)?
SOURCE: Brainyard, in partnership with Oracle NetSuite.
Kurt Barwis
CEO, Bristol Health
Can teamwork make the dream work?
But while the odds may feel stacked against CFOs, there are strategies that can help. One key element is assembling a strong, dedicated team.
CFOs who thrive in today's healthcare landscape often point to their teams as the foundation of their success. Without a clear line of sight into the organization's operations, CFOs would be blind to the financial realities on the ground. Their teams provide the data, insights, and communication channels necessary to make informed decisions and maintain a holistic view of the hospital’s ecosystem.
In healthcare, many of the CFO's greatest concerns lie outside the finance office, embedded deep within direct patient care—a space CFOs may not interact with daily. This disconnect makes it essential for CFOs to form strong partnerships with clinical experts.
Without this trust and frequent, thorough communication, CFOs can find themselves in dangerous territory, making decisions in a vacuum that may impact patient care in ways they don't fully grasp.
So where to start?
CFOs often say a dedicated team is the key; the key to being fully aware of the state of the organization, and the key to making informed decisions.
Many of the CFO’s concerns happen on the ground level, in direct patient care, with which CFOs don’t typically come in contact on a day-to-day basis. A CFO is a healthcare leader but not a clinical expert. Therefore, it’s crucial to rely on the clinical experts, and to have a good relationship centered around thorough and frequent communication not only with executives, but also clinical staff.
Doug Watson
CFO, Allina Health
“To be successful as a CFO and to be able to have that vision, you really do have to understand and partner with the clinical enterprise within the organization,” says Bristol Health CEO Kurt Barwis. “But I think the most important thing is that the CFO isn't singularly focused on the financial outcome, even though it's getting more difficult not to do that.”
“The CFOs of the future really do have to have that strategic knowledge. They may be smart, but you can't put them at the top of your organization if they have no people skills, no interpersonal skills, and most importantly, no self-awareness skills.”
—Bristol Health CEO Kurt Barwis
Barwis says CFOs should have balance in how they engage across their organization and how they approach their decisions.
“A lot of times what I'll find is that when we're not connecting, it's because people don't really know how or who to call, or they're not clear on how to get information,” says Doug Watson, CFO of Allina Health.
Watson says the first step is making sure there is a clear opportunity for communication; clinical staff shouldn’t have to face obstacles or confusion about how to communicate with CFOs. CFOs may find they can’t use the same communication strategies they did a decade ago, as modern healthcare operations require new direction.
“We have to become more nuanced in our communication strategies,” says Kyle Wilcox, vice president of finance for MercyOne Medical Group. “The challenge is effectively communicating across domains.”
After perfecting a clear communication structure, CFOs can then help each clinical team be successful in their endeavors.
“That's where the magic happens in healthcare,” says Watson.
With these relationships in place, CFOs can have a much more accurate picture of their organization and its challenges, but it takes some work to get there. Education and professional development are a big chunk of the equation, says Providence CFO Brandon Williams.
A CFO's time is spent...
SOURCE: HFMA
Kyle Wilcox
Vice President, Finance, MercyOne Medical Group
Don’t forget other executive staff
While CFOs are often close to their CEOs, this relationship must be open and supportive to work. The first step? Building trust.
“I have to be able to push back; I have to be able to develop that trust before I let go of that authority and power,” says Barwis. “And more importantly, I have to instill a really strong understanding that, ‘No, you're not just going to make those kinds of decisions in isolation.’”
Beyond CEOs, when CFOs have a synergy with CNOs and CMOs, they can better understand clinical issues like physician burnout, nurse staffing ratios, and other challenges that may not, at first glance, have an obvious correlation to the bottom line.
“I learned so much sometimes from being in a meeting or a strategy session, which may not impact me directly, but just hearing the discussion gives me a broader view of the various risks that could come out of that,” says St. Jude’s Children’s Research Hospital CFO Pat Keel.
Another important dynamic is the CFO’s relationship with CTOs and CIOs, a dynamic Williams calls “one of the biggest levers that you can pull.”
As technology advances, these relationships will become even more crucial to a CFO’s understanding of the benefits and risks of technology. One of the primary ways the role has evolved is through the incorporation of data-driven decision-making. CFOs are increasingly expected to leverage analytics and financial modeling to forecast trends, optimize resource allocation, and drive cost efficiencies through new technology. With more AI and automation coming into the industry, many health systems are exploring what parts of their organization can be automated, often beginning with administrative tasks and parts of revenue cycle.
“The least satisfying part of most people's jobs are the things that could be automated,” says Watson.
By closely collaborating with CTOs, CIOs, CFOs can ensure they are investing in the right technology that, for example, allows clinical staff to be where they want to be—with the patient.
CFOs should also ensure they’re taking in the input of stakeholders. Keel calls this communication critical.
“The numbers themselves aren't the challenge [to the job]. It's how [leaders] relate to each other across clinical, operational, and financial domains, different specialties, and different payment methodologies across various states. I think that's the challenge that future finance leaders need to be comfortable with.”
—Kyle Wilcox, vice president of finance for MercyOne Medical Group
Brandon Williams
CFO, Providence
“You have to engage your stakeholders and really listen to what their pushback is, because frequently that's very insightful and can help you prevent making a bad decision,” says Keel. She says when a diverse group of people looks at a problem, the solution can be a much bigger success.
CFOs should also be able to support their decisions with data.
“Is the data supporting your instincts and the outcome you're targeting?” asks Keel.
A survey from the Society of Actuaries shows that about 60% of healthcare executives use data analytics in their organizations. However, a report from Arcadia found that less than 60% of healthcare organizations use their data to make business decisions.
As the use of data analytics grows in healthcare, CFOs should make sure their team is not falling behind on analytics investment, adoption and education.
Don’t Fear The Future
The CFO’s role has evolved and, in turn, made collaboration within healthcare evolve. The work that goes into aligning financial strategies with clinical operations and staff creates greater opportunities for healthcare teams to work together to progress care.
But the skills a CFO needed 10 or 20 years ago are not the same today. With an increasingly tense economic landscape that grips inflation, labor market woes, regulatory pressures and growing payer disputes, a modern healthcare CFO must be well-versed in leadership, (including all the soft skills that accompany it,) operational oversight, and strategic operational vision.
Going forward, this must be how the industry trains, mentors and prepares these new leaders. From clear communication, to collaboration, to negotiation, a CFO’s toolkit is much more complex, and it's up to them to take charge of their education and skills to fulfill the role. Barwis suggests taking courses to improve these skills, such as a course to negotiate better payer contracts.
Keel says the healthcare industry should put an emphasis on mentoring all young leaders in finance, to ensure that every executive in the system has a basic understanding of what it takes to manage a healthcare organization’s dollars and cents.
“So many leaders that come up in healthcare are trained either as clinicians or support people, and they don't have the financial skill set,” says Keel.
They also need to understand how to lead, and those skills aren’t often found in a classroom.
Rick Gundling
Senior Vice President for content and Professional Practice, Healthcare Finance Management Association (HFMA)
Pat Keel
CFO, St. Jude Children’s Research Hospital
A CFO’s boundary crossing competencies
SOURCE: AICPA & CIMA
“The CFOs of the future really do have to have that strategic knowledge,” says Barwis. “They may be smart, but you can't put them at the top of your organization if they have no people skills, no interpersonal skills, and most importantly, no self-awareness skills.”
“The numbers themselves aren't the challenge,” adds Wilcox. “It's how they relate to each other across different domains, different specialties, different payment methodologies across your various states. I think that's the challenge that future finance leaders need to be comfortable with.”
Marie DeFreitas, CFO Editor, HealthLeaders