Challenges of a Finance Expert/CFO in a Hospital

Challenges of a Finance Expert/CFO in a Hospital

Challenges of a Finance Expert/CFO in a Hospital

This interview was conducted by Catherine Parson, Managing Director and owner of Principle Selection Ltd and published on LinkedIn.

As an international executive recruiter, I worked two years ago on a recruitment project for a Hospital in Bangalore-India, sourcing an investment team and operational team. I met Asoka Karandawala recently and he shared with me some of the challenges CFOs in hospitals face. Asoka is a qualified Chartered Accountant with 25 years experience in the healthcare sector with extensive commercial and financial management experience as a Finance Director. He is now an independent Finance Director to growing companies and a Management Consultant specialising mostly in Healthcare & Hospitals. Here is what we discussed:

1) CP: One of the key challenges amongst senior executives in hospitals is having financial competence in order to make decisions. What are your views on this and how can those executives overcome this challenge?

AK: In my opinion, there are still too many senior executives in hospitals that lack the necessary financial knowledge and competence. In the UK, the public sector runs 95% of healthcare and 5% is private and the majority of operational managers even in the private sector do come from the public sector and in general they lack financial and commercial awareness.

Operational managers may have excellent experience in their own particular field of expertise but healthcare systems do not usually inculcate financial experience in these managers as they go up the organisation’s hierarchy. At senior level, they take on even more P&L responsibility and have to be able to make their own decisions.

This results in many senior managers in hospitals being unable to prepare business cases on investment decisions into new equipment or technology for presenting to a Board of Directors, which will usually consist of at least one or two financial experts as non executive directors alongside the Finance Director/CFO. This puts more pressure on the internal finance team and the FD/CFO to produce such business cases.

In every day operational decisions, such lack of financial expertise can also result in incorrect analyses/interpretations of situations which then could lead to incorrect decisions and worst of all budget overruns on operating expenditure, which puts pressure on the hospital.

There are ways to overcome this lack of financial awareness and expertise. For middle management, attending finance for non finance managers course is essential and I instituted in-house courses when I worked in a hospital. Understanding budgets and financial terms is a must for any manager taking on budget responsibilities and reporting on these to senior managers.

My advice to any aspiring manager is to study for a MBA in healthcare which will enhance their understanding of finance and make them more commercially aware. It will also help them to gain a senior manager role.

2) CP: Would you also consider time pressures which include regulations and compliance to be detrimental to the success of a hospital?

AK: Increasing regulation and compliance is a fact of life in hospitals and with human life involved, it is rightly so. Of course, this puts increasing costs and pressures on hospitals but this is something they have to live with. I cannot see less regulation in the future. When you consider safety procedures in the airline industry and compare the healthcare sector, there is no comparison – healthcare still has a long way to go.

The only upside for hospitals is that the barriers to entry are high and to startup a new private hospital takes a very talented and expert team to make it a success.

3) CP: In your opinion, what is a right mix of resource and training which is needed to ensure that hospitals operate and report effectively?

AK: Resources in a hospital are always scarce or seem to be due to financial pressures. However, increasing regulation means that hospitals have to maintain certain staff to patient ratios and ensure that all staff have adequate training and ongoing professional development. Records have to be kept to ensure this happens.

More than this though, I would consider that the ‘soft skills’ training in patient/customer care is essential for any hospital whether in the private or public sector. In the public sector, this is a very topical issue given complaints about nurses’ interactions with patients and their relatives.

In private hospitals, it is key to getting a competitive advantage. There is no point in getting the latest equipment if the complaints against your staff attitudes are increasing.

Good treatment/attitude maybe mentioned but bad treatment/attitude is conveyed to a lot more people by those suffering such experiences.

Getting this ‘soft skill’ side right takes time and continuous customer training is required for all levels of staff. It costs time and money but pay off in the long run.

4) CP: In your experience, what are some of the other challenges that you have faced working with hospitals as a finance expert?

AK: In my experience, I have faced all of the above challenges when working in a hospital and in addition, one of the key areas that hospitals lag behind to rest of industry is in information technology and it’s use. Hospitals are woefully behind leaders such as the retail and banking sectors. There is a lot of data but not much information available and integrated systems to track patients and their treatments are not in use generally with several systems in departments being cobbled together with old legacy systems. This does give senior managers an added challenge when they cannot have analyses at their finger tips and have to rely on data that is too old or questionable. As the finance expert in the hospital, this was a big challenge to supply senior colleagues with meaningful, timely and relevant information.

Lack of integrated IT was one of the biggest challenges I faced working in a hospital and having worked as a consultant in healthcare over the last 10 years, I find that not much has changed in that field.

Asoka’s blog: http://bit.ly/1obKEpe

Principle Selection website: http://bit.ly/1oxEltr

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