By Kelly Gooch
Kenneth McGhee uses an array of financial and behavioral knowledge as chief treasury officer of Chicago-based Loretto Hospital.
At the nonprofit community-based organization, he manages revenue management streams and acts as the financial liaison between the hospital’s organizational brand, culture, strategy and technology areas. He says there are obvious aspects of the job but also some unexpected responsibilities.
Before joining Loretto Hospital, Mr. McGhee was CFO of Pinnacle Hospital in Crown Point, Ind. He previously spent 10 years as the director of finance for Chicago-based Michael Reese Hospital, which is now closed, and five years as the director of finance for Jackson Park Hospital in Chicago.
Mr. McGhee earned a Master of Science in business administration, Master of Science in finance, Master of Science in healthcare administration, all from Robert Morris University Illinois in Chicago.
Here, Mr. McGhee explains the essential skills for chief treasury officers, discusses the changing healthcare environment and offers advice to other hospital finance executives.
Note: The following responses were lightly edited for length and clarity.
Question: What are the two biggest challenges healthcare chief treasury officers are facing right now?
Kenneth McGhee: We are challenged with the same issues as most businesses — adequate cash flow, using the technology systems available to us to help us be as efficient as possible to improve timely payment, and working on denials. In the past, it was a lot easier to get predictive cash flow because the state of Illinois paid us directly with expedited payments. I think the state denial rate was probably like 5 percent across the board [at that time], and now with the six MCOs [managed care organizations] it’s like 20 percent.
Q: Beyond financial knowledge, what skills are essential for hospital and health system chief treasury officers in today’s healthcare landscape?
KM: I think you’ve got to have a great knowledge of how the specific hospital works as far as the money coming in [and] the end-to-end patient experience — from patient registration and food transformation (quality and distribution of food) to charges being dropped, and follow-up patient care. In the past, the role of CTO may have just been the back end — you got the money in, you posted it and that was it. One of the reasons I wanted to earn a master’s degree in healthcare administration is I wanted to supplement my finance background with future opportunities in hospital administration, and honing in on the overall operation is key to furthering my value to the hospital.
I’ve also spent time working with our marketing consultant to better understand human behaviors [as they relate to] people paying their bills. We have applied that knowledge to design communications that support segmented patient receivable accounts in efforts in improve the rate at which money comes. Our communication demonstrates empathy for patients struggling with their bills. The approach increases their desire to repay as they feel they are working with a caring agency in a stressful situation.
Q: What are your top priorities for 2019?
KM: The top two would be grant funding and new revenue. We recently hired someone to focus on securing grants that the hospital received in the past but have been lost through the state budget over the last couple years. This position is also charged with identifying and growing different streams of revenue from grants. [Also], identifying new lines of business we can bring into the hospital that align with our mission and are profitable.
I don’t think we can continue along the current path — doing the same things we’ve always done and expecting the same results. The issue with the grants is a clear indicator that change is necessary, otherwise we cannot stay independent much longer. Nonprofit hospitals in Illinois are the majority, but when your population is like ours — 70 percent Medicaid — your payments are not that large. We rely heavily on the tax assessment to get us through each month to make payroll and pay our vendors, so we’re trying to expand our core services to generate new revenue streams that we haven’t considered in the past. For example, we have a new MRI machine that was on-site once a day and now we’re going to go purchase it outright and have it accessible seven days a week which will help us improve patient care and increase billable services.
Q: Since being appointed chief treasury officer, what is one accomplishment you are most proud of?
KM: Loretto Hospital struggled with our efficiency ratio and we were experiencing a lot of employee overtime. As a hospital, we worked on employee satisfaction which increased their levels of engagement that converted into a more productive workforce. One of the outcomes from a financial perspective is we were able to reduce nonclinical department’s overtime by 50 percent which we forecast will save the hospital between $750,000 to $1 million a year.
Q: If you could pass along one nugget of advice to another chief treasury officer, what would it be?
KM: I don’t think the ‘numbers guy’ always does a good job at telling their story of the benefits of sound financial management. I would suggest sharing more about what it is that you do because there is probably a wide gap between what people think you do and what you actually do. Sometimes, we need to be our own advocates. For example, with the MRI [machine], engineering and security know that it’s going to be here seven days a week, but do the doctors and nurses know it will be fully available for their patient care? It seems obvious but again, my advice is to just make sure the key players are involved in any decision that affects the hospital so they can cascade the information to their teams and everyone is rowing the boat in the same direction.
Source: Becker’s Hospital CFO Report