The CFO Role Evolution in Healthcare: Policy, Profit, and Purpose

Megan - 0:59 Welcome back to CFO Weekly. Today, I'm joined by Ed Bleacher, 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.

Ed - 1:47 Thank you, Megan. It's great to be here.

Megan - 1:49 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?

Ed - 2:07 It's an interesting topic and interesting question. I've been at this for more than thirty 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 a 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, and 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 that seek to balance budgets across categories — the federal politics push for cuts in Medicare and Medicaid spending. They don't influence the demand for healthcare, 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 picked up further 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. Broadly, as we look at the dichotomy between federal budgets — in particular defense spending and healthcare spending — 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.

Megan - 3:57 And before we go any further, let's just take a step back. Can you just walk us through your background? It's very interesting.

Ed - 4:04 Again, I've been at it for a little more than thirty years. I started out as a healthcare auditor for a bit, and spent a little more than twenty years working at Children's Hospital of Philadelphia in various financial roles. From there, I worked over to Cooper University Health Care, a 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 directly working in provider settings in the financial suite and all things that go into managing the financial ins and outs of health care systems, hospitals, physician practices, managed care arrangements, 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.

Megan - 5:09 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?

Ed - 5:19 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 toward 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, pest 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. 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. Improved health tends to lead to improved economics, an 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 it's important for us to look at it in terms of the greater good. 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 allows us to do those things. However, I think it is equally important, if not more so, that we be focused on domestic issues on an everyday basis as well. Outside of the other issues of our economics, there are fundamental components of healthcare that support that, whether as an employer base in terms of jobs, job growth, job sustainability, in terms of driving economics, driving the value that the healthcare industry brings at large, or in supporting the engines that drive economic stability within America. There is some of that certainly within defense as well. Certainly, defense contractors are employers too, and building and constructing defense mechanisms, systems, and equipment are part of that, and I think there's a balance there. But I'll say that I'm probably biased given my history in terms of where I've worked and been in the trenches — I feel 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 seems to be more outward-facing in terms of the values that it brings to the American nation.

Megan - 8:30 And what are some of the most common misconceptions that people have when comparing healthcare and defense spending?

Ed - 8:38 That's an interesting topic. It's difficult for me to say what everyone's misconceptions are. For myself, when I think about the pictures of a pie chart, I often equate them to conversations about how the budget gets balanced or allocated. I feel like they're two-dimensional, and in some respects they're presented as if they're just slices of the pie and they're interchangeable — as if more for one means there's less of a need for the other. As we contemplate a trillion-plus dollars in defense, the question has to be: as it eats up more of the federal dollars available, does that mean there is less of a need for healthcare? I can't find, in my understanding or in literature, anything that would suggest that spending more on defense means we need less in healthcare or that we can just take the money from healthcare and the country won't be affected. I think that's part of the lost conversation, part of the misconception. However you want to look at it, spending more on defense or spending more on healthcare doesn't mean that we don't need the same or more dollars in the other direction. I think each of those has to be evaluated independently in terms of what is actually needed and what the value is for spending those dollars.

Megan - 10:09 I mean, arguably, maybe you need more. When you spend more on defense, you need more on healthcare because of mental health care and those soldiers come home and need healthcare, so it is an interesting topic and I'm sure not an easy balancing act.

Ed - 10:27 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 healthcare that goes without being talked about as well, but it definitely dovetails into the other to some extent. We forget that private healthcare predominantly provides the vast educational components that train the next generation of nurses and doctors that also find their way into military treatment facilities. 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.

Megan - 11:20 And from a CFO's perspective, where do you see the biggest inefficiency or opportunities within healthcare spending today?

Ed - 11:28 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. Healthcare has a lot of pieces to it. It has insurance providers, pharmaceutical companies, hospitals, physician practices, 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, more often than not, competing with one another for the same dollars, and that creates friction and, in some cases, redundancies in service that could be consolidated. It creates redundancies in counter-efforts — efforts from one entity to maximize dollars from another entity, and efforts from those entities to maximize dollars back. All of that creates inefficiencies and redundancies. I think those are areas that some organizations with fully integrated models have been able to reduce. Those are also areas that at times through mergers and acquisitions get reduced, but in remaining models where you've got multiple systems competing against each other, or long-term development of new drugs creating a need for profit that is not reinvested in better health but rather distributed to individuals or groups of individuals for more personal wealth — I think at the end of the day, we would be better served reducing some of those inefficiencies and driving more of those dollars back into health improvements.

Megan - 13:32 And as we were talking about a few minutes ago, healthcare systems are often asked to do more with less — like almost any business these days. So how do finance leaders prioritize investments when resources are constrained?

Ed - 13:47 It's a struggle, and this is certainly not something done in a vacuum. From a long-term financial planning process through annual budgeting and even through more nimble decision-making, things happen on a much more everyday basis, and I think it boils down to hard decisions. The current system really does push prioritization of investments into projects and programs that ultimately provide a higher return on 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. Those are areas where, again, 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 is perhaps more akin to more mature models, but at an individual level where we see health systems looking in isolated platforms, their effort to grow and proliferate their ability to provide more care means 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 service delivery in the hospitals and practice platforms that they operate — 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.

Megan - 15:37 And how do reimbursement models and government funding structures shape the financial realities of hospitals like St. Christopher's?

Ed - 15:45 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% or more Medicaid business. As a platform, that funding typically sets base rates at less than cost. So even if you are incredibly efficient, you're not covering your costs with baseline reimbursement. Funding mechanisms from the government that include supplemental dollars are essential — they essentially cover the gap in terms of cost versus baseline reimbursement. To the extent that those are disrupted, the reality of high-Medicaid regions in need of quality healthcare is really an economic model that has its struggles. If those are disrupted, it is difficult to make decisions and difficult to function, and the need for healthcare isn't 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. Most healthcare organizations have been ramping up efficiency efforts ahead of the headwinds of looming deep Medicaid cuts, but they all mean further change if they're not repealed or offset — particularly for real safety net hospitals like St. Christopher's.

Megan - 17:28 And when you think about long-term sustainability, what changes would need to happen in healthcare funding to improve both cost efficiency and patient outcomes?

Ed - 17:39 These are difficult questions. I think at the end of the day, sustainability comes with real continuity of care, real assurance of no business interruption, or the notion to the neighborhoods that you're there and you're going to provide the quality of care for all the services that they've come to depend upon. Funding to enable that really has to be multi-year, has to be set up in a way that is reliable, so that folks doing multi-year planning for service delivery have reliance in it. 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 if you're in the market, you're talking about relocating folks, and these things take time. So if you're talking about long-term sustainability, we need healthcare funding to be in place that is known, that is steady, that has reasonable cost coverage, and allows for the sustainability of equipment and the buildings and infrastructure in a reasonable way.

Megan - 19:09 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?

Ed - 19:20 I think for most, they do leverage — and we do leverage — our government relations. Individuals can 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. 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, those are the types of levers that folks need to take advantage of to get their voice heard, and there's certainly strength in numbers, so to the extent that we can work together, that would help. What we don't do in a vast way is really think about it longitudinally. Like I said, all the pieces from insurance companies to pharmaceutical companies to healthcare hospitals and providers — we often don't work collectively to have our voices heard, and we can do more of that.

Megan - 21:06 And before we get to the last question, I'm just curious about technology. Are you excited about the use of technology and maybe its ability to help increase efficiencies, and how is AI playing into healthcare?

Ed - 21:22 It's still a bit of an enigma. I am extremely excited about the opportunity to leverage anything that is a tool we can use to automate and really reduce the overall cost of administrative functions and the speed at 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 can't speak for all of the components of the industry, because there are still varying levels of haves and have-nots in terms of the ability to invest in artificial intelligence versus not — whether that comes through vendor relationships or through individual large-scale organizations that have the resources to invest directly. I do think that it will play a significant role. I'll give it over the next decade. There certainly could be a much faster path forward, but I think it remains to be seen.

Megan - 22:35 So looking ahead, how do you see the role of the CFO evolving over the next five to ten years, whether specifically in healthcare or just in general, and what skills and mindsets are going to be crucial for the CFO of tomorrow?

Ed - 22:51 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 who just has financial meetings or presents financial information. The understanding and context of which the information is now put together is vital. 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 a great function for gathering information, crunching numbers, and putting together forecasts and things of that nature. However, change management and adoption of changes in policy or directions, gaining efficiencies, process improvement, or even lean and Six Sigma adoption — things of that nature tend to come through operations. So it's really a matter 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. Beyond that, it's creating relationships outside of your organization through purchasing organizations or other peer providers or other integration points that can lead to partnerships, lower cost points, and economies of scope or scale — whatever that may be. Those types of relationship-building skill sets, finding common ground, mutual benefit — those are skill sets that are needed today and well into the future.

Megan - 24:52 Ed, thank you so much for taking the time to be on the show today. This conversation has been both interesting and enlightening.

Ed - 24:59 It was my pleasure, and thank you so much for having me.

Megan - 25:01 And to all of our listeners, please tune in next week. And until then, take care.