Hospital EBITDA falls 174% in April as CFO leadership expectations rise

Hospital EBITDA falls 174% in April as CFO leadership expectations rise

May 29, 2020
Business Affairs

CFOs also need to quantify the precise financial impacts of the pandemic—closely monitoring and tracking incremental COVID-19-related expenses and losses. This will help in securing government assistance, in quantifying the pandemic’s impacts to boards, executive teams, and other stakeholders, and in identifying the financial gap for the organization. Finally, CFOs should project near-term scenarios to understand the potential for debt covenant and credit rating issues, and to address such issues moving forward.

Tomorrow’s role: Financial recovery planner. Planning for a post-COVID environment requires CFOs to accept some level of uncertainty, while conducting rigorous scenario modeling. Building flexible, sensitive financial plans equips organizations to adapt to various potential future realities.

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How long hospitals and health systems will be coping with post-surge issues is a big unknown. Some organizations are planning for permanent capacity dedicated to COVID-19 patients, while others are planning for lower clinical volumes projected for the long term. Organizations shifting to recovery mode will simultaneously have to focus on:

• Continuing to address immediate, remaining COVID-19 care needs
• Filling significant budget gaps widened by the pandemic
• Addressing a backlog of elective procedures and other delayed care
• Assessing the pandemic’s financial and operating toll on the organization
• Continuous modeling of operating scenarios based on different projections (and building actual experience) for COVID cases, payer mix, and resumption of non-urgent surgical cases

While finance leaders still must do a fair amount of blocking and tackling during this period, they also need to begin developing long-term financial recovery processes that can be implemented now and continue post-COVID.

Healthcare’s “new normal” will create significant need for financial leadership that is fluent in the use of data, analytics, and flexible tools. Finance leaders must continue to focus on forecasting cash flow and developing operating and balance sheet projections for the organization. The organization will correctly look to financial leadership to understand the comprehensive implications associated with how long the current crisis lasts and how fast the organization can recover under various circumstances and plans. CFOs will need to continue recasting the organization’s financial plans based on a variety of scenarios as more information and analysis is available.

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