The art of delivering bad news

Who is going to break the news when an audit takes a bad turn or there is a breakdown in a negotiation with a payer? The CFO, of course.

There is no way to make bad news sound good, but, according to CFOs who have been there, it is possible to soften the blow.

One way to ease into giving bad news is to anticipate it. Pamela Vukovich, director and senior CFO consultant at Warbird Consulting Partners and former health system CFO, said many challenges hospitals face – like a big Medicare reimbursement change – is known about for a long time before it happens. The job of the CFO is to plan for the change, understand the impact and create a plan to mitigate the damage.

Creating a solution is one of the most important things a CFO can do, according to Doug Fenstermaker, executive vice president of healthcare at Warbird. Fenstermaker was the vice president and chief financial officer for HealthEast Care System in St. Paul.

“Always come to the table with solutions,” Fenstermaker said. “It is only valuable to say the sky is falling if you know how to prop it back up again.”

If a CFO is unable to get out in front of a problem, it is imperative to break the news early, said Reed Tinsley, a Houston-based CPA and healthcare consultant. It is easier to make tough decisions when the problem hasn’t progressed beyond repair. And the CFO will often have to be the one to move those decisions forward.

“Don’t let it stagnate,” Tinsley said. “There is paralysis of decision making in a lot of healthcare organizations, so once bad news is delivered, take the next proactive step to move forward.”

It is also a good idea to not make delivering bad news habitual. For instance, if a CFO tells people every year that things are tight and they have to keep cutting costs and laying off staff, eventually people will get sick of hearing it. And if they fire employees when they might not have needed to, a CFO loses credibility. 

Fenstermaker said one thing that can help the process is to seek out people who have been in similar situations before breaking the news. If the Internal Revenue Service is going to do an audit, find a colleague at another organization that has been audited and get tips from him or her.

One final thing to remember is to get everyone involved when there is bad news to give. If there is going to be a dramatic impact on the organization, including layoffs or furloughs, there is a human resources component that will have to be planned. And it is best to get that involvement before breaking the news, Fenstermaker said.

The first thing employees will want to know is how the news will impact them and their colleagues. Fenstermaker said a human resources department has to be ready with an answer, and that sometimes takes a lot of lead time to figure out.

“You could have the best laid plans on how to manage the workforce, but it can create cultural havoc if HR hasn’t had enough time to figure out what they are doing,” he said. “And it can end up being a challenge for the CEO, because they often have to break the news. You have to protect the rest of the executive team from the negative consequences of the bad news.”