Two CFOs see promise of AI, but have yet to build a dedicated budget
Core concerns of labor and supply inflation are growing at a faster rate than payment, and workforce issues haven't gone away, CFO says.
From left, John Beaman, CFO for Adventist Health, and Robert Broermann, CFO of Sentara
Photos: Courtesy of Adventist Health and Sentara, respectively.
CFOs of two of the country's largest nonprofit health systems were asked about their financial strategies in the midst of generative AI becoming the next big thing with the launch of ChatGPT in 2022.
Robert A. Broermann is executive vice president and CFO of Sentara, headquartered in Norfolk, Virginia. The integrated, not-for-profit healthcare system is among the largest health systems in the Mid-Atlantic and Southeast, with 12 hospitals in Virginia and northeastern North Carolina.
John Beaman is CFO for Adventist Health, headquartered in Roseville, California. The faith-based, nonprofit, integrated health system serves more than 100 communities on the West Coast and Hawaii and operates 28 hospitals.
The CFOs on separate coasts are experiencing many of the same financial issues. Inflation and higher staffing costs remain remnants of the COVID-19 era.
The core concerns of labor and supply inflation are growing at a faster rate than payment, Beaman said. Workforce issues haven't gone away. Adventist has increased pay but is seeing some relief on contract labor.
"Our average, rate for skilled clinicians is up over 30%," Beaman said. "Our revenue increases have not been able to keep up."
Hospitals are unable to adjust prices to reflect higher costs due to long-term contracts.
Sentara is aligned with 40% of other hospitals in the country that are not breaking – even financially.
"We've got a good 40% of hospitals either losing money or hovering around that break-even line," Broermann said.
Both seek strategies for cost savings. This means automation and looking at the role AI can play.
Neither health system has a comprehensive AI strategy in place, although both CFOs see its promise in the beginning stages of use.
"We're still very much in the early innings of the AI game," Broermann said. "There are some use cases out there."
This includes ambient listening technology for clinical note-taking, a popular use of AI in healthcare.
Sentara is also beginning to use AI for medical coding in the revenue cycle. In general, Broermann sees AI as allowing for more automation between hospitals and payers.
"The prospects of AI are fascinating," Broermann said.
Adventist Health doesn't have a dedicated AI budget, said Beaman.
"We do evaluate AI when we have a problem to solve or implement," he said.
Adventist is currently making the move to the Epic platform, which is expected to be completed within two years. With that move, there will be more of an integration of revenue cycle processes, Beaman said.
"It gives us the ability to further automate," he said.
What AI is expected to do for both health systems is consume more of the technology spend.
Adventist is looking at the totality of tech spend, some of which will be AI.
The health system has a 10-year vision and about a five-year investment plan, according to Beaman.
"Every year we refocus our three-year plan," Beaman said.
They then build toward that vision, using investments to go beyond the four walls of the hospital, he said.
"We spend a lot of time, outpatient versus inpatient," Beaman said. "The overall need for inpatient should be less."
Expenses are kept in line where Adventist has a higher number of patients who have commercial insurance. In the inner city of Los Angeles and in rural areas, the hospitals depend on more fixed payments from Medicare and Medicaid.
"We're still feeling the stress in those communities," Beaman said. "We have a high desire to be in value-based arrangements."
As well as having a business benefit, value-based care aligns with the health system's mission to help patients in their healthcare journey, he said.
Sentara has had to cut services at one of its rural hospitals. It will be discontinuing obstetrics at some point, Broermann said, due to the viability of the program. The hospital is delivering 250 babies a year, which represents less than one a day.
"There's not enough volume there to support that," he said.
Due to the payer mix, healthcare is a complicated and fragile system when it comes to revenue, he said. There are some areas where Medicare pays below the health system's cost, and there are areas where Medicare pairs fairly well.
"CMS has to watch its nickels too, we get that," Broermann said.
"We're still seeing challenges out there in the marketplace," Broermann said. "We're starting to recover from the COVID effect. When we look at volumes, we're getting back to pre-COVID situations. Our volumes have pretty much returned to pre-COVID levels. In terms of basic hospital operations, we've returned to normal. The main issue is getting into the black."
Email the writer: SMorse@himss.org
