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 Welcome to this Week in Health it with our continuing series on c Ovid 19 preparations from the healthcare industry. My name is Bill Russell Healthcare, CIO, coach and creator of this week in Health. It a set of podcast videos and collaboration events dedicated to developing the next generation of health leaders.

Before we get going, I want to give you three resources for those of you who are in health it during the crisis. The first is for CIOs. I'm currently helping my coaching client CIOs as a sounding board and advisor through this time. If you'd like to connect with me over the next two months to experience coaching at no cost, shoot me a note at bill@healthlyrics.com for anyone in health IT who finds themselves in uncharted territory and you want to crowdsource solutions with a team of seasoned professionals.

We have set up two ways that you can do that. We now have a Slack channel that is monitored and supported by our sponsors, VMware, Galen Healthcare, Sirius Healthcare, Starbridge Advisors, and Pro Talent Advisors, as well as health lyrics, which is myself. Uh, the Slack channel allows you to get your questions answered.

Uh, you know, can my telehealth scale? What do I do about VDI? My EHR performance is lagging, uh, any of those kind of things. We have experts. We have . Uh, technology experts. We have architects, we have CMIOs CIOs, uh, who can, uh, step in and help you out with, uh, crowdsourcing those solutions, uh, as well as other health systems are bouncing ideas off each other.

If you want to access, send me a note at Slack at this week in health it.com. That's Slack, S-L-A-C-K, at this week in health it.com. And we're gonna get you set up immediately. Uh, the second channel is, uh, you know, our sponsors are also supporting an email channel. . At support at this weekend, health it.com.

If you just want to shoot an email over with your question, we will get it routed to an expert from one of our sponsors who will be able to support you, uh, in that challenge. I wanna thank each of our sponsors for stepping up to Pro, to provide these services to our listeners and to the industry. , I wanted to have a conversation around the financials of what's going on.

I've seen, uh, a lot of posts, people are concerned about the financial viability of health systems and what's going on with health systems and they're losing revenue and those kind of things. And, uh, there's no, no one better in the industry that I know of to talk to about this. Then, uh, then Rob Deha.

He's the recently retired CFO for UPMC. He's a great resource. I learn every time I talk to him. I just learn a ton and, uh, I thought he would be a good person to talk through this with. And so here's the conversation with Rob. This afternoon we're joined by, uh, Rob Mache, recently retired CFO for UPMC. Uh, congrats on the retirement and, uh, welcome back to the show, Rob.

Thanks, bill. Good to be here. Always, always great to have a discussion with you. Well, I'm, I'm looking forward to this. Uh, and just outta curiosity, what are you doing in retirement? So, uh, I'm working out like a fiend, uh, running every other day. Um, have a, a new granddaughter. So first time grandparent, uh, granddaughter, Nora, we're loving that.

Then professionally, uh, I've joined, uh, the Board of Great company and then also I'm working as a strategic advisor for Health Catalyst two. Great leaders, um, um, Matt Hawkins and Dan Burton and, and even better people. So, uh, good, good to work with both of those individuals and those companies. Yeah, and I've had, I've had both of them on the show and they are phenomenal.

Um, you know, industry expertise is amazing. They're, uh, generosity. Uh, they're just great people. Just great people have on the, yes. Alright, so I wanted to have a conversation around the financial challenges. Health systems are, are either facing right now or, and some of the strategies they're using to address that.

Um, as you know, as we know, elective surgeries have stopped. That's a major source of income. Uh, I'm being told that a lot of the, um, physician practices have all but almost closed down, uh, and gone to telehealth. And we know that telehealth pays at a different scale than, uh, in, in office visit. And I.

To the JP Conference and as they present the, uh, financials, you know, cash on hand is a very important metric and, and, uh, some, some systems have a lot, you know, 200 days cash on hand. Some have 90 days cash on hand. And, uh, can you give us an idea of. Uh, you know, of what that metric is and why that's important in normal times as well as in in times of crisis.

Sure. Uh, one thing I have to do before we start though, I really want to acknowledge the, the people on the front lines here, bill, the, the caregivers, not just the physicians and the nurses, but the EVS people, the, the dietary folks, the transport people. You know, you go in grocery stores now and you see how people are tentative about how close they get to people.

Imagine being a frontline caregiver and the, the, the danger they're putting themselves in every day to, to see us through this crisis and then going home to their families at night. So I think it would be remiss if we didn't mention that. Yeah, absolutely. And you know, the. From a leadership standpoint, you have these, you have these people who are doing these heroic things during the day, but they still have to go home to their families.

You know, there's concern and when you go home at night, you have to explain it to your kids. And, you know, you're talking to your, uh, you know, 80 year old, uh, you know, father or whatever, and you're trying to, you know, you're, you're really burning the kennel at both ends. And those people really are, uh, heroic at this point.

And I, I don't want this conversation to see maybe premature, but I, I, you know, I'm. As I'm looking at this, uh, there's part of me that's worried that the health systems are gonna run outta money. They're gonna run outta cash, and then, then you're gonna exacerbate this problem of not only are they, uh, trying to care for people without the proper PPE and the tests are taking 10 days, uh, but now they're worried about not getting paychecks.

And I, I know we're not gonna let that happen, but. That is a very real concern, I think is starting to, to pop up. No, we'll talk about that and I was gonna sort of discount the entire conversation to say the financial discussion right now is probably the least important thing that we can talk about. Um, this is about getting through the crisis and saving lives.

But, um, having said that, I think the role of the CFO needs to be different in the past. CFO's role was really, um, a person that created friction to make sure that resources were being finite, resources were being allocated appropriately, uh, driving efficiency through an organization. I think that's really flipped now.

Bill, the CFO needs to take a, a role as a facilitator, really kind of a road grader for the, for the clinical folks. Um, cutting through red tape, um, speeding up decision making, and really just about procuring resources as opposed to . Maybe being the person who put a, a stop on things in the past. So, uh, I think in terms of the financial challenges there, there're, it's truly a tell of two cities in terms of the large, um, successful, financially successful systems today will be impacted.

But, um, they will not be. Impacted in a way that's sort of existential. Um, what I worry about are the small systems, the rural systems, the single hospital systems that already had challenges. So if you think of the haves will be impacted, but will be okay. The have nots, I think will be in a situation where.

When this is done, it will force probably further consolidation or, or a bailout from the government, uh, or, you know, additional, uh, struggles for them. So it's really gonna, I think, make that line of demarcation even greater than it is today. In terms of the haves and the have nots, um, the, the large systems have a great deal of financial stability and strength.

I think the other thing that matters is kind of location. Right now, if you're in one of these hotspots, there are immediate financial pressures. Um, other parts of the country are still waiting to see what this is going to really develop into. So the, the financial impact profound, um, you know, rule of thumb, about 70% of the inpatient admissions are driven through the emergency department.

So. Much of that will continue, although people will avoid the emergency department. So that will be impacted as well. The other 30% is considered elective that will be impacted. Uh, just because it's called elective doesn't mean that it's someone's choice. These are, in some cases, either life threatening or dire pain circumstances where intervention is needed, but it is going to have an impact and we'll see a switch from these surgical procedures to more of these medical admissions.

Or cvid 19 emissions, which are much less reimbursement then. The traditional surgical interventions, which are traditionally a higher margin opportunity for health systems. So that is going to impact the, the revenue line of these health systems. I think the other thing that we can't discount is the impact on the other industries, uh, in the coming weeks and months as the unemployment starts to spike here, I've seen estimates of up to 20% unemployment.

Don't forget, people will be losing their commercial coverage through their employers, and so you're going to see increasing. Payer increasing, uh, Medicaid as a payer and uncompensated care as well. So that's going to impact the revenue of these systems also. Um, I think the other thing is we think about costs from a labor standpoint and a supply standpoint.

Right now, labor is at a premium, so there is significant overtime. There's temporary employees, there's a labor shortage, if you will, and with . Some of the caregivers who will be impacted by C Ovid 19, there's going to be a shortage. So, uh, labor costs will be spiking significantly. Supply costs, uh, from what I understand from talking to some of my colleagues, there is, um, critical shortages of PPE.

Um, there's some, some bad behavior going on in the supply chain with some of the suppliers in terms of pricing and availability. And a real lack of domestic suppliers. Most of this is offshore in terms of the, the supply chain, the ultimate manufacturer. So these are all things negatively impacting the financials.

The other thing that can't be discounted is the, what I call stranded overhead. Think of what's happening by stranded overhead. What I mean by that is you have an operating room, uh, operating rooms, which are very expensive to maintain. Anesthesiologist, CRNA supporting staff. Those costs are really fixed.

Um, there is a level of surgical volume that's anticipated, and as that drops, people aren't going to be. Laying off their anesthesia department or the anesthesiologist. So those costs are stranded, if you will. The health systems will continue to incur those costs without the adequate level of surgical volumes, uh, imaging volumes, specialists.

So what are your orthopods and your neurosurgeons going to be doing when they can't? Uh, be intervening in terms of, uh, um, surgery. So those costs will be spiking as well, or, or will not be covered by revenue. So these are all, uh, financial issues that are, that are. Manifesting themselves now and, and will accelerate as, as this, uh, disease progresses.

Yeah. So right now we're on the, uh, we have not flattened the curve. So essentially we're right in the midst of the crisis itself. So the CFO's role is really as a facilitator, you know, get, taking out the roadblocks, making sure that there is, uh, you know, the funds available to do the things that you need to do.

That's the role. Um, once the curve flattens and we start to see this, then does the role change or, I mean, will there be different phases in the role over the next six months, I guess? Well, I think so and, and I don't, uh, I mean, this is probably going to have a rather long, uh, period. So even though the curve gets flattened.

If anything, that's just as you know, hopefully, right? We're wanting to extend this so that it isn't a spike, but it's a much longer timeframe. So this facilitation role, I think will go on for six months, nine months, until the crisis truly passes. Um, the other thing, there are other impacts. Um, you know, we haven't talked about the investment portfolios Bill.

Many of the large nonprofits have multi-billion dollar investment portfolios. Some of them use them to support and fund operations. So with where the equity markets, that's, that's going to be years before they recover. So I think what you're going to see is, um, financial impact, and again, these are paper losses to many of the health systems, but others do use these funds to support operations.

These large, uh, organizations, you're gonna see investment losses in the hundreds of millions of dollars, close to a billion dollars on some of these systems. And you'll see those as soon as the first quarter, but certainly for the full year. So that's gonna impact ratios, uh, potentially lending arrangements so that that can't be discounted, uh, either in terms of the impact and then also philanthropy.

Donors who had significant equity portfolios, their, their fund, their um, uh, charitable decision making will change. It will likely become more conservative. And again, we have many systems that do quite well, uh, on philanthropy, so that's going to be impacted as well. So I think the CFO role is going to be this way probably for the next six to 12 months.

And then, uh, really it's, it's going to be about actually some retrospective work and thinking about . What could have gone better? Uh, what, how could we have reacted? How could we have prepared better, uh, as an executive team for, for the next crisis? And there will be a next crisis, whether it's in several years or 10 years or 20 years.

But, uh, I guess the way viruses work these things, um, they continue to recur. Yeah. So Rob does this, does this. Represent a, um, a reset. I mean, can we almost look at this as a reset? Like, you know, you have the crisis and then you come out of it and maybe the business model changes as a result of it. And, and you, you're starting to think about different strategies.

I mean, one of the things we're seeing is the, uh, the telehealth volumes. First of all, we know that telehealth has a net promoter score that's extremely high. People love it once they use it, and now we. 70, 80% of visits are being done via telehealth and uh, you know, could that potentially change behavior?

Will that change business models? Do you, do you see some things? Is this a reset of how we do things? I think anytime you go into and come through a crisis like this, things change on, on the backside of this. So, uh, and, and I view these as positive, so I absolutely believe telehealth will go from something that has been very difficult to establish funding.

Many of the payers have long resisted telehealth. They viewed it as becoming incremental instead of replacing. Existing, uh, modes of care and primary care to a more efficient, more consumer friendly manner. It was often viewed as just an incremental way to spend healthcare dollars. So I think this, the help, the telehealth will come through this now as an established, uh, bonafide way of delivering care.

In fact, I think it provides some hope to Health Systems Bill. When you look at what's happening with CVS and with United in terms of convenience care and, and putting things in stores and making it part of the retail experience, Walmart Telehealth allows the large traditional health systems to, to leapfrog that convenience care because nothing's more convenient than than your iPhone.

So if, if the reimbursement's available, it's certainly accepted by the consumer. The consumers that I talk to absolutely love it. You don't leave your home and you can get a number of services. In a very convenient manner. So I think telehealth is one of the bright spots, um, in terms of the future of healthcare, but I think this crisis is going to push it to the forefront as, as an accepted way of doing business.

I think a couple of the other things, there's a lot of talk now about practicing at the top of your license, and I know some of the states are suspending licensure to allow, uh, physician assistants to do more things. And I think that is a, a real positive. We've been held back by many cases, licensure, but also tradition in terms of what can an advanced practitioner do safely and effectively versus what they can't do.

So I think that's another change on the back end of this, is that we are going to push to get more people practicing at the top of their license. That creates capacity that allows our specialists to do more intensive and complex cases, but I think it's an overall positive for the industry to create capacity.

I think the other thing is that, again, once we get through this, and I don't wanna discount where we are now, we're just entering this crisis, but we will get through it. That's a positive. This. Going to destroy the world. It's gonna be very terrible, but it, it won't destroy us. But on the back end of this, I think when we look at this in a retrospective way, we're all going to revisit preparedness and capacity and, um, what are the right number of ICU beds and what do we do in terms of consumables and inventory stocking levels?

And, you know, there was a great article I read today, . Is that, you know, this crisis is being driven by a 75 cent mask that no one domestically produces. So I think you're gonna see a discussion around domestic manufacturing, uh, come back to light. Now, what should be done in terms of national security and preparedness done onshore versus offshore?

I think you're gonna look at what are the appropriate staffing levels. What types of equipment should be utilized, and we're always struggling again, as as finance professionals trying to be efficient and lower the cost of healthcare. But this is is kind of a sunk cost that we know that we need to prepare for disasters and for these once in a lifetime.

Types of issues that that come about. So I think it is going to cause us all to relook. There's nothing like, uh, a crisis to prepare you for the next one. So I think that's gonna happen. And I think just really this retrospective look at at operations and leadership. So on the back end of this. How did the organizations, whether again, the clinical operations, the IT staff, the hr, the finance, the supply chain staff, the, the leadership of the organizations, how did they react?

How did they respond? Did they step up to the challenge? Were they lacking? I think it's, again, another way that we can come out of this, um, in a more positive way and is a better. Better health systems and, and better stewards of, of the, the health of the population. Uh, and so, um, you know, I wanted to talk about cash.

That's where I started and it's probably where we're gonna finish, which is, um, the, uh, the federal government understands that these people are on the front lines. They understand what they're doing, and, and they're, they're, they're not gonna let this happen. They're not gonna let people go without paycheck and those kind of things, especially.

But there are some systems that, uh, will, are struggling from a, uh, cash perspective and some that will have cash to weather the storm, as you talked about earlier. What, what, what can those CFOs doing that are struggling with from a cash position right now? So I, I said that I present some positives as well.

And so the, the positives to this, the, um, the legislation that was just passed today, and the details are still forthcoming, but I understand about $130 billion of funding that's going to go towards hospitals and healthcare providers. So that's gonna be a needed, um, infusion of, of, of cash and funding for these struggling organizations.

There's going to be a 20% add-on at least some of the earlier legislation, talking about a 20% add-on for Medicare payments for c ovid 19 treatments. Um, they're, they were talking about suspending some of the Medicare, uh, sequestration reductions. So that's gonna be positive financially for the health systems in terms of days', cash on hand.

If you look at the, the AA credits bill, the AA rated credits, um, many of them have 200, I think the average is about 270 days cash on hand. So that's really three quarters of a year. And that measurement is with no revenue, just covering expenses. So these significant cushions were put in place. For the benefit really of bond holders so that the ability to service your debt is still there.

So I would argue that these days', cash on hand cushions are here for this very reason to get us through these types of situations. So again, these strong, healthy financial systems, um, you've got the days' cash on hand. You have the resources to cover this kind of an issue, and they will. So the, the large systems, there's no need to worry.

They will be fine, they'll be certainly impacted, but they were built for this kind of a situation. Not just financially, but even in terms of their mission. You know, their, their researchers, their . They're in the academic elements. So they were built to innovate. They were built to improvise. They were built to discover.

And so I think this can be the finest hour from any of these institutions. I do really worry though about the smaller institutions, the struggling institutions, they will be impacted. You are right. Some of them may have difficulty making payrolls, and that's where this federal stimulus, these dollars, um, it will be important that they are infused into the system.

Um, quickly. Now the question is who will they go to and in what they be allocated? I would submit to you that they probably should be weighted more towards the struggling small rural systems that are financially, um, delicate right now as opposed to those that have built in these very significant, strong cushions.

And I know that was part of the discussion that JP Morgan was really with some of these financial results. How much is too much and the, the large capital expenditure programs and the investments and alternative. Lines of business to diversify revenues. These are all things that can be deferred and likely will be deferred, but I have no worries about the strong systems.

It's these smaller rural systems and standalone systems that will be significantly impacted. Rob, I, I appreciate you coming on the show and letting me just bumble through questions with you. I, I, you know, I just, I, I saw a post just before we came on here where somebody was saying, Hey, I, what, what if we don't have enough money for this?

And so it is a very real concern. Um, and I think it's probably, I mean, if you were in the leadership team, it's. You might want to communicate to the entire organization of, Hey, we, we are built for this. We do have the wherewithal, we do have the days cash on hand. Uh, we are going to, uh, you know, we're gonna weather this all.

I mean, this is a time of leadership and communication. This is not a time to be. Clearly sitting in a room and counting the numbers and, and as you indicated, the the good CFOs are, are front and center right now, knocking down barriers and making sure things get done. No, I think you're right. I mean this, you know, you can look at this as, as a real negative It is, but you can also, we think about all the positives that can come of this, the great stories that we're hearing and we'll continue to hear about, about people stepping up and, and providing leadership and comfort and care for people.

And so. We'll get through this. It'll be a tough time, but this can also be, you know, um, be our greatest hour. We, we are resourceful. Have you seen the number of ways people are making ventilators? No. I've seen three d Manufacturing people are doing things at home and so that's why I said in, in these academic settings, uh, these folks are innovators, bill, they, they solve issues.

They run emergency departments. They. Uh, they protect us in disasters and, and, uh, you know, in Pittsburgh we had the Tree of Life shooting and so it's the same people that stepped up in the Tree of Life shooting at UPMC and at Pitt that are now stepping to the forefront to help Pittsburgh Combat and Pennsylvania combat the C Ovid 19 issue.

So, um, you know, it's tough times, but I think there are a lot of great things that have come out of it. You know, we'll, we'll survive and leadership's important and, and in these large systems where you have 20,000 employees and 50,000 and 80,000 employees, it's at an individual level. It's a one-to-one kind of leadership, uh, imperative that we have.

And so I think we've got great leaders in healthcare and, and people will step up. Absolutely. Rob, I'll let you have the last word. And I really appreciate you, uh, really focusing in and helping us to understand the, uh, financial aspects of this. Uh, this, this is, uh, these are truly extraordinary times and it, it calls for great leadership and I appreciate you, uh, taking the time to, uh, to share your wisdom and expertise with us.

Thanks, bill. Stay safe. I, I love my conversations with Rob. I learned so much from him and I just really appreciate him taking the time. To, uh, to level set on what the, the CFOs for these health systems are, are facing right now. And, uh, what are valid concerns and what are maybe not concerns at the present time, uh, for health systems.

Uh, again, really just want to thank him for his time. Special thanks to our sponsors again, VMware Starbridge Advisors, Galen Healthcare Health lyrics and pro talent advisors for choosing to invest in developing the next generation of health leaders. This shows a production of this week in Health It. For more great content, check out the website this week, health.com.

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