Leadership
Alan Lovelace: Healthcare CFOs require stamina to respond to post-COVID pressure
January 25, 2024
3:45 pm
What can modern hospital or health system CFOs do to keep their organizations on a stable financial footing in the financially fraught post-COVID-19 era?
In answering this question, most CFOs will begin by telling horror stories and tales of woe involving revenue squeezes and expense proliferations. Pressures come from everywhere, including:
- Physicians’ desire for more equipment, staffing and increased pay
- The community’s need for more services at greater affordability
- The government’s expectation for better clinical and operational metric outcomes
- Their own executive leadership’s demand for better bottom lines
It’s tough being a modern-day CFO. Few are cut out for it and even fewer want it.
But if anyone exemplifies how best to respond to these pressures, it’s Alan Lovelace, who for 13 years has been vice president and CFO of Stillwater Medical Center (SMC), in Stillwater, Oklahoma.
Lovelace has been deeply involved in healthcare financial management since 1992 and is a 30-year HFMA member. Having been a CFO at three different hospitals located in the heart of America, he has seen the environment for healthcare finance fluctuate from almost good to bad to sort of good to bad again post-COVID, particularly around the rural hospitals for which he has been financially responsible.
Operated under the auspices of the City of Stillwater, Oklahoma, and as a Medicare Rural Hospital, SMC has been financially successful over most of the past 13 years, producing operating margins of 8% to 10%. But the past two post-COVID years have taken a toll on its finances, eating into some of the monies it had banked in the better years. Lovelace has been challenged in navigating the hospital — whose average daily census has been 55 — along with 45 clinics scattered around north-central Oklahoma, where the outpatient-to-inpatient revenue split has been 85% to 15%. He attributes his ability to do so to a combination of experience, determination and a willingness to learn new ways of managing and leading in this complex environment.
“I never forget that they pay me to manage problems,” Lovelace said.
Regarding the recent post-COVID challenges, he said: “I’ve seen greater margin pressures and margin erosion caused primarily by declining reimbursements from commercial carriers over and above the cost increases we have experienced in labor rates for our 1,500 employees and in the supply chain. The reality is there is only so much cost savings that can be squeezed out of a hospital. So we have had to use some of the earnings we banked in the past to cover our declining margins.”
To maintain its independence in the future, SMC embarked on a somewhat painful turnaround plan that has so far allowed them to move from a negative 2% operating margin in 2022 to a positive 2% in 2023.
Lovelace emphasized to finance leaders that an essential component in his efforts to improve SMC’s performance over the years has been collaboration. (See also the sidebar below.)
“Collaborating with community leaders has been very beneficial for the hospital,” he said. “In one meeting five or six years ago, I learned of a program called New Market Tax Credits, best described as high-level financing for capital projects and high-priced medical equipment targeted for highly distressed economic areas. Over time I was able to develop new knowledge and skill sets around this financing, and it allowed the hospital to participate in five New Market Tax Credits of over $78 million, which helped the facility with much-needed construction and medical facility expansion and purchase of medical equipment.”
Lovelace also recommends embodying kindness when interacting with stakeholders — including physicians.
“Kindness works well when dealing with physicians,” he said. “I have had physicians come to me and complain about the pre-authorization process being too cumbersome, too slow, causing surgeries to get canceled because the process is not being completed fast enough. Instead of being defensive or argumentative, just listening and then solving their problems goes a long way to improving overall outcomes. I believe that just listening is a form of kindness.”
Cost effectiveness
SMC’s rural service area consists of primarily 120,000 people. Given the organization’s status as “the only show in town,” its board and administration have expressed concern about being able to provide the care required for constituents. Among the biggest problems faced by the residents and the hospital are issues around transferring issues in the emergency department regarding patients with mental health conditions.
“Although the organization knew that it would lose money, it was decided, on the outpatient side, to start a clinic that employs a psychiatrist, psychologist and their support staff to help these patients have resources to improve their outcomes,” Lovelace said. “There had been nothing like it in Stillwater before this. While specific outcomes have been difficult to ascertain, the behavioral health services being provided to the community and the community needs being met have had a positive impact on those individuals who have been able to access the care.”
Favorite HFMA memory
“Back in 2005, I attended the HFMA’s Annual National Institute (now known as the Annual Conference). We were at the Mandalay Bay Hotel in Las Vegas, and I was surrounded by so many of my peers. I remember that the education and knowledge being transferred between the presenters, my peers and the trade show vendors was eye-opening and extremely valuable. I enjoyed the time, the atmosphere and the people.”
A final thought
Lovelace had the following fundamental message for his peers: “Don’t take your job too seriously. It’s a big job with lots of responsibilities. But at the end of the day, it is your family and friends that matter most. Keep the job in its proper context. But always remember to do the right thing for the patient.”
5 leadership tips from Stillwater Medical Center’s Alan Lovelace
1 Be collaborative. Get to know all the stakeholders in the organization, including outside of the C-suite — other executives, direct reports, division directors, physicians and their leaders and leaders in the community. It is essential to establish relationships by meeting with them and spending time to gain their trust and their unique insights into their areas that inform your decision-making.
2 Be kind. Early in my career, I encountered a leader who was not kind. I decided at that time, with little experience, to just be kind, which is a decision anyone can make. It is a choice to be kind, caring, compassionate, collaborative. And it has paid big dividends in my career. Listening to others, trying to connect and understand their issues and then dealing with them has allowed for better outcomes in most circumstances.
3 Be a continuous learner. Never be satisfied that there is a finish line. I never believe that I have arrived. Always seek out new opportunities. Never be satisfied.
4 Always know what your CEO is doing. The CEO and CFO should think of themselves as business partners. They need to keep each other aware of deals they are making. For example, the CEO may be persuaded about the merits of a deal, but when talking with the CFO, the CEO may realize that it is actually a bad deal. For the same reason, CFOs should continually update CEOs on important events they are facing.
5 Participate in senior leadership rounding. It is vital that CFOs get out from behind their desks and interact with front-line staff and management from outside the finance division. They should walk into the radiology department, for example, and talk to the manager, asking questions about the machinery in the various rooms and how equipment is working, what their needs are and what concerns they might have. Finance leaders also can break down barriers by allowing departmental managers and staff to ask questions on any subject. That’s how to live up to the need to be collaborative.
With this series of columns, we recognize the dedication and insights of HFMA’s longest-standing members, healthcare finance executives with memberships of 25 years and longer. If you would like to share your perspectives, please feel free to contact the author.
