Despite financial challenges, including a 60-day disruption of its contract with UnitedHealthcare and a collapse of an interstate near the system's flagship facility, Atlanta-based Piedmont Healthcare posted an net operating income of $288 million in fiscal year 2017 — a feat led by its seasoned CFO Michael McAnder.
Mr. McAnder, who has 33 years of healthcare experience, joined Piedmont as CFO in July 2015, after serving as senior vice president of financial operations for six years at Oakland, Calif.-based Kaiser Permanente. Prior to his time at Kaiser, Mr. McAnder worked in financial operations at Allina Hospitals and Clinics in Minneapolis, Banner Health in Phoenix and Lutheran Healthcare Network in Mesa, Ariz.
Here Mr. McAnder discusses the major unexpected changes in healthcare, describes several challenges health system CFOs face and discloses the two individuals who influenced his leadership style the most.
Note: The following responses were lightly edited for length and clarity.
Question: Since joining Piedmont, what has been one of your proudest moments as CFO?
Michael McAnder: One of our CEO Kevin Brown's strategic imperatives is stewardship — to make the best use of our resources as a nonprofit. With that in mind, I picked up the mantle of our Strategic Transformation and Resource Stewardship program. [Something I am proud of] is that since the program began in 2014, Piedmont has implemented about $220 million in margin improvements. Our new three-year goal is $150 million in savings. We have a little more than $100 million identified toward the goal, so that's $320 million since the program started. We just keep digging. The low-hanging fruit is gone. Now we're digging into the trees. The STARS program is part of the culture now, it really is. It's very disciplined. A lot of organizations wouldn't have that level of discipline. It's easy because everyone in the organization knows what we're doing.
To me, what's unique about the STARS program is it's very sticky. We don't record any savings unless it's audited by a third party, which I believe is unusual, and we also document the maintenance of those savings, which is pretty unusual. Most folks will have a cost-cutting program and then later the margin improvement is gone.
I'm also proud of how well our integrations have gone. There haven't been any really significant cultural bumps. Knock on wood — everyone is performing ahead of where we thought they would be so that's really great. We have succeeded because of discipline and having the right dedicated team.
Generally, we have a process we have followed. We want to get them on our Enterprise Resource Planning system as soon as we can. Sometime between six and 12 months, we put them on Epic, our electronic medical records system. Once we have them on our systems and because we're a very strong operating company model, we can get economies of scale out of acquisitions. Every one of our acquisitions has improved its margins significantly.
Q: What skills are essential for a health system CFO in today's healthcare climate, beyond traditional financial and business acumen?
MM: You've got to be flexible, mostly because of all the different policies and mandates we have to live within. It's such a highly regulated industry and it's very complex. I think what's essential is driving business, driving the bottom-line operating margin and continuing to have the organization grow.
You also have to be able to make decisions with incomplete information. You don't always have all of the information when you make recommendations, which is somewhat difficult for traditional bean counters due to their conservative nature. I happen to feel like I'm an entrepreneur who happens to be in the CFO role.
I don't look at things as black and white. If somebody is willing to do a business plan, I'll review it. If I agree with the assumptions, I'm supportive of proceeding, even if it puts the organization at some risk. But, to me, that's how you continue to grow and learn as a team.
Q: Can you describe a few unique challenges health system CFOs face?
MM: Obviously, the cost of healthcare in our country is a huge issue. If you're not managing your expenses, your bottom line is going to go away because revenues are going down. Each year, our managed care, our good-paying volume, goes down. Medicare and Medicaid, the lower-paying volume, is increasing. At some point, you will have an intersection. So that's why you really have to continue to be getting costs out of the system.
I think it's a very complex business. A lot of different organizations have gotten into healthcare and they think they'll fix it. They've found it's not so easy because the industry is so complex and they underestimate the complexity of it. The amount of complexity is mind-numbing.
People always ask why it's so complex and so expensive: It's [the] regulations. It's also because you have incentives that are not always aligned. To succeed in healthcare, you need to have physicians aligned with you, which is not always the case. So I think having more aligned incentives is what you're looking for as a CFO.
Q: What major changes in healthcare have you seen in recent years that you would have never expected when you started in the industry?
MM: I would say it's the consolidation and also the pace of change. I've been in healthcare for more than 30 years, mostly in the Midwest and West before arriving in Atlanta. Metro Atlanta has lagged behind other metro areas in one key healthcare trend: Most markets have consolidated down to two or three healthcare systems.
And the amount of regulation has accelerated and the amount of change also is accelerating, which means you have to have the ability to be flexible and to be OK dealing in gray areas, as I mentioned before. Gone are the days when you would have all of the information and you would make a decision based on every data point.
Q: What philosophies, events or people influence your leadership style?
MM: I think my biggest influence was my dad, Lyle. He was a serial entrepreneur in Fergus Falls, Minn. He had a series of businesses when I was growing up that I worked with him on, including a Mobil oil distributorship, a Honda motorcycle dealership, an antique shop, a car dealership and an auction business. I learned that entrepreneurial spirit from him, for sure.
Then I had a mentor in Mesa, Ariz. — Don Evans. He was my boss for many years. He was a really good human being and certainly influenced me on how I conduct myself professionally. I don't take myself too seriously. I'm very passionate about the organization I work for and I'm very loyal to that organization. I bleed Piedmont orange. You probably get me ticked off if you don't make a decision that's not in best interest of Piedmont. That's probably the only time you'll see me get angry is if someone is trying to take advantage of the organization. I take that role very seriously and hold my team to that same level of rigor. 'If this is your money, would you be making this investment?'
I think as I've gotten older, I've gotten wiser. I've become a much better listener as I've matured in the later part of my career. I have a much better work-life balance.
Q: If you could pass along one nugget of advice to another hospital CFO, what would it be?
MM: I think what I'd say is try and look for the long-term play. You can't manage this business on a day-to-day basis. You have to have a clear direction and stick with it. I think that's the thing our CEO Kevin Brown has done really well. I have never worked at an organization with a one-page strategic plan before. Every meeting starts with it and we use it at every presentation. That consistency has brought clarity. It's also why we've gone from five hospitals to 11 in the three years I've been here. That resonates with other organizations when we talk about our plan. It's really important.
In addition, obviously, you have to act with integrity and character. If you're in a position where you can't do that, you have to make a different decision about whether you can keep working for someone.