From left, John Beaman, CFO of Adventist Health, and Robert Broermann, CFO of Sentara.
Photos: Courtesy of Adventist Health and Sentara, respectively.
The CFOs of two of the nation’s largest nonprofit health systems were asked about their financial strategies as generative AI becomes the next big thing with the launch of ChatGPT in 2022.
Robert A. Broermann is executive vice president and chief financial officer of Sentara, headquartered in Norfolk, Virginia. The nonprofit, integrated health 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 chief financial officer of 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.
CFOs on different coasts face many of the same financial issues. Inflation and rising personnel costs remain vestiges of the COVID-19 era.
The main concerns are labor and supply inflation are growing at a faster rate than payments, Beaman said. Labor problems have not gone away. Adventists have increased their salaries but are seeing some relief in contract labor.
“Our average rate of qualified clinicians is up more than 30 percent,” 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 in line with 40% of other hospitals in the country that are not bankrupt – even financially.
“We have 40 percent of hospitals that are losing money or are around the break-even point,” Broermann said.
Both are looking for cost-saving strategies. This means automation and examining the role AI can play.
Neither health system has an overall AI strategy in place, although both CFOs see its promise in the early stages of its use.
“We’re still in the early days of the AI game,” Broermann said. “There are use cases.”
This includes ambient listening technology for clinical note-taking, a popular use of AI in healthcare.
Sentara is also starting to use AI for medical coding in the revenue cycle. Overall, Broermann sees AI as enabling more automation between hospitals and payers.
“The prospects for AI are fascinating,” Broermann said.
Adventist Health does not have a dedicated AI budget, Beaman said.
“We evaluate AI when we have a problem to solve or implement,” he said.
Adventist is currently in the process of migrating to the Epic platform, which is expected to be completed within two years. With this move, there will be more integration of revenue cycle processes, Beaman said.
“It gives us the ability to automate more,” he said.
What AI is expected to do for both health systems is consume a greater share of technology spending.
Adventist looks at the totality of technology spending, some of which will be on AI.
The health system has a 10-year vision and a five-year investment plan, according to Beaman.
“Every year we refocus our three-year plan,” Beaman said.
They then build on that vision, investing beyond the four walls of the hospital, he said.
“We spend a lot of time, outpatient or inpatient,” Beaman said. “The overall need for hospitalized patients is expected to be less.”
Spending remains consistent where Adventists have a higher number of commercially insured patients. In downtown Los Angeles and rural areas, hospitals rely on more fixed payments from Medicare and Medicaid.
“We still feel the stress in these communities,” Beaman said. “We are keen to participate in value-based agreements.”
In addition to having a business advantage, value-based care aligns with the health system’s mission to help patients on their health journey, he said.
Sentara had to cut services at one of its rural hospitals. Obstetrics will be discontinued at some point, Broermann said, due to the viability of the program. The hospital delivers 250 babies per year, which is less than one per day.
“There’s not enough volume to support that,” he said.
Because of the mix of payers, health care is a complex and revenue-fragile system, he said. There are some areas where Medicare pays below the cost of the health care system, and there are areas where Medicare matches quite well.
“CMS also has to watch its money, we understand that,” Broermann said.
“We still face challenges in the market,” Broermann said. “We are starting to recover from the COVID effect. When you look at the volumes, we are returning to pre-COVID situations. Our volumes are almost back to pre-COVID levels. In terms of base hospitalization operationswe are back to normal. The main problem is going into the dark.”
Email the writer: SMorse@himss.org