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Alumni in the News: Portland Business Journal: Karen Shepard, Nonprofits CFO of the Year
Author: By Andy Giegerich, Portland Business Journal
Posted: May 20, 2013

Read the original article in the Portland Business Journal here.

There’s a lot of common ground among our three CFO of the Year finalists in the nonprofit division.

Karen Shepard, CFO for Bend-based St. Charles Health System — and the winner of the Business Journal’s Nonprofit CFO of the Year — spends her days keeping 3,500 employees and multiple medical staffs current on federal privacy and security regulations. She also spends a lot of time gaging how health care reform will affect St. Charles.

In Portland, Cambia’s Vince Price has to meet a strict 1 percent profit-and-loss target. As the veteran CFO analyzes his strategies, he wonders how health care reform will affect his organization.

On Portland’s so-called “Pill Hill,” Oregon Health & Science University’s Lawrence Furnstahl marvels at the “golden age of biology, medicine and health care” that OHSU researchers hope to advance in the growing institution’s labs. However, Furnstahl, OHSU’s CFO, also spends at least a few minutes every day anticipating pending health care reform changes.

Federal health care reform measures are clearly a strong backdrop as Furnstahl, Shepard and Price perform their sizable daily activities. By this time next year, health insurance exchanges will have begun determining how many patients can visit St. Charles or OHSU, or how many members Cambia’s affiliated brand Regence BlueCrossBlueShield of Oregon manages.

In four years, many Oregon health care providers could either work under the auspices of coordinated care organizations, a Gov. John Kitzhaber initiative currently used to manage treatments for poorer patients. If it’s successful, it could even roll out to the general patient care side.

The three health care CFOs need to consider not only the implications reform provisions will have on patient care offerings, they must consider how new regulations and other considerations will affect their bottom lines. The CFO’s role, as a result, will become especially critical because the federal reform efforts squarely aim at cutting health care costs.

Yet with just six months to go before reform begins shaping the system, there’s still uncertainty because many rules still need to be finalized.

“Other than maybe banking, we’re the highest-regulated industry,” said Shepard. “Between ObamaCare and what the state is doing, we’re trying to see into the future on something that doesn’t have any guidelines yet. It’s quite challenging, but it keeps it very interesting.”

St. Charles is mapping out plans to address new payment methodologies.

“It’s really about transforming care, it’s caring for patients in the least expensive place (possible). But the other part is, we have patients and they have trauma.” And that dynamic, coupled with the many questions Shepard has about the new health care world, makes for a cloudy next few years.

At Cambia, Price has many of the same questions.

“The first thing we’ve all done is to try to understand the impact of the changing market conditions, including new regulations, to our customers and our business,” said Price. “With health care reform the customer base will grow quickly. We have to understand what it means to us and then deliver products and services that meet the needs in the market.”

Furnstahl said OHSU’s team is embracing the role research will play in reforming the health system.

“We are big supporters of health care reform at OHSU,” Furnstahl said. “Government and private insurers are asking providers to manage the health of populations within global budgets that rise at a more sustainable pace than over the past 40 years. We know that health and longevity is only about 10 percent a function of health care, with about 30 percent due to genetics, and about 60 percent a function of behavior, environment and social circumstances.”

As a result, clinicians must be trained in new, inter-disciplinary ways.

“At OHSU, this is squarely on our mission of improving the health and well-being of Oregonians, and we have an amazing array of resources deployed on this challenge,” said Furnstahl.

The three superstar CFOs that are finalists for our top award all happen to work in health care. We asked winner Karen Shepard of St. Charles, Cambia’s Vince Price and OHSU’s Lawrence Furnstahl how pending federal and state reform measures will shape their jobs in the coming years.

Karen Shepard on turning around St. Charles and taking the slow path

What your organization does: St. Charles Health System provides hospital, clinic l and other outpatient healthcare services to Central and Eastern Oregon.

Significant financial opportunities: Upon my arrival at St. Charles Health System in January of 2009, the health system had experienced two years of operating losses and significant negative financial impacts as a result of the financial market’s crash in 2008. The downturn in the number of days of cash on hand put St. Charles compliance with bond covenants at risk and the financial infrastructure was not stable.

How you capitalized on those opportunities: Over the past four years, our initial focus was placed on stabilizing the financial infrastructure to include timely, accurate reporting and data analysis to identify the performance gaps. Non-performing assets were either turned around, closed or sold if they were not core to St. Charles business, such as AirLink and durable medical equipment sales.

As a result of these activities and deleveraging the balance sheet St. Charles received bond rating upgrades from Moody’s in 2010 and again in 2012.

Significant challenges last year: Preparing for healthcare reform is impacting all healthcare institutions requiring transformation of the care delivery system and simultaneously the payment models. Clearly the payment reform will result is lower payments in the future and we need to continue to deliver cost effective, high quality care.

How you met those challenges: We have begun piloting multiple population health models for our Caregivers, SharedCare, which is a health improvement plan and some Medicaid members in preparation for many health care reform initiatives that begin in 2014.

What was your best cost-cutting idea last year? Redesign of the Caregiver Health Plan to include a wellness program that creates caregiver and family member engagement in their improving their health.

What was your best revenue-generating idea last year? Adding focused training and resources to support proper documentation of medical care which significantly enhances revenue and quality metrics allowing the health system to be paid at an appropriate rate for the services provided.

How do you leverage technology to help your company’s financial position? The health care industry relies on electronic medical records for accurately documentation of care and supports billing for services, quality reporting and data analytics that is key to evaluating the performance of the health system.

What was your toughest risk-management challenge and how did you deal with it? The greatest challenge is keeping 3,500 employees and multiple medical staffs current on HIPPA privacy and security regulations to ensure our patient records are secure.

How has your job changed in the last five years? The health care reform initiatives at the federal and state level and the ever changing regulations requiring transformation of care delivery and the health care business model while working in a very uncertain environment.