The Powerful CEO/CFO Relationship
Event Recap: April 18, 2023
Panelists: Marty Bonick (CEO) & Alfred Lumsdaine (CFO) from Ardent Health, Moderator: Jon Skeeters (Partner) from Bradley
What kind of qualities did you look for in hiring the right CFO? And what skills were needed to effectively run ardent? Vice versa…
Marty: First and foremost, was understanding my own strengths and weaknesses. With zero CFO experience, we needed someone with credentials to do the job. Having a CFO with public company experience was critical. Alfred deals with banking and lender calls, tells the company story, and articulates the Ardent vision. The healthcare industry is unlike a lot of businesses. Technicalities are important and healthcare is unique. We have a real revenue cycle that’s not always linear and logical.
Alfred: I was more of a healthcare service CFO versus health-system until my time at Quorum - which was more of an interim role to assist with their distressed capital structure. I was largely focused on recapitalizing their balance sheet versus running the health system. After the recapitalization was complete, I was not anticipating staying inside the health system space. However, I was drawn to Ardent because of Marty. We have created a complimentary relationship/partnership with tremendous chemistry where we can both leverage our own experience and grow professionally.
Communication is Key.
What kind of cadence did you establish right way with Alfred?
Marty: We were off to a rocky start based on our office locations within the same building. Now we sit next to each other and talk every day, multiple times a day. The conversation is free flowing, and you must have transparency on both sides. I’ve seen organizations without transparency where the CEO and CFO are doing separate things, and this doesn’t work. Our direction strategically must be the same, so the owners know what’s going on and stay informed. “Early, often, and frequent, is key”. Alfred and I understand each other’s perspectives. He is here to remind me to say we don’t have an unlimited checkbook, here is something we can take a risk on, and he will push me or bring me back down to earth when needed.
How do you balance long-term goals and putting out fires? What role do you each play?
Alfred: Like many industries, we have been in a unique situation after the pandemic with staffing, labor, cost, inflation, etc. The top line is much more fixed than any industry and inflationary pressure is significant. There is a tremendous burden on the “tyranny of the urgent”. Marty is strategic and focused on the long-term, but we must continually focus on the now. Marty tracks where the industry is going and “sets the north star” for Ardent in terms of long-term strategy. Ardent is trying to lead in evolving health systems into much more consumer-focused organizations. Marty continually pushes the organization long-term, while I push based on the next 30 days. This complimentary relationship helps us hit our major milestones.
Marty: Hire a good team around you to focus on the now, so the leadership team can focus on the future. Organizational changes set Ardent up for the future. Two-thirds of hospitals are losing money, but Ardent is playing offense and focused on the “now”.
How do you navigate critical business decisions in finance?
Marty: I look to Alfred to be our critical-eye and litmus test to make sure we are making good business decisions. He is the conscience that sits on my shoulder, and we must have that tug-of-war to be successful. Ardent has recently made some bets in partnering and investing in different companies. What comes to mind is the Healthcare Revenue Cycle. Do we insource or outsource? We had a bifurcated model historically, and it was a career maker or breaker if we get it wrong. Luckily, we got it right and outsourced it. It’s easy to emotionally jump to a conclusion, but we must first prove our thesis. Alfred and his team have the diligence and focus to support these types of business decisions.
How does the CFO proactively move the company forward?
Alfred: Earlier in my career, I was myopic, in terms of “Yes or No”. I have learned over time if you have a “No”, have a “No, but…”. Marty ensures I have visibility into the entire organization. Everything has financial implications; therefore, the CFO must have insight, so our ideas are fully baked when they get to the CEO. Ardent is currently building that muscle internally.
What trends are shaping the Healthcare Industry?
Marty: Consumer focus is a high priority as the healthcare experience is poor. The care is wonderful, but the follow up services around that are painful. We use our smartphones for most every function; however, in terms of healthcare the smartphone is obsolete. We’ve spent a lot of time thinking about how to be consumer centric. Disruptors are getting into the healthcare space, but few are buying hospitals. We are trying to figure out how to use our hospitals to our advantage and the answer is the physicians. Ardent already has the physicians but has not led with them. We are starting to use hospitals as assets to cash flow the physician-side of the business. It’s currently a work in progress, but Ardent has most of the ingredients.
Alfred: There has never been a better time to execute on this pivot. Historically, we have been fighting to keep people inside the four walls. However, there is now an opportunity to connect inside the ecosystem via other sites and types of care.
Banking Crisis, Interest Rates, Treasurers Role, and Measuring Liquidity
Alfred: Fortunately, our treasurer and Marty completed a balance sheet refinance before I started. Our balance sheet is largely bullet-proof for the near term. Rising rates create challenges and unintended consequences throughout all aspects of the business. Creating optionality is key and leads to greater flexibility. Having a strong balance sheet gives Ardent options others might not have and creates opportunity for future acquisitions and investments.
Marty: Positive cash flow and a solid balance sheet open more doors.
How is Ardent Dealing with Supply Chain, Labor, and Talent Issues?
Marty: There is more demand than supply of staffing. The nursing industry had double the attrition rate during the pandemic, but we have not doubled the output of graduates. Contract labor agencies shot through the roof. Average hourly rates were $65/hour pre-pandemic, and increased to $200+/hour, putting pressure on the industry. We saw competitors do desperate things, so we had to stay competitive. We must pay more, but it doesn’t make up for inflation so set up a competitive and challenging environment.
We were able to stay competitive because of the size and scale Ardent has. We have created discipline around standardized and centralized activities to drive costs down and provide more effective and efficient services. Inflation is real, and margins have taken a hit. We continue to challenge the organization to think differently and stay ahead of our competitors.
Alfred: Given the staffing shortage and increasing costs, we are seeing a rise in opportunities to think about telehealth, technology inside/outside hospital, and deliver care efficiently.
Is Ardent expanding into new markets?
Marty: One must develop an understanding at a detailed level of where your money comes from and where opportunities are. Ardent was hospital-centric, but if you look at health care services, there is a definite shift from inpatient to outpatient care. Ardent had minimal investment in outpatient care; however, there is top line growth inside our current markets to simply expand outside of the hospital (clinics, urgent cares, etc.). With technological improvements and disruptors – there is potential revenue created outside of the hospital. Ardent will look to expand inside its core markets and “maximize the opportunities we have right in front of us.”
Healthcare Industry: Who has the Power?
Marty: Size and scale do not mean as much as it used to. The challenge with growth is you read about two large systems coming together. Creating megabillion dollar systems but not taking advantage of integrating their systems. Companies must create a predictable experience and leverage their size and scale.
How has the role of the CFO evolved?
Alfred: It’s much more focused on the business than it was historically. Over time there is a realization that everything touches the financial function. It is moving away from the controllership role and much more focused on executing strategy.
Thoughts on Nashville’s healthcare scene?
Marty: Nashville has been a provider-centric town. We have done a really good job recruiting other tech talent and fostering local talent. Austin was an innovative tech town, now Nashville has gained an advantage. This increases the odds of success when you have a network of people that know how to create solutions. We know what works for other major healthcare systems will work for us. Nashville has done a great job of incubating that talent.
Is there a fundamental shift in labor capital investment?
Marty: Not in the near term. Maybe certain niche aspects can transform. But technology can certainly help us do our job more efficiently and effectively. For example, vitals are typically taken 4-6 times per day which takes labor. We partnered with a company called BioIntelliSense, which creates a multi-parameter wearable device and advanced data services for continuous vital sign monitoring. We can incorporate AI and computing to analyze and feed that information to the nurses, removing the mundane tasks, making their jobs easier and more efficient.
That said, if we can take vital signs more frequently, perhaps we can free up capacity or intervene medically before people need a prolonged length of stay. Radiology is also ripe for disruption. Computers can read film better than the naked eye. The human component of what we do will always be there, but technology will help us be more efficient.
How do you create transparency and stakeholder visibility?
Marty: We must check our ego at the door and have humility to have those honest conversations. We have established a trust level, which we continue to develop.
For example, with potential partners, I establish the vision and strategy, but the reality is “go talk to Alfred”. If we can’t make this work financially, even if it’s a great idea, we are not going to do it.
About Ardent Health Services
Ardent Health Services is a leading provider of healthcare in communities across the country. With a focus on consumer-friendly processes and investments in innovative services and technologies, Ardent is passionate about making healthcare better and easier to access. Through its subsidiaries, Ardent owns and operates 30 hospitals and 200+ sites of care with more than 1,400 aligned providers in six states. Learn more at ardenthealth.com.
About the CFO Forum
Chris White of Savills co-founded the CFO Forum alongside Emory's Goizueta Business School in 2013, while our Nashville Chapter was founded in 2021 alongside Vanderbilt’s Owen Graduate School of Business. The Forum creates a productive community for CFOs to connect with their colleagues, exchange best practices, and gain access to expert business leaders' exclusive research and thought leadership. Information is available at www.cfoforum.us. The CFO Forum is generously supported by our partners at Vanderbilt’s Owen Graduate School of Management, Bradley, Deloitte, Aon, Savills, and The Grant Partners.