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The Role of the CFO in Controlling Health Care Costs is Focus of School-Sponsored Roundtable

November 30, 2011
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Steven G. Ullmann, director of the School’s programs in health sector management and policy

CFOs have taken on a critical strategic role within their organizations, especially with regard to health care costs and health care reform. That is according to Steven G. Ullmann, director of the School’s programs in health sector management and policy, who addressed the new role of the CFO during a roundtable discussion this month in Miami. The  latest in a series of such discussions hosted by The CFO Alliance in partnership with the School  explored the transformative paths health sector businesses must navigate to achieve high-quality, low-cost health care benefits for their employee. Ullmann emphasized that a CFO’s role has become a dynamic one.

“The realization is that CFOs these days are strategic in the C-suite – they’re no longer just watching the budgets and finances of organizations,” said Ullmann. “They’re becoming more and more directive and involved in figuring out organizations’ strategies, especially as we go through major changes associated with health care reform.”

Ullmann told the audience of more than two dozen CFOs that the rising cost of health care is impacting the competitiveness of the U.S. Today, 17.4% of GDP goes to health care expenditures, more than any other country. That figure is expected to rise to 20% within the next decade, roughly equaling $13,000 in health care expenditures for every person in the United States.

“This is not just a domestic issue,” said Ullmann. “This is a global issue, because this affects our competitiveness in the world market.”

Ullmann added that the health care industry is unique in that, unlike most other markets, competiveness in health care can actually raise the cost of care instead of lowering it.

“If two health care facilities across the street from each other have an MRI machine, for example,” said Ullmann, “and both have incorporated the capital to purchase the machines, the facilities have to distribute the cost. How would they do that? By over prescribing MRI’s for patients who come through their doors. In the end, you have an overutilization of health care and costs go up.”

The number of services performed per patient is also growing, leading to increased pricing of medical services as a result of increased demand. According to Ullmann, prices are increasing at a rate nearly double that of the Consumer Price Index, a national measure by the U.S. Bureau of Labor Statistics of price changes in consumer goods and services.

“As a patient has less responsibility, the bulk of the costs and risks shifts to organizations--through their insurance companies--and to the government,” said Ullmann. “If you reduce incentives to shop around, patients are less subject to incentive structures in terms of their utilization.”

Ullmann noted that employers are trying to get costs under control. And in the workshop that followed his presentation, he asked the CFOs to discuss what they believe would be the best health care strategy for their own organizations.

The roundtable discussion was the fourth in a series of such events since early this year, when the School partnered with the CFO Alliance to establish the national group’s South Florida chapter. The first two events featured presentations by D.J. Nanda, a professor of accounting at the School of Business.
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