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March 25, 2020
David Burda
COVID-19 Economics Outcomes System Dynamics

COVID-19 Will Test the Ability of Healthcare CFOs to Manage Financial Risk

Chief financial officers around the world are scrambling to figure out how to manage the short-term economic impact and the long-term economic effects of the COVID-19 outbreak on their companies and organizations. Nowhere is the need to find answers more urgent than in the offices of CFOs at the hospitals, health systems and medical practices on the frontlines in the fight against the deadly virus.

PricewaterhouseCoopers earlier this month asked CFOs at 50 different companies across all industry sectors, including healthcare, in the U.S. and in Mexico about their reaction to the novel coronavirus pandemic and how they think it will affect their operations. Their answers may help CFOs at provider organizations in the U.S. respond to what many experts consider the biggest threat to their financial sustainability ever.

Asked to rank their Top 10 concerns, as measured by the percentage of respondents who cited the concern as one of their top three regarding the COVID-19 pandemic, the CFOs said: 

  • Potential global recession (80 percent)
  • Decrease in consumer confidence, reducing consumption (48 percent)
  • Financial impact, including effects on results of operations, future periods, and liquidity and capital resources (48 percent)
  • Effects on our workforce/reduction in productivity (42 percent)
  • Supply chain issues (34 percent)
  • Not having enough information to make good decisions (14 percent)
  • Lack of a comprehensive/tested company emergency preparedness plan (6 percent)
  • Difficulties with funding (4 percent)
  • Impacts on tax, trade or immigration (2 percent)
  • Financial disclosures, including effects of results of operations, future periods and liquidity and capital resources (0 percent)

Fifty-eight percent of the CFOs said they expect their company’s revenue and/or profits to decrease this year as a result. Forty-percent said it was too soon to know. Only 2 percent said they didn’t expect the outbreak to have any financial impact. And no one said they expect revenue or profits to rise.

For hospitals, health systems and medical practices, those expectations will be exaggerated as COVID-19 treatment costs push expenses substantially higher and revenues from other clinical service lines, including elective surgeries, drop precipitously. 

In response, the CFOs said they expected to take the following actions:

  • 62 percent said they would be implementing cost containment measures
  • 44 percent said they would be adjusting their financial guidance
  • 32 percent said they would be deferring or canceling planned investments
  • 28 percent said they would be changing their company’s financing plans
  • 10 percent said they would be changing their merger and acquisition strategy
  • Only 14 percent said they are not considering changing anything at this point

Again, those actions likely will be exaggerated at provider organizations that are dealing with the crisis on the ground.

You can download the results of the PwC CFO survey here. PwC said it will regularly repeat the survey to track how CFOs in all industries are responding to the COVID-19 outbreak.

The Healthcare Financial Management Association also has created a page on its website to track COVID-19 industry news and developments that are affecting how healthcare CFOs do their jobs. You can visit the page here.   

Stay home. Stay safe. Stay alive.

Thanks for reading.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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