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Becker’s Healthcare Podcast
Balancing Growth and Financial Pressures in Healthcare with Jenni Alvey
00:15:17
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- [00:00]
A
This is Madeline with the Becker CFO Revenue Cycle Podcast. I'm so excited to be joined today by Jenny Alvey, CFO of IU Health. Jenny, thanks for being on with me.
- [00:11]
B
Yeah, thanks for having me, Madeline.
- [00:13]
A
And we're so excited to have you back on the podcast. But for some of our listeners who might not know you or haven't tuned into the previous episodes, do you mind just sharing a little bit about yourself and more on IU Health?
- [00:24]
B
Sure. I'm happy to. Really glad to be here. My name is Jenny Alvey. I have the privilege of serving as the Chief Financial Office for Indiana University Health. I've been with IU Health for over a decade, including leading our revenue cycle services, being the treasurer before stepping into the CFO role, and just a little bit about IU Health. We're the largest health system in Indiana. We serve patients across the state throughout a network of both our academic and our community hospitals, our physician practices, all of our highly specialized programs. And really our mission is deeply rooted in improving the health of all Hoosiers. It truly drives all of our financial decisions that we make and how we talk about funding our vision while ensuring that care affordability and access to care for patients are also happening. At the same time, we continue to make investments in our workforce and communities. We remain committed to our longer term strategies that both our team members and our patients benefit from. You've probably seen we're moving to Epic and we're excited about that implementation in 2027. And then we're also going to be doing our new downtown medical center and we're excited about that too. So we've got some really big projects coming down the pipeline.
- [01:52]
A
Amazing. It does sound like a busy but exciting time at IU Health right now. And before we even kick off the podcast, I do have to say congratulations on the 2025 National Championship as well.
- [02:03]
B
Yes, of course. That is. We. We love Coach Signetti and really appreciate what the Hoosiers have done, and that team is just amazing. It's been fantastic to be a Hoosier this year. So cool.
- [02:17]
A
One of my dear friends went to the game actually, and she sent all the pictures. It looked amazing. So congrats on that. Had to throw that in there. As a fellow Hoosier myself.
- [02:25]
B
Yeah, it's, it's. I'm very proud to be an alumni. It's awesome. That's amazing.
- [02:30]
A
Well, thanks for again that intro there. And I guess I wanted to kick off. So. IU Health obviously just released its most recent financial report, Operating margin did decline to 0.5% despite some revenue growth. So could you share maybe some of the biggest structural cost pressures you're working to address over the next few years and just, just any thoughts on, on your most recent report?
- [02:53]
B
Yeah, thanks for asking about that. We knew we were going to have some pressure. Actually, we've been pretty transparent about having it in 25, 26 and 27 as we take on some big one time endeavors that we believe are setting us up for the future. So as I said, we had quite a bit of investment in the Epic system and our downtown hospital. We're bringing our Fort Wayne hospital online in 2020 as well. And so we have some really big projects. We are still very focused on our destination programs and our school of Medicine partnership. So we had quite a bit of investments in that. And then lastly, I'll just mention we've been on a care affordability plan for several years and we feel really strongly about making sure that our care is affordable while we provide great access and quality care to our patients. And so last year was really another big lift getting to where we thought we needed to be at the national average is a percent of Medicare. And we feel really good about that. And we have a plan, a long range plan that will continue to strengthen our margin and operating income as well as our balance sheet. So just more to come, stay tuned. But we feel really good about where we are financially and where we're headed, especially keeping our mission and our vision, you know, in the front of our minds.
- [04:29]
A
Yeah. And as you mentioned at the beginning of the podcast, all these big projects going right now, the transition to epic, how do you and your finance team just stay aligned amid all these changes? It's good things, but amid all this change.
- [04:42]
B
Yeah, actually we are very lucky. I am so thrilled to be in a great system like IU Health because of the way that we partner with our operational teams, our strategy teams, our clinical teams. I'm very lucky to be part of that executive team in how we all do our work together. And the financial planning is really well connected to our strategic planning, our clinical planning, our workforce planning. We do it through a long range financial plan. It's a very disciplined process and we have done it for many years and it is about funding our vision. So we maintain that rolling 10 year financial plan that reflects our revenue, our expense, our balance sheet assumptions. It gives us visibility beyond an annual budget cycle. And then we're using that 10 year plan to help prioritize major long term investments. So when my clinical partners, our chief Medical executive and our chief nursing executive came in and said, we really feel like we want to implement epic. We partnered with the entire executive team to say, hey, we're already doing these large growth projects. If we put EPIC in there, we're going to have to do some things differently. And so we use that 10 year plan to sit down as an executive team and make some choices on what we were going to prioritize, deprioritize or move down a couple years. And so that's really, we're doing it as a team. They aren't financial decisions that they are decisions across the system. With all the executives and all of
- [06:24]
A
our operational teams, wonderful teamwork really does make the dream work.
- [06:28]
B
It does, it does.
- [06:30]
A
Definitely. Well, so Jenny, I do want to switch gears a little bit here. You know, we've all been hearing about financial headwinds facing hospitals and health systems and a lot of policy changes going on right now. So I wanted to get your thoughts on maybe some governmental changes that some hospitals and systems should be keeping a close eye on right now and why you think they should.
- [06:52]
B
Yeah, I. This has certainly probably been at the top of the list for most CFOs across the country. The government uncertainty makes it very hard to do our jobs because the changes can happen in such a material way with your revenue so quickly that you aren't expecting it. And so what my advice has been and how we have done it is you need to be planning for those things. You need to have playbooks in place. And so we've been very, very close in partnering with the state on our state directed payment programs and supplemental funding. They are increasingly critical to hospital economics. They come with uncertainty, political risk, which requires a lot of planning and response. So being able to partner with, I will say peers, some people might say competitors, but I'm going to say they were our peers. We had several that we partnered with this past year in working with the state on, hey, how do we make sure we're prioritizing our Medicaid patients and how do we make sure that we're also reducing our commercial prices? How do we make sure that we're providing great quality care and we're able to do that going forward and supporting the state and their Medicaid needs. So we did a lot of work and focus there and that was a very particular focus in our state. I think across the nation though, we also have to focus on the changes in the Medicaid policies, particularly, you know, the work requirements and eligibility changes. And they could sound straightforward on Paper. But in practice they create a lot of coverage churn and emotion as it relates to uncompensated care. It can introduce significant financial burden for patients and create administrative barriers for patients to come in and get the care they need, or for hospital organizations to be able to provide the care. So we're just making sure that we're keeping a priority on ensuring our individuals who are eligible or connected to that coverage and help minimize their financial burden. And maybe a third category would be in really the broader regulatory and payer environment. There are a lot of reforms to prior authorizations, denial, behavior shifting, payment models and really how hospitals and payers interact operationally. Even small policy changes can really have a material impact on our cash flow and revenue predictability. So when you put it all together, it just reinforces the reality that hospital leaders are already managing thin margins, high capital needs, workforce inflationary pressure and growing demand. So we have to anticipate that scenario, plan and make sure we're ready for what comes at us and think about how we're going to make sure that we're true to our mission and deliver on the care that people expect from us.
- [09:54]
A
No. Some really great insights there. And you're so right. Everything you just listed. Healthcare leaders definitely are busy right now, so any solutions are useful. Could you dive a little deeper into how IU Health is positioning itself from, you know, and its financial strategy to remain resilient amid some of these uncertainties? You touched on it a little bit, but just anything deeper that you could dive into?
- [10:18]
B
Yeah, I think the again, I'm going to go to long range planning and if you do that as a team, that can really help you be prepared not only for what gets thrown at you, but also for the choices that you make. And we, we do it in two to three year cycles where we do a deeper dive. And right now we're working arm in arm with all of our hospital and physician leaders in how we're thinking about what are our volume needs, what is our market capacity, what should we be prioritizing, how are we thinking about that in partnership with the School of Medicine? What do we think inflation is going to be, how are we going to ensure we have a healthy workforce that are really truly engaged and that we ensure that they're paid at market and how do we make sure we're very efficient? So you think about putting all those aspects into a plan and then you overlay all of your strategies so you have to ensure that you are running very efficiently and running effectively at the same time. That you are continuing to grow, that you're continuing to provide great care to our communities and focusing on making our communities healthier. So I think if you, if you really sit down with the teams and you do that in a long range planning cycle, it, it could have a material impact. And a lot of people don't realize not for profit entities are limited to generating cash through operations and borrowing debt, while for profits can also issue equity in stock. So it's making access to debt markets critical for not for profits. And we really do then have to ensure that as expense and cash outflows for major capital strategic projects as they're impacting our days cash on hand, a strong balance sheet becomes increasingly important to be able to continue to deliver on our mission or respond in times like Covid and be ready for emergencies. So a lot of us across the country are trying to diversify our revenue streams. Think about that from a planning perspective and then just everyone needs to continue to be committed to care affordability. So we've made a lot of public commitments to price transparency, reducing patient financial burden. And that really requires balancing the margin protection with access and equity.
- [12:52]
A
Yeah.
- [12:53]
B
Wow.
- [12:53]
A
Some really great advice there. Along with governmental policy changes that we're seeing, what major decisions today do you think require CFOs to think even beyond that? Traditional financial management maybe acting as like an enterprise strategist almost.
- [13:10]
B
So we think of it here almost as like two different things. Our mission engines or operating engine and how we generate the resources that sustain care access affordability, reinvestment in our people faces near term headwinds, a lot of reimbursement pressure, labor cost utilization shifts and requires that continuous optimization because margins are thin. So we also have to think about our strategic engine, the investment engine and the balance sheet. And that engine converts that discipline risk into really a long term compounding for mission reinvestment. So that's really how I think about it. It supports the investments and facilities, technology growth, things like our new adult academic health center campus, regional growth projects and implementing EPIC to the new ehr that that is what really stabilizes an organization when operational winds shift. So you have to be highly focused on both and be thoughtful about how you're preparing for the future. And so that's hopefully that answers your question. But I think both of those engines are essential and one kind of defines the pace of flight and the other helps us maintain the altitude over time. If you think about it, you know, from an overall operational perspective.
- [14:38]
A
Yeah, no, definitely answers my question there. Again, Jenny, truly appreciate you taking the time to connect. It's always such a pleasure chatting with you and excited to hear about all the great things that continue to happen at IU Health. And again, congrats to your team as well.
- [14:54]
B
Yeah, thank you. Thanks for the time today, Madeline. It's always great to talk to you and love, love reading everything in Becker's. It's so such a helpful way for us to be able to stay connected to what's going on across the country.
- [15:07]
A
Well, we really appreciate you also providing us some insights. So thanks again, Jenny, and we'll be in touch.
- [15:13]
B
All right, thank you.