Q&A with Sam Heller, Executive Consultant in Finance, PDV Health Consulting

Financial management plans and systems must be strong and efficient in order for healthcare organizations to succeed and provide quality healthcare. Sam Heller has almost thirty years of experience as a Health Care Chief Financial Officer, with twenty-five of those years at the Visiting Nurse Service of NY. During his tenure at VNSNY, Sam helped grow the organization from $400M in revenues to a $2B Home Care and Managed Care Organization. 

Paul: Sam Heller is a long-time friend and professional in the finance field, and I want to share some of his thoughts and insights into healthcare finance, especially in the current healthcare environment. Before we dive in, Sam, please tell us a little bit about yourself and your background in healthcare finance? 

Sam: I’ve been in healthcare finance for all of my career, a majority of which I spent as the Chief Financial Officer of the Visiting Nurse Service of New York, the largest non-profit homecare managed care company in the country. After that, I also was the CFO at 1199 SEIU Funds – the Service Employees International Union. Throughout my career, I’ve been involved in all aspects of finance, including finance operations, acquisitions, investment of our endowment, revenue cycle management, and strategic planning. I’ve also worked very closely with organizational boards, CEO’s, regulators and other healthcare leaders. 

Paul: You have a great background, and I know that you’ve done many successful things because we’ve worked together at the Visiting Nurse Service of New York, which is a great company. Due to the COVID-19 pandemic, hospitals and healthcare organizations–be they big or small, nonprofit or for profit–are really struggling because of many issues such as the additional need for PPE, especially as we’re experiencing another surge. And now there’s a new strain brought to attention by recent events in the UK. Even if the vaccine would be able to help fight this, we don’t know what’s coming next. How does a finance professional work with their CEO in trying to manage this crisis that we’re in? 

Sam: I think all organizations must focus on two different areas. One is the day-to-day financial issues that all healthcare organizations are facing, and the other, at the same time, is trying to understand and have a plan for how they are going to operate post-COVID. So what do you do today? Number one, you need to obviously focus on your sources of revenue and expense, and the basic finance operations. You must explore opportunities to reduce your costs, simultaneously as other costs are increasing. You have to look at the revenue cycle–that’s always a key issue again in finance. So while it’s kind of basic, it’s also an issue that could fall to the wayside as the organization is facing COVID related challenges. Those are examples of what you must focus on today. But at the same time, you will also have to focus on the future, understanding what things are going to change and what things will stay in place. Other areas to focus on are customer service and data analytics. What has become apparent through this crisis is the need to quickly perform financial modeling and understand where things are going, what’s going to happen if your revenue declines, and is your patient base changing. 

You need to do this financial modeling and be able to advise your CEO, your board and other organizational leaders, where things are potentially going, so you can plan for them on a going forward basis. You have to look at alternative ways of delivering care, depending on what kind of organization you are, but it’s clear that things are going to move more and more away, as they have in the past, away from site-based care. How do you invest in digital technologies to take advantage? How do you invest in making patients feel comfortable? And will your future patients feel comfortable coming to your site, if you have a site? You also must think about your workforce and how to make them feel comfortable. So those are just some of the examples of areas to focus on while you’re dealing with the day-to-day challenges. One of the clear day-to-day challenges is whether your revenue is declining during current events, where are you in terms of your cash, how you’re monitoring your cash? Do you have a line of credit you can access to carry you over what could be a cash crunch. To summarize, you have to focus on today, while you’re working with your CEO, Board and the leadership team to plan for the future.

Mobile phone for Covid 19 business impact with facial masks and Alcohol Mini Hand Sanitizer gel on working office desk table workspace.

Paul: As you know, I was a former CEO at a very large FQHC, or federally qualified health center, with 16 health centers, and some of them had a psych and a medical in one building, but we had a lot to worry about. On one occasion during a meeting with my CFO, he said, “The best way we should look at this is clinic by clinic and look at the gross margin that we hold our managers responsible for, and not necessarily the bottom, bottom line, because there’s some things that are out of their control.” How do you deal with the things that are out of their control and that might also involve some tougher decisions? 

Sam: That’s a great point. It’s something that’s a challenge for every CFO in every organization. If you look at the total bottom line, which includes overhead, things that are not in the control of the individual managers, you’re in a constant battle with the managers of whatever operational division you’re looking at, as to, “Why am I getting so much overhead?” So I totally agree with the CFO you’d worked with that looking at gross margin before overhead is allocated is critical. Gross margin includes the expenses and revenue that the manager of that operational area is in charge of. That is a great way to focus. And then the CFO and the CEO, together with input from operations, looks at overhead, but separately.

Paul: We know that every payer has what we call the frightening audit, and a lot of companies have undergone audits. What advice would you give to an organization that receives a letter saying ‘you owe us X amount of dollars because you didn’t bill, or code, this correctly’? 

Sam: If you get a notice from a payer and in some ways, there is probably a difference from a governmental payer to a private payer. But clearly, you have to understand what is the issue and whether it’s true or not, did someone make a mistake or misunderstood the regulations/rules? So let’s say the answer resides in a gray area, not something where you clearly make a mistake or did something wrong. If it is in one of those gray areas, you have to totally understand it, go back to the insurer and explain why it’s in the gray area and how you handled it the way you did, why you did it correctly and establish a connection and a discussion. With a governmental payer, you need to take a slightly different approach. You push back and you don’t necessarily accept what the payer is saying. One has to look at the facts and go forward via further discussion.

Paul: Many people work in organizations that conduct different lines of business, such as perhaps clinics or home care, and they may do many things that are involved in healthcare. One question that always presents is, when should an organization decide to put together a parent-child or subsidiary relationship to benefit the organization where they might be autonomous and the overhead may be very slight? Or do you create a full-blown merger? For example, we see hospitals taking on other hospitals and not necessarily right away merging them together, but using an organization to consolidate to see what it looks like. If the organization is in financial trouble, they have what we would call a parent-child relationship, where the board is in control, they’re a subsidiary, they maybe have a couple of people sitting on the parent board. 

Sam: I think every situation is somewhat different, and you just have to look at what types of organizations you are looking at, based on the examples you gave, homecare, outpatient, or two hospitals merging. Let’s say if it’s two hospitals merging, and they are similar types of organizations with perhaps similar patients, are they using the same revenue and cycle management tools. Some kind of system must be in place to capture the information so you can manage these companies. When it comes to our financial systems, for example, you’re going to want to have them reporting to you; best case is on the same financial type systems, so you understand what’s going on in that organization. However, if you’re acquiring a different type of business, that business may not get the attention they need to succeed. For example, they may not be receiving IT priorities, or marketing priorities. Yes, maybe it is better to have them work independently and not allocate your overhead IT. Let them go and buy their own systems, and again, be responsible for that system. Quality measures might be totally different, or it might be the same, but maybe there you want a different type of system. The same for revenue cycle management. It’s a totally different type. And it might be better for them to negotiate and purchase separate systems. 

Partnership Concept. Multicultural men shaking hands after sealing the deal, women clapping in the background

Paul: When you and I were at the Visiting Nurse Service of New York, we executed many acquisitions and you’ve participated in at least ten of them. What is the biggest challenge that an organization encounters when they take on a new company, what were your own challenges, and how did you get around them? 

Sam: One of the major challenges in any acquisition is moving from due diligence to integration. And what many organizations fail at include a couple of things. What they fail at is you have a separate due diligence team, and then you say, “Okay, due diligence is over, let’s make the acquisition,” and you hand it over to the integration team. What I’ve found in the acquisitions we made, you have to have similar members of the team do both. So whatever you learn through due diligence, you can then transfer to the team doing the integration. So that’s one of the major things, I believe, you have to put in place. The second thing is, when facing an acquisition, you have to understand if it’s the same type of business. Who is, in terms of the leadership in the organization being taken over, do you continue with that leadership if it’s the same kind of business? 

We were in the homecare business that took over all their homecare agencies, and what we felt was that leaving the same management team in place may not always work for an organization, because they’re going to continue to go their way. It’s something you have to be very careful about and understand the current management, how they feel about the acquisition, and the culture of that organization. And if you want to change the culture, you might have to change the leadership team. If it’s not the same business,  you probably have some more leeway in terms of taking those steps, because you do not have that expertise in your organization. So you might, and probably do want to keep the leadership team in place while looking at other aspects of the business.

Paul: When do you think it’s time for an organization to say, “Listen, we need to bring an outsider in?” And what do you bring to an organization as a finance consultant? 

Sam: Organizations can get mired in the day-to-day, from putting out little fires, handling mini or major crises, and so on. Having someone who can help them deal with one of those fires, and who can also help them to think and look at an issue from a different perspective and come up with creative ideas are some of the major reasons why a company wants to bring in a consultant. From difficult and challenging issues, to operational crises, or to help leadership think things through and resolve differently–that’s what I do. I come in, look at things differently, strategically, and come up with creative, innovative ideas on how to correct the problem, on how to move forward.

Paul: That concludes our interview. Thank you, Sam! 

Sam Heller, a PDV Health executive consultant specializing in healthcare finance, may be reached via our website or email to paul@pdvhealth.com – please include in the subject line: Sam Heller. 

Sam Heller