From Transition to Transformation
Unlocking Value with Interim CFO Leadership
By Shigeyuki Murota, MBA, MS, Managing Director, Sandra Pardus, MBA, Senior Advisor, Ardell Butler, Senior Advisor, and Katie Martin, MHA, Senior Associate
Executive Summary
An Interim Chief Financial Officer (CFO) provides a temporary but highly valuable leadership solution for organizations undergoing financial transitions, crises, or growth. Interim CFOs can provide immediate availability with deep expertise to address complex issues while minimizing disruption. Interim CFOs offer key strategic financial leadership during critical periods such as leadership transitions, audits, or financial restructuring. Even though an hourly rate is typically higher than a full-time CFO, Interim CFO engagements can be cost effective as they create a flexible engagement while avoiding a rushed decision to hire a permanent CFO. In addition, Interim CFOs can provide an independent perspective for the organization’s best interest by maintaining objective views with results-oriented focus. By providing critical financial leadership when and where it is needed most, a CFO offers organizations the flexibility, expertise, and strategic focus required to navigate challenges, seize opportunities, and facilitate transformations.
Industry Overview
Federally Qualified Health Centers (FQHCs) and FQHC Look-Alikes are organizations with unique needs. CFOs must strike a balance between ensuring viability and helping leadership maintain essential services to their patients and communities. CFOs need to manage strategic, sustainable, and mission-centered financial operations for health centers while paying close attention to unique requirements and regulations health centers must follow. Even with seasoned CFOs in healthcare industries, it is not an easy job to pivot and become CFOs for health centers as familiar policies and procedures, standards, reimbursement models may not be applicable.
With end of the federal COVID-19 Public Health Emergency declaration in 2023, all health centers have been facing the reality of post-pandemic financial challenges. As special funding related to COVID-19 starts to disappear, and pressure on 340B revenues continues to increase, CFOs need to focus on protecting health centers’ assets for sustainability while exploring strategies to diversify revenues and improve expense management to counteract cost increases related to high inflation.
Current Trends & Developments
The FQHC and FQHC Look-Alike CFO role is highly specialized as it requires extensive leadership experience with a solid financial background and unique knowledge of Health Resources and Services Administration (HRSA) regulations, which can be like finding a needle in the proverbial haystack of an applicant pool. Organizations are looking for CFOs who have prior experience to navigate through the ever-changing financial landscape and keep businesses running during times of leadership change. Hence, it is critical for CFOs to keep abreast of the numerous changes facing the health center movement, both from internal and external factors.
Since 2020, 69% of healthcare organizations have changed their CFO. CFOs in all industries, but especially in the FQHC space, stay in their roles for shorter tenures and retire at higher rates. The average tenure of CFOs in the FQHC space is only 3-5 years, which can interrupt business continuity and long-term strategic planning. With this rate of turnover, it is no surprise that interim leadership is the most common initiative for health center executive leadership.
Most Common Initiatives for CEOs and Presidents
Source: CFO.com by Informa TechTarget
Healthcare Industry Departing CFO Trends by Exit Type: Q1 - Q3, 2020 - 2024
Source: Russell Reynolds Associates
Challenges & Risks
Two-thirds of FQHC executives report that finding the right leadership is either moderately or extremely challenging. The risk in finding the right leadership hire applies to interim staff as well – finding the right person for the job can be challenging, no matter if the hire is interim or permanent.
Many executives in FQHCs have been operating the same way for a long time. An Interim CFO must be respectful of the culture and past while communicating changes positively. If an Interim CFO is hired while the search for a permanent CFO is ongoing, they must tread carefully to integrate within the organization while implementing robust financial practices to steer the organization in the right direction. If change is not communicated effectively or the Interim CFO does not develop a solid plan to take the organization forward even after they are gone, the risk of operations deteriorating or returning to status quo remains.
Opportunities
The main opportunity for health centers who choose Interim CFO staffing is prompt accessibility and flexibility. Rather than expending resources on hiring a permanent CFO simply to have the role filled, Interim CFO placements allow greater flexibility in use of resources and may drive cost savings in the long run.
An interim CFO placement brings a fresh perspective to health center operations, drawing upon experience while being mindful of future changes. Interim CFOs are uniquely positioned to provide skillful leadership and transform the course of organizations, leaving them in a comfortable place when it is time for the assignment to end.
Conclusion
FQHCs and FQHC Look-Alikes should be open to hire an Interim CFO to help navigate times of leadership transition. Interim CFOs apply their extensive and diverse experience to navigate and communicate change while steering organizations in the right financial direction. Interim CFOs often bring years of experience in the FQHC space, which is ideal to maintain business continuity in times of change.
In recent years, the FQHC and FQHC Look-Alike space has experienced high rates of leadership turnover, and it is often difficult to find the right candidates to fill leadership roles long-term. Interim CFOs play a valuable role in filling leadership gaps while working on succession planning and CFO development. Their unique experience brings a new and independent perspective to drive financial success. The Interim CFO can be short-term leaders with long-term impacts.
Sources:
McGlone, Jim, et al. “Healthcare CFO Turnover Highlights Upcoming Talent Gap.” Russell Reynolds Associates, 11 Nov. 2024, www.russellreynolds.com/en/insights/reports-surveys/healthcare-cfo-turnover-highlights-upcoming-talent-gap#:~:text=While%202024%20saw%20a%20shift,leaders%20with%20prior%20CFO%20experience.
Minemyer, Paige. “6 Trends Federally Qualified Health Centers Should Monitor.” Fierce Healthcare, 13 Sept. 2017, www.fiercehealthcare.com/finance/6-trends-federally-qualified-health-centers-should-monitor.
Zaki, Adam. “Interim CFO Demand up 103% Year-over-Year: Weekly Stat.” CFO.Com, 5 Apr. 2023, www.cfo.com/news/interim-cfo-demand-up-103-year-over-year-weekly-stat/654589/#:~:text=Given%20the%20turnover%20levels%20and,risen%20103%25%20since%20last%20year.