For example, where do we get all of our aspirin tablets that we take for a variety of ailments or pain? Despite the brand on the packaging, aspirin is not a US product, so where are these tablets manufactured? The Bitterfeld Supply Center in Bitterfeld-Wolfen, Germany, is one of the biggest aspirin production plants internationally and is still used by Bayer. Other medications may include components made in Spain as well as those from other nations, including China.

For example, with an annual production of 120 billion pills, China provides the vast majority of the aspirin sold in North America. Omeprazole and simvastatin are two other commonly used medications that are frequently imported from India.

Regarding health, there are many options outside of conventional treatment. These include complementary and alternative medicine (CAM). Cancer patients may find relief from nausea, pain, and exhaustion, as well as from the worry and anxiety that comes with their treatments, when they take part in alternative means.

On the other hand, when modern medicine fails to alleviate a patient’s symptoms — for example, in the case of advanced cancer or emerging infectious diseases — people turn more to traditional treatments. Also, most people think that traditional medications are harmless because they are all-natural. It is standard practice to combine herbs with other herbs, prescription or OTC pharmaceuticals, or other drugs. Therefore, this may not be the case and may cause additional medical problems.

Traditional medicine is often preferred because it is less expensive, aligns better with the patient’s ideology, addresses concerns about chemical (synthetic) side effects, provides more personalized care, and makes health information more accessible to the public. Herbal medicines are primarily prescribed to treat non-life-threatening, long-term health issues rather than acute, life-threatening ones.

If tariffs enter the picture in terms of pharmaceuticals and the pricing is also increased, there may be a resurgence of the use of more traditional forms of medications. Some major pharmaceutical firms have indicated that they will build new production facilities in the United States to avoid tariff-increased prices.

The Continuing Role of Herbal Medicines

A wide range of acute and chronic diseases, as well as a number of maladies and difficulties, including but not limited to cardiovascular disease, prostate issues, depression, inflammation, and immune system boosters, are treated with the use of herbs. In China, traditional herbal treatments were a key component of the plan to control and cure SARS in 2003, and in Africa, a flower has been used for decades to treat wasting signs caused by HIV.

In Europe, herbal medicines are also widely available; Germany and France sell more herbal over-the-counter medicines than any other European country. In most industrialized nations, herbal teas, essential oils, and extracts are offered alongside conventional medications. As researchers continue to explore the world of traditional medicines, they have found some crucial herbal ingredients that are amenable to new pharmaceuticals.

And, traditional medicines have been a part of the Native American tribes’ cultures, where the use of herbs was the basis for many health issues. For pain relief, Native Americans chewed willow bark. Aspirin, the most widely used medicine in the world, was discovered in 1897 using salicin, the main element in the bark. (Salicin is a building block of salicylic acid, the main component of most over-the-counter shampoos and treatments for acne and dandruff.)

Native Americans understood the rationale behind vaccines, which is to prevent disease by exposing the body to a weakened form of the infectious agent. According to Dr. Sophie E. Neuner, a research associate at the Johns Hopkins Bloomberg School of Public Health, indigenous communities sometimes self-inoculate by taking tiny doses of drugs, which help to mitigate the negative effects of higher doses.

Therefore, there has always been a place for traditional medicines, worldwide and, if tariffs present a financial burden to some groups of people, the tendency will probably be to try traditional medicines once again. That is not to say that there will not be a continuing use of these medicines, but it is more prevalent these days to use prescription pharmaceuticals rather than herbal remedies.

I know that in my family, my grandfather, who was a pharmacy intern at one time, did provide us with traditional cures for fevers and upset stomach. Will tariffs turn the tide from pharmaceuticals to traditional medicines? The question is waiting to be answered.

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Health system CFOs across the country face a unique quandary. Operating margins remain low, staffing shortages restrict services, industry-wide buying power is waning, organizational credit ratings are at risk, and inflation rapidly affects reimbursement and patient affordability. From the CFO’s point of view, it is prudent to look toward other industries and adopt a holistic approach to managing their organizations’ financial health.

The following seven habits can be employed by health system CFOs leading through turbulent economic times:

Embrace Adaptation in the Post-Pandemic Era

The pandemic disrupted traditional operations, requiring a departure from established norms. In this post-pandemic era, CFOs must acknowledge that returning to the pre-pandemic status quo is not feasible. Rising labor costs and supply chain challenges in the face of capped payor contracts demand fresh strategies. Relying solely on traditional approaches and partners in this new environment will not work. To remain effective, CFOs and their operational leaders must lead their organizations in adapting to the new post-pandemic reality.

Repurpose Savings for Clinical Impact

Non-clinical departments often struggle to inspire clinicians, but CFOs can bridge this gap by strategically connecting clinical goals with repurposed savings from overhead departments. Healthcare leaders should embrace innovative cost-saving approaches, such as considering non-clinical spending as a strategic category of costs to negotiate. CFOs can funnel those savings back into the clinical environment, easing pressure on physicians and nurses and enhancing patient care. An annual habit of exploring non-clinical spending to fund clinical initiatives can pay off for both resources and morale.

Shift from Volume to Efficiency

The age-old adage “volume is everything” in healthcare may not go away entirely, but it is evolving. CFOs increasingly steer their organizations toward cost-efficient practices rather than merely focusing on volume growth. Shifting performance measures from volume to efficiency is worthwhile, even if it is a departure from traditional thinking. This habit is needed as the industry acknowledges the importance of cost-effective care delivery—and the value within risk-based payment programs.

Execute Beyond Technology

Technological solutions typically rely on business cases and aim to provide essential tools for modern operations. However, this technology assessment must go beyond adoption and implementation. The true value lies in the execution of the solution and the insights gained from its use and performance. Sound systems require good data to meet their potential. As an example, a national home goods retailer conducted an RFP and needs assessment for its 1,200-truck delivery fleet. The organization derived information to extend the contract with a current vendor. The negotiation resulted in over $1.8M in savings through invoice credits, cash retention bonuses, and contracted cost savings. Most notably, the negotiation never disrupted distribution. The habit of “focus and finish”—connecting technology with non-tech performance measures—ensures that insights are effectively translated into actionable strategies. The discipline to perform a rigorous “look back” analysis on major technology investments is essential to achieving the promised ROI.

Embrace Data and Strategies Beyond Your Four Walls

There is a world of insights and opportunities beyond the healthcare industry. Although healthcare is unique compared to other industries, there are insights and lessons to be learned from looking at how business is conducted outside of healthcare. For example, wouldn’t a hospital want to know what the local university pays for groundskeeping in the same city? What about bank processing and other financial fees? In one case, the CFO of a big-box retailer looked beyond the industry for insights and saved over $10M by uncovering overcharged credit card processing fees that had slipped past their internal process for more than four years. With this information, the CFO and team negotiated a refund of the fees and all credit card agreements.

Knowledge sharing across industries can be valuable for all organizations. The habit of expanding a network of partners and collaborating with businesses outside the industry can provide fresh perspectives and solutions, which ultimately benefit the health system’s financial performance.

Question the Status Quo

CFOs should embrace the habit of challenging industry norms and targets. It’s a requirement to push change management boundaries in pursuit of effective solutions. One industry norm worth challenging is the singular reliance on group purchasing organizations (GPOs) to aid in spend analysis and negotiations. With GPOs addressing only 25% of non-clinical spending, there is an excellent opportunity to address cost savings in these categories. Unlike direct clinical spending, health systems compete with all industries to secure optimal non-clinical product and service contracts. Leading companies outside healthcare often devote more time and resources to secure better contracts. Continually setting the bar higher—to renegotiate contracts, adopt cutting-edge technology, or pursue innovative partnerships—can drive tangible results and transform the financial trajectory of health systems, no longer leaving money on the table.

Manage Non-Clinical Costs Proactively

Non-clinical cost allocation, akin to investments in a personal portfolio, requires constant monitoring and adjustment. CFOs should adopt a proactive habit of managing non-clinical costs that consume approximately 20% of revenue. By acknowledging the dynamic nature of healthcare finances, CFOs position their organizations for financial success. Also, the CFO can no longer assume that existing structures and partners are sufficient to control these non-clinical costs. Research shows that 75% of non-clinical spending falls outside GPO and procurement contracts. With today’s financial challenges, this leaves a gap in controls that must be addressed. The habit of managing non-clinical costs proactively pays off.

Proactive management of v costs has been proven to result in favorable contracts and significant savings in both annual direct costs and signing bonuses. This outcome was demonstrated by a discount retailer that conducted an RFP and needs assessment with their 10-year incumbent Warranty provider. The proactive assessment resulted in a more favorable contract with higher vendor engagement and training support from a new vendor. Beyond the service value, the resulting savings were $4M in annual direct costs and a $4M signing bonus in the contract’s first year, with the new vendor covering all transition costs.

Today, the role of a health system CFO extends beyond traditional financial management. CFO leadership requires a blend of strategic vision, adaptability, and innovative thinking about benchmarking and managing change. CFOs who embrace these seven habits can navigate the healthcare industry’s challenges in a post-pandemic economic climate, foster financial resilience, and ultimately contribute to enhanced patient care, organizational success, and highly competitive service delivery.

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Special thanks to co-author Mark Van Sumeren, who has more than 40 years of experience in healthcare strategy, operations, and supply chain management. As the General Manager of the healthcare practice at LogicSource, he spearheads cost-savings initiatives within nonclinical healthcare supply chains. Previously Mark held senior executive positions at Owens & Minor, Ernst & Young, and Detroit Medical Center, collaborating with major integrated delivery networks and academic medical centers to enhance operational efficiency and supply chain practices. 

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In my earlier posts in this series, I have written primarily from the perspective of what primary care physicians can do to improve their patients’ health and reduce total costs of care. Concurrently, they can reclaim their right to practice in a non-frustrating environment with a limited number of daily patient visits. Torinus approaches improving health care from the perspective of a business leader faced with rising health care costs. Here I will quote and paraphrase from Torinus’ book and, since I basically agree with his recommendations, will amplify with some of my own thoughts.

He argues that company CEOs must make health care a strategic priority since it is one of the top three costs for any company. In addition, healthcare costs can make the company noncompetitive if not managed aggressively. However, strategic priority to him also means it is essential for the company to attend proactively to the health and wellness of its employees, not just be the provider of an insurance plan.

CEOs need to consider the long term for their companies and employees. The company and the employee together spend about $16,000 per year for a family for insurance as of his 2014 book publication, obviously much greater than that today! Using his $16,000 estimate, an employee who works for a company for 25–40 years represents an insurance expenditure over a lifetime career that could be as much as $400,000 to $640,000 in 2014 dollars. This drives home the point that it only makes sense to have a long-term view of employee health, beginning with an aggressive approach to maintain wellness, actively reduce risk factors and manage disease as it occurs.

Some repetition here is worthwhile. Don’t just focus on treating disease but prevent disease and maintain wellness. Of course, that will cost some money now, but the end result will be a substantial decrease in total costs over the years. And, don’t just cover disease care but arrange for each employee and family member to have outstanding primary care to avoid unnecessary excessive specialty care.

He observes that the current health care system focuses on specialty care, whereas it needs to focus on the care recipient with high-quality primary care — the patient/consumer/employee. But to be effective, the patient/consumer/employee needs to be engaged. Instead, the current healthcare system disengages the patient — it removes responsibility because the patient is not the doctor’s customer.

In his company, expenses were rising to double digits by 2003, but with their new plan in place, it dropped to 2% or less per year.

Torinus’ “prescription” for all companies (and what his company initiated beginning in 2004) follows:

First, every company, including small companies, should self-insure with an added stop-loss catastrophic policy.

Second, employees should be offered only a consumer-directed healthcare policy (CDHP), in essence, a moderately high deductible plan (often about $2500) with either an associated health savings account (HSA) or a health-related account (HRA.) The company should prefund the account with an amount (often about $1500 or more) that the individual can use for any health care needs with the assumption that since it is now the individual’s money, he or she will spend it more wisely — employee/patient engagement.

Third, the company should insist that each provider have price transparency. Since that’s often difficult to obtain, Serigraph uses various companies like Alithias Inc to provide that for them so that they can compare one provider to another. For example, they determine the price of the all-inclusive (gastroenterologist, anesthesiologist, and facility fee) along with quality data of colonoscopies at the nearest five centers and then rank them. The employee or family member who needs the colonoscopy is told that, for example, the company sees it as appropriate preventive care and so will cover the cost, in this case up to $1,500. [His book appeared before the ACA became law, so the insurance component would cover colonoscopy now, but the principle is still valid.] This is an amount that will pay for, say, four of the five local centers, but if he or she selects a provider that charges more, they are on the hook for the remainder.

Fourth, if the company is large enough, it should provide an on-site primary care clinic at no cost to the individual. For example, at Serigraph, the clinic includes a concierge-type physician (meaning that the physician is salaried, has a low number of patients under care, and gives ample time and energy to each employee/family member patient, consistent with some of my previous posts) plus a nurse practitioner, a health coach, a dietician, and a chiropractor. On the other hand, if the company is too small to justify a full-fledged clinic, then the company can pay the retainer for a nearby direct primary care/membership/concierge physician who works with others, such as a health coach.

Fifth, the clinic, with particular attention by the health coach, gives all employees a health risk assessment annually and then works one-on-one with each employee (and family member) at no cost to maintain wellness and health, including the use of behavioral change programs around diet, nutrition, exercise, stress management, and smoking cessation.

Sixth, the clinic staff gives very intense management of chronic diseases and coordination of specialist visits when needed. (See my earlier article on care coordination by the PCP)

Seventh, Serigraph uses what Torinus calls Centers of Value for procedures beyond those that the primary care physician does. These are doctors/institutions that have outstanding quality records yet a competitive price for, say, a knee replacement. Serigraph gives their employees $2,000 toward the deductible or covers the deductible for the surgery when they use these Centers of Value.

Seventh, his company gives (and he recommends others do likewise) generic drugs for free, and all of the above prevention and wellness programs are supplied free of charge. Finally, the company makes free counseling available for developing advanced directives, and if an individual requires end-of-life care, hospice is available free of charge.

I notice that his company spends considerably on extensive/comprehensive primary care, including wellness maintenance, proactive prevention, behavioral health, and chronic care management. In return, the company is rewarded in return with lower total costs and healthier workers.

Given that healthcare has become a company strategic priority, then it needs to be managed, and that requires data. Hence, he urges all companies to develop health-related management dashboards, including both a financial dashboard (how much is the company spending) and a health dashboard (how many individuals in the company have uncontrolled blood pressure, uncontrolled asthma, uncontrolled cholesterol, have not had appropriate mammography or colonoscopy, etc. — all information collected from the clinic in an unidentified manner to protect individual privacy).

These approaches are based on fundamental principles, including individual responsibility; marketplace discipline — installing consumerism, steering business to the best quality and price (“do good work and you get our business”); proactive care — maintaining employees’ health and wellness and give extensive care to those with chronic illnesses; and sound management — putting those who pay, i.e., the employer and the employee, in charge.

Torinus suggests that there are multiple rewards for following this basic approach (I added number 2 since he implied but did not write it.)

1) The reward for business is a healthier workforce and more affordable healthcare expenditures.

2) The reward for individuals is more health and wellness, less illness, and fewer dollars spent.

3) The reward for high-value providers is more business.

4) The reward for entrepreneurs comes if they innovate with better care provided at a lower cost

5) There could be a reward for taxpayers — if governments (federal, state, and local) were to utilize these approaches.

Sound advice? I certainly think so.

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