Rick Warren, Chief Financial Officer & Chief Operating Officer, Innovation Care Partners, brings lessons from more than 25 years in Healthcare Finance. This includes roles as senior finance and FP&A roles at Ascension (one of the one of the largest private healthcare systems in the United States), Banner Health, one of the largest nonprofit health care systems in the country, and CVS Health, one of the US’s largest retail pharmacy store chains. This is a must-listen for anyone who is interested in finance procedures in healthcare and the most important metrics in healthcare for anyone in finance.
This episode covers:
- How finance can help transform healthcare equity – the challenge of getting lower socioeconomic group fair healthcare coverage
- Rick Moving from a political science degree to finance and ultimately CFO
- The importance of Relevance over precision in FP&A
- The nightmare budget which crashed before it was saved
- Lessons from Boy Scout leadership positions
- Margins for hospitals still struggling post-covid
- The fundamental healthcare financial metrics including reducing hospital expenses, admissions per thousand, ER visits vs primary health care physician, SNF nursing home days spent, revenue and expense per member per month
- The secrets to effective business partnerships in FP&A
- Favorite Excel Function
FP&A Today is brought to you by Datarails,the AI-powered financial planning and analysis platform. Keep your own Excel financial models and spreadsheets and benefit from AI for data consolidation, reporting and planning.
Follow Paul Barnhurst on LinkedIn
Full transcript:
Paul Barnhurst:
Hello everyone. Welcome to FP&A Today, I am your host, Paul Barnhurst aka the FP&A Guy. FP&A Today is brought to you by Datarails, the financial planning and analysis platform for Excel users. Every week we welcome a leader from the world of financial planning and analysis. Today we are delighted to be joined by Rick Warren. Rick, welcome to the show.
Rick Warren:
Thank you. Great to be here.
Paul Barnhurst:
Excited to have you. So, just a little bit about Rick. Lemme get a little bit about his background. He comes to us from Mesa, Arizona. I actually lived out there for eight years, went to school at ASU, so Go devils and enjoy that area. He’s currently in a heat wave, so we might ask him about that a little later. He’s currently the CFO and CEO at Innovation Care Partners. He earned his bachelor’s in M B A from ASU and he also serves on the board of directors for the United Food Bank. So thanks again for joining us and we’re gonna start off with this fun, fun little question before we have you give your background this time. Tell me about your, the worst budgeting experience you’ve had in your career.
Rick Warren:
Well Paul, I don’t know if this is very exciting or, or very you know, yeah, very exciting. But early, very early in my time I was supporting IT. They had a very, very large IT organization within the corporation. About $120 million in spend. And I inherited a budget file that was very cumbersome. You know, I mean, all of us, anyone in finance knows Excel files can get cumbersome from time to time as you continue to bolt things on, right? Massive file predates the auto, auto save kind of automatically, right. And I hated to have that on because it just took so much time for the thing to save. Well, you know, where the story’s going, the day before the budget’s due auto save. We’ve done a ton of work. Autos save was not activated, crashed, had to rebuild the entire IT budget till about two in the morning. My manager, my manager was not very pleased at that point, obviously, but and, and lacked the detail. The budget lacked the detail we would’ve wanted. We got there, you know, close enough from an overall spend perspective. But yeah, it was just a nightmare to try to manage to that budget throughout the year. Even tried to recreate it. We got most of it in place from the detail perspective, but yeah, it just was not up to snuff in terms of really what you want in a budget file.
Paul Barnhurst:
Yeah, I won’t even ask what made it so bad? ’cause I’ve been there. I remember, you know, not so much Excel, but I’d written an entire paper in college and the entire thing crashed. The floppy disc I had it on became bad and they couldn’t retrieve it. I remember I had to go beg the professor for an extra day to get it done. So I, that kind of, that, you know, that type of thing, I can relate. So, you know, usually we ask what you learn from this experience, and I’m gonna guess I can probably tell you what the answer is, but I’ll I’ll go ahead and let you give that?
Rick Warren:
Well, yeah, a couple things, right? So, inherited this file, but I really try to make sure files are as crisp or as, you know, minimal as possible. I, I tend to be lazy anyway, and so, you know, I’m gonna try to find the best or the shortest way to do something. And then the other one which Excel has done a nice job of auto implementing now is the auto save function, right? Being sure that files are saved early and often. And again, not, not very exciting in terms of what I learned, but definitely has saved me a lot of errors in, in the future for sure.
Paul Barnhurst:
Well, I mean, I think there’s two, two good things there. The first we’ve all learned the importance of save and making sure the auto save on. Obviously Excel’s got a lot better. It’s much easier. But we’ve all lost a file. I’ve lost more than a few where you’re like, I just lost two, three hours of work, or whatever the amount is, and you just wanna, you know, pull your hair out. Right? So I can totally relate to that one. And I think the second thing you mentioned is just, you know, keeping files light, you know, structuring them well. And sometimes we had complexity thinking it’s gonna make us more accurate. You know, it’s almost like a, a foolish accuracy. Like, we gotta be totally precise. You’re never gonna be Right. Anyway. So you probably don’t need that extra layer of detail. Occasionally you do, but so many times, and I’m guilty of it, I’m a very much a detailed person. It’s like I put that in, it’s like, do I really need that in? Probably not.
Rick Warren:
Yeah. I think, you know, it’s a really good point. I mean, we’re not accountants and so it doesn’t have to tie to the penny. Right, exactly. I mean, I had a VP who used to say relevance over precision. Right? So, you know, it doesn’t really matter if it’s 12 cents or 14 cents if we’re talking millions of dollars. Because we’re not in accounting. Right. We don’t have to balance it. Right.
Paul Barnhurst:
Exactly. It’s a rounding error. And so you, you gotta think about it that way. I like that relevance over precision. So why don’t you go ahead and walk us through a little bit about your background. Tell us about yourself and how you ended up where you’re at today.
Rick Warren:
Yeah, so as you mentioned went to Arizona undergrad and graduate degree there. So, funny story. I my undergrad is actually in political science mm-hmm. <Affirmative> which doesn’t lend itself to a finance <laugh> career as you can imagine. Thought I wanted to join the foreign service, go to work for the state Department, took the written exam, passed that went for the orals. And about that same time I’m thinking, I don’t know if I wanna raise a family in, in some of the areas of the world where they might send me. And so I had kind of a pivotal moment where I said, crap, this isn’t the career for me and this is my final semester of my undergrad degree. And I’m like, well, I can either go back and, you know, redo my entire undergrad and get a business degree or what I opted to do was just graduate with the PoliSci degree and then go get my MBA.
And so that, that really made a difference from a career perspective and kind of fell into finance. Just happenstance was at U-Haul during my evening MBA program. I was running through a s u and went into a finance role or a quasi finance role, kind of an operational finance role, right. On the, in the operations and absolutely fell in love with it. And kind of the rest, I guess you could say is history and have spent the last almost 25 years in, in healthcare finance. And have loved it.
Paul Barnhurst:
Now as I’m hearing you say all that, we have a few similarities. My minor was political science. I did do a business major, but can relate to
Rick Warren:
That. You were smarter than me. <Laugh>, <laugh>.
Paul Barnhurst:
I dunno if it was necessarily smarter or not, but I did do that. So I, I enjoyed PoliSci. And the second thing is U-Haul. So when I went to grad school, the the owner’s son, Scott, what was his last name, was Joe
Rick Warren:
Schoen.
Paul Barnhurst:
Yeah, Schoen. Yes. They recruited me there. I ended up not going to U-Haul, but I had an opportunity to do an internship there. But he was in my M B A program.
Rick Warren:
Yeah. Smart moves.
Paul Barnhurst:
Yeah. So definitely familiar with U-Haul. So, yeah. I mean, I, I think everybody is, but just, you know, really close. ’cause He was a great, it was, it was fun to be in grad school with him. Good guy. But, yeah. Yeah. So you, you answered the one question I was gonna ask of how you ended up in finance with a PoliSci degree. So we, we, we covered that one, but the next one I wanted to ask, and this is, I’ll say a selfish question, so to speak. So I noticed as I was, you know, learning about you and looking at your resume, that you spent 18 years as a Boy Scouts youth leader. I, myself, have spent a similar amount of time, my parents spent about 40 years as scout leaders between them. And I’ve done, you know, Cub Scouts, boy Scouts, all different ages and different groups, you know, number, number of years. So I thought I would ask you what’s maybe one or two lessons that you’ve learned from that experience of working with youth that makes you a better leader at work?
Rick Warren:
Yeah. so the one that immediately comes to mind is patience. <Laugh> as, as you know dealing with, you know, a dozen or so, 12 year old boys is a incredibly patience trying experience, if you will. It really test your patience. And so you’re not, I’m not dealing with anyone that immature at work ever maybe a couple times, but for the most part that that’s not the level of maturity you’re gonna deal with, but it just helps you slow down and, and, and take things as they come and not overreact and not panic about, you know, the budget file crashed and I’ve gotta get it done and, you know, before tomorrow type of thing. Right? You, you can think methodically through things. And so I think that’s a, a big piece of, of what I learned. The other thing probably is more personal than as a leader, but it really has helped me to become flexible and adaptable.
So there are situations in scouting where you know, as you’re dealing with boys, you, you create experiences for them that kind of try test them in terms of are they able to adapt to this, right? Mm-Hmm. <affirmative>. But in addition to that, just because you’re living outdoors for a couple days or a full week, right? There are things that you don’t plan on happening that happen, and you need to adapt and be flexible. And so that’s a huge one as well, which every day in corporate America, in our, in our jobs, there’s things that change and we have to adapt and we have to be flexible. And so those are probably the two things that, that come to mind quickly are patience and flexibility, adaptability.
Paul Barnhurst:
I think those are both skills I could definitely relate to having done that. The, you know, the adaptable, the, the rainstorm comes, the snow comes in the middle of the summer that you didn’t expect, whatever it might be, somebody twists their ankle or hurts themselves. And you just gotta quickly adjust and be flexible, okay, how do we manage this? What do we do now? And so it helps you when the work situation comes to, to keep your head about you to kind of keep calm and think, okay, I’ve done plenty of situations like this, this, you know, in a different environment. How do I keep calm and manage this one?
Rick Warren:
Yeah. It, you know, interesting as you’re saying that, I’m thinking back to, I was a scout as a, as a young boy. And it was interesting. My first job out of college, for whatever reason, I had Eagle Scout on my resume. And the, the hiring manager, that’s all they wanted to talk about. And that that’s, and it wasn’t so much they were a scout, they were fascinated by it. Right? And mm-hmm. <Affirmative>. That’s probably honestly what got me my first job outta college was the fact that I was an Eagle Scout. Which, so it just kind of, it, it, there’s so many skills that that, that learn, you learn and, and grow from, from that experience. From your perspective, you, you spent a number of years. What, what is the lessons that you’ve learned that have helped you?
Paul Barnhurst:
You know, one, one of my favorite I learned, so I did what’s called wood badge training, which is, you know, yep. The adult leadership training. Many of our listeners probably don’t know what that is, but it’s a great training. And in fact, funny enough, I still have a card from it. And one thing I really like that it taught is the importance of basically the stages of team development and the leadership style you need for each level. And what they used is, it’s called the Edge principle. So as the team’s forming, you need to be explaining, which often means you’re upfront, you’re teaching and get very detailed. And then as you get to that next stage where there’s a little bit of what you’ll call storming, there’s a much more demonstration. Gotta demonstrate your thing, you gotta rein them in. And that third stage, they call it, you know, the G is guide.
You get to that point when a team, you know, little older boys, they start knowing what they’re doing. You’re starting to guide them, and they’re starting to perform. And then really, I like the fourth step. It calls it performing. And the idea is you enable, and it shows a circle where they’re all kind of working together and you’re just monitoring. And that, that leadership style has always stuck with me. That idea, that edge principle and thinking about that of how that applies to groups I’m working with and leadership. Because those stages you go through are pretty normal for every team. And so that’s one thing I’ve learned more in the leadership. And the second, like I said, I’m sure pa you know, patience is definitely one. Yeah. And so I, I’d say really that’s always stuck with me is that kind of leadership development model and how it can be applicable across so many different organizations.
Rick Warren:
I, I lo, I lo I’ve never heard that edge. You know, all anyone who’s been through any business class has heard, you know forming, storming, norming, performing. We all know that. Yes. Yeah. I had not have heard, heard of Edge, so thanks for sharing that. I’m gonna have to go look that up and commit it to memory
Paul Barnhurst:
<Laugh>. Yeah. So I really like it. It fits with, like I said, anyone who’s watching this will be able to see. There’s a little card that I’ve had it now for, I don’t know, 12 years. Just sits on my desk. So, been been good. So switching gears here a little bit. We covered the scouts area. I’m sure a few people are like, what are they talking about? <Laugh>? This is a finance podcast, but hopefully they’ll find value in it. So you recently posted on LinkedIn about health equity. How has emerged as one of the pressing issues in healthcare in the us? You know, what role can we play as financial professionals in solving that issue? And maybe just help people understand what that issue is. First, just give a little bit of a Yeah. Background and then your thoughts on it.
Rick Warren:
Yeah, you bet. So you know let’s just be really transparent here. And, and Paul, as white males, we don’t experience this at all, right? I mean, so health equity tends to impact lower socioeconomic groups minorities. And, and what it really, really boils down to is their inability to get the exact same type of care that you and I might be able to get. Whether there’s overt discrimination, whether there’s payment issues, right? I can’t afford the care, right? Et cetera. And so there’s a lot of, a lot of push. The, the primary governing body for Medicare, which is CMS, centers for Medicare and Medicaid Services, actually has implemented a new program this year in, in one of their test models that focuses heavily on equity. And so, really, when you think about it, finance we’re always about the bottom line, right?
It’s all about the bottom line. And so a lot of equity flies in the face of that bottom line. So let’s just take a hospital system, for example. The best payers in a hospital system are the commercial payers. It’s commercial insurance, right? It’s the employed, employed people who get their insurance through their employer, UnitedHealthcare, Aetna, Cigna, those pay the top rates. And it’s usually 120, 130% of Medicare. So if Medicare is paying a hundred bucks for a procedure, they’re gonna pay $130, right? Medicaid is the worst payer, meaning that they’re the lowest payer. So if Medicare’s paying a hundred bucks, they’re paying 80, maybe 90. And so automatically what happens, there’s a bias towards, well, if, if I put my hospital a new hospital in an area where there’s a lower socioeconomic group, and the primary patients are going to be Medicaid patients, I’m gonna have a low performing hospital. And so there has to be this recognition that hospital systems really should not be operated on a for-profit perspective, right? Really trying to optimize care across the population, not just in those most lucrative or most profit, profit-oriented areas of the, of the geography.
Paul Barnhurst:
No, I, I appreciate you sharing that. And yeah, it does, right? For profit, the idea is to maximize profit for shareholders, which, if you’re doing that and you’re putting ’em in those locations and you’re focusing on those people, you’re automatically creating inequity, which has to be hard to watch as a, you know, as a person. You get it from a, I think we all understand it from a finance perspective and why the investors are doing what they’re doing. Totally. But can totally understand. I I, and I’m sure we have some people in our you know, audience listening who are like, okay, they must be in the US right? Yeah. Because we have a very different healthcare system than a lot of other countries. And some of those challenges are unique to us. Some are not unique to us, some are shared worldwide just in different ways.
Rick Warren:
Definitely. So,
Paul Barnhurst:
[Datarails ad] You know what, it is, like 13 different spreadsheets emailed out to 23 different budget holders, multiple iterations, version control errors, back and forth updates you never really feel in control of the consolidation and collection process. Yep. I’ve been there. Stop. Breathe.
Data rails is the financial planning and analysis platform for Excel users. Data rails takes data from all your company’s disparate sources. No organization is too complex, consolidating everything into one place, secured in the cloud. Now all your data finally talking to each other, everything is automated. Back into your report in Excel. Cashflow FX conversion, intercompany transactions now automated and up to date, drill down and variance analysis in seconds. Don’t replace Excel, embrace Excel, turn your Excel into a lean mean FP&A machine, find out more@www.data rails.com.
So, kind of continuing on, you know, when you’re as a, as a leader in, in the healthcare industry, you’ve been there for 25 years, what are some of those key operational financial metrics that you like to keep track of, that you like to look at that really help you understand how the business is performing?
Rick Warren:
Yeah. The, so in reality, if you’re gonna make money, you’ve gotta lower your expenses, right? That’s no shock to anyone in finance, <laugh>, no matter where you are, right? And so, sure, as you think about it from, from that perspective, some of the most cost most costly expenses are hospital expenses, right? So if I’m looking at it from an overall insurance perspective, I’m looking at my admissions per thousand. So how many people am are admitted to the hospital per thousand members? I have, right? Another big one is ER visits. So how many people are going to ER as opposed to the just seeing their primary care physician, right? Yep. There’s a, there’s a huge over utilization of ER in our country. And so that tends to drive a, a big, a big spend. And we look at that. Another one, we call it SNF days, SNF, which is basically what the rest of the world knows as nursing home, right?
So how many days are, are people spending in a nursing home getting rehabilitated or whatever, so they can go back to their home. And then the, a big, a big area within the finance realm is we look at both revenue and expense on a per member per month. So we really boil it down to a unit cost and a unit revenue perspective to understand how profitable a certain line of business is, a certain payer is, how expensive they are, et cetera. And so those are, those are probably the big areas that we look at that from a healthcare perspective.
Paul Barnhurst:
Got it. And so I’m, I’m curious how, you know, how difficult was it for you being in healthcare, managing this all during COVID? Like, how much did that kind of impact you? And you’re, you’re smiling and laughing already, so I can imagine I had a huge impact. I know so many things were shut down, a lot of surgeries, procedures, you know, from a finance perspective, how did you manage through that time as a leader?
Rick Warren:
Yeah, so it’s interesting. So I, I’m in a li I’m in a niche area of, of finance, healthcare, of healthcare, if you will. And it’s I, I work for what’s called an accountable care organization, an ACO. Mm-Hmm. And basically we take risk from insurance companies. We manage that risk, so they’ll pay us a certain amount, and then if the claims are less than that, great. We make a profit. If the claims are more than that oh, you know, we have a loss. Well, got it. Okay. So you can imagine for us during covid, that was fantastic, right? We, we, we, we actually did better than we had before. ’cause No one was, to your point, no one was getting anything done, right? If you had covid, you had, you were going to the hospital, but no one else was ever in the hospital, right?
Unless they had a severe issue, right? So, so from the non-hospital side, the insurance companies, they made a ton of money. The hospital side really suffered and, and we’re still struggling. So we’re owned by a hospital system. We’re still struggling on the hospital side across the country. If you look margins in 2022 for hospital organizations were negative. So negative half a percent negative percent operating margins. Really still struggling to move from back from that covid environment that are low pay, low profit margin, back to where the procedures are profitable, hips and knee replacement, cardiology things. Those are the more profitable ones. And so they’re moving slowly back there. But a lot of those are also going to standalone surgery centers, if you will. And that gets into a whole other story. But, so, so depending on what side of the healthcare spectrum you’re on, whether you did well or not within when Covid happened,
Paul Barnhurst:
Sure. And, and that makes sense. So it’s like every business, right? Yep. Some businesses did great during Covid. If you were Amazon, you were thrilled. Yep. You know, I was working for a company where one of the big parts of our business was taking automotive insurance claims. If nobody’s driving, yeah. Nobody’s crashing. Nobody’s filing claims. Which, you know, it kind of sounds bad and you think, but that was the business model, right? Sure. There’s a certain number of people on the road and you expect a certain number of accidents, and all of a sudden you see a reduction of 90% for, you know, several months. And that’s a huge impact on the business. You know, fortunately, we’re diversified enough as an organization that, you know, we, we ended up being fine. We came out of it strong. But it was definitely a real challenge is all of a sudden, you know, dealerships, I support car dealerships and they’re shutting down. Nobody’s getting service, nobody’s buying new cars. And, you know, everybody’s wanting to call us and cancel their subscriptions.
Rick Warren:
Sure. Yeah. <Laugh>
Paul Barnhurst:
Trying to go, well, no, please don’t, we’ll do this. Or we’ll stick with us and we’ll stick with you, you know, all the, all the things you say to try to get through that type of time. So yeah, it was a definitely a crazy environment. So I, I appreciate that on the metrics. And it’s kind of, you know, interesting to hear ’em ’cause they’re so different than many of the metrics you get for typical businesses. And that’s why I wanted to ask a little bit about those. Sure. And I know you’ve been a CFO, you know, a couple, couple different roles where you’ve been a business unit or a company CFO. So if you could go back and tell yourself one thing before you became a CFO, what would it be and why?
Rick Warren:
Well, this is gonna sound funny because what I told you I learned from Scalia, it’s probably be patient, I tend to be a very impatient person, right. <Laugh>,
Paul Barnhurst:
I, I don’t know if I can buy that. Didn’t you say you have seven kids? If you have seven kids, you have to be patient.
Rick Warren:
I do. Well, you, you can ask my kids how patient I am. They, they, they’d probably agree with me that I’m not very patient. So I, I tend to be not patient with myself. I’m probably a little more patient with some others, but sure. With myself, I’m not. And so I felt like, especially early in my career, I was always clamoring for that next role, that promotion, that diversification, whatever it was. And, and, and just telling myself, Hey, just let it come. Right? It’s gonna happen when it happens. And, you know, you don’t have to over-engineer it and, and you know, you’re gonna learn as you go through these things. I think the other thing I would tell myself, and I didn’t appreciate this till probably 10 or 12 years into my FP&A, the importance and the value of partnering with the business. And, and I think, you know, we’ll probably talk more about that. But those are the two things. Patience and be more patient and, and partner with the business. So,
Paul Barnhurst:
Yeah. I, I, I think those are two that all of us could be better at. You know, business partnering is huge in finance, and we’ll talk more about that here in a minute. And, you know, patience, right? I think all of us could probably be more patient, especially with ourselves. We’re our worst critic. We’re the hardest on ourselves. Often we think, Hey, I gotta be moving up in my career. I need that promotion, that next role when we’re really learning a lot where we’re at. And if we just be patient and give it some time, yeah, we’ll, we may be better off in the long run, but sometimes we don’t see that. ’cause We’re just so focused on, I, I need to get to that next role, or I need to get that next promotion or paycheck or whatever the reason may be. They’re usually multiple. Yeah. But I, I’ve been the same way. So I can totally relate, relate to that one. So next question is, obviously you’ve hired, you know, FP&A and finance staff being a CFO. What are the key qualities you look for when hiring someone in FP&A? What do you wanna see?
Rick Warren:
Yeah, I just, it’s funny, I just posted this, something about this on LinkedIn yesterday. Probably the first and foremost is integrity and transparency. I didn’t talk about that in my post, but those two are really big for me. I wanna know as soon as possible, right? When there’s an error, when there’s a problem. <Affirmative> generally probably 95 to 98% of the time it’s not the analyst’s fault or the, you know, whoever it, it, it’s just, it just happened, right? And so I, I believe that we learned from those things. And so that’s a big one. Problem solving. I used to ask a, a question when, when I was manager and director of any hire, I was gonna ask to tell me, tell me the number of disposable diapers consumed in the US right? Kind of one, you know, just one of those random crap, crap crap questions, no pun intended there, <laugh> about, you know, what, just what, when am I ever gonna use that in this role, Rick? Right? Why are you asking me that? Right? Because I just think helping, figuring out how they think. That’s the most important part. I could teach you everything you need to know about finance, finances, but if you can’t problem solve you’re, you’re not gonna be much value to the team. So those are probably the two biggest ones. How about you?
Paul Barnhurst:
Definitely transparency and integrity. I wanna know if there’s a problem. And then for me, I wanna see, you know, two things. One, like you mentioned, the thinking, the problem solving, the critical thinking. I wanna understand how they think. And I also wanna see if they’re a motivated person. You know, are they hungry? Do they have a desire to learn and grow? Because like you said, they, I can teach ’em the finance stuff. I mean, ideally I want someone with finance, sure. But if I have someone who’s not motivated or not a critical thinker that has a great FP&A resume, and someone who doesn’t have that fp and a resume, I’m gonna take the other person that’s that critical thinker and that’s motivated to learn and showing me that they’re have that growth mindset trying to develop themselves. So similar to you. Yeah, I think there’s definitely some similar things on that front is, and what I look for, I mean, I’ve often found some of the best FP&A people I’ve worked with, and I’ve said this more than once, or people have an engineering background, you know, they don’t come from finance ’cause they’re so solid on the math, they think critically, they have so many of those skills that if they have the, you know, the good communication skills to go with it, they’re fabulous FP&A people because of the background they have.
Rick Warren:
Yeah, no, that’s a, that’s a great, a great point. A lot of the, a lot of the people that I jelled most with in, in my M B A program, were engineers moving out of engineering into a finance type of function, if you will. So,
Paul Barnhurst:
Yep, exactly.
Rick Warren:
I think totally get that.
Paul Barnhurst:
That’s funny. Yeah, I, I’ve, I’ve definitely seen that a lot and sounds like you have too. So, you know, kind of now talking about FP&A, or, we talk a little bit about hiring, but what are some of the key, key things from your perspective to be a good partner? You mentioned that’s one of the things you wish you would focus on a little earlier in your career and recognize. So how do you think about partnership and being a good partner for the business today?
Rick Warren:
Yeah, there’s a, you know, and I think I’ve heard you use this, use this term before, right? I, I think the antithesis of a good partner is the CF-No, right? Yes. Right? And, and, and so, so that’s an easy one. I think the other, the other thing I would say is when I think about a partner, right? Most of us, I, I, I read something a a while ago, 60%, a little over 60% of the people in the US I couldn’t get a worldwide stat, but over 60% of the people in the US are in, are in a partnership relationship, right? Mm-Hmm. <affirmative>, married, living together, boyfriend girlfriend. Sure. So when you think about that relationship, what, what do I want for my spouse or my significant other, I want success, whatever that means for them, right? So when I think about a business partner, I’m trying to help that organization, that department, that team, whoever I’m supporting, succeed, right? So I’m their strategic partner. I’m gonna come in and I’m gonna talk about how can we grow your business? How can we optimize your business? How can we, you know, help you improve from an efficiency perspective, whatever it is. Whether it’s the chief operating officer where the SVP of sales can I support them in that role? I think that’s the biggest piece for a finance partner to do, is really determining what do they need and then meeting that need.
Paul Barnhurst:
Good analogy there. Relating it to relation, you know, personal relationships, whether that be marriage or living with someone or whatever the arrangement may be. As you mentioned, you know, if you care about ’em, you want their success, right? In any healthy relationship, you’re gonna care about ’em. And it should be similar at work. If you have a healthy work relationship, you want your partner to be successful. And one of the things I saw one time like kind of four pillars of trust book, one of the key concepts that talked about is your intentions is a key thing to building trust. And if your intention is to help your business partner be successful, it’s gonna be much easier to build trust than if your intention is, I’m gonna do whatever’s needed to get me promoted, and I don’t care about my business partner.
Rick Warren:
Yeah,
Paul Barnhurst:
You’re gonna be much better off focusing on taking care of them. It will pay off in the long run. And that’s why I tell people, ’cause sometimes you get caught up in thinking about me and how do I, how do I look good? If you make your partner look good, you’ll look good. The, your leaders will notice.
Rick Warren:
Yeah. And that, that’s a really good point. So as I think about this, and I, I mentioned earlier, it took me a little while, a little while to learn that. So when I started out, I was really committed to learning the business. And so it wasn’t a problem for me to work with ops to learn the business mm-hmm. <Affirmative>. But in 2010, I started with a, a a company called Prime Therapeutics and, and was their fin the finance leader for their pharmacy area. And in that role, I started to support A COO who really changed the, the trajectory of my career because how he leveraged me, but at the same time treated me. He helped me partnered with me. And I realized that’s how you partner with someone. And so I, a a lot of my career success, if you will, from then on to a guy named Dwayne Barnes, who really just helped me see, this is how you partner with someone, right? And, and so it’s not just being there and understanding the business. I liked how you said it, right? It’s being strategic and helping them improve and succeed.
Paul Barnhurst:
Yeah. And that’s great, right? Often it takes that that mentor or that leader to show us the way. Yeah. Because we don’t always realize how it needs to be done. And that’s one of the things we really, you know, try to bring to people with this show, is to help ’em get some of that experience. Maybe they don’t have the leader, maybe they are the leader, but learning from different people of how they pick up those skills and how they thought about it. ’cause It doesn’t come natural to everybody. You know, some people might naturally be a business partner and figure it out. Others, we need, you know, a fair amount of help along the way.
Rick Warren:
Yeah. Yeah.
Paul Barnhurst:
So next question here, kind of getting back a little bit to healthcare and budgeting and forecasting, maybe what are some of the things that you see as unique to the industry when it comes to budgeting and forecasting? Are there some unique things you really have to deal with that you don’t think most other industries, you know, have to consider when they’re doing the process?
Rick Warren:
Yeah, I’m, I’m, I’m not as sharp as, as most people out there. And so I, I don’t know all the industries, but I will say from, from where I’ve been in the healthcare side most recently, probably the biggest factor is the long tail on revenue. So in, in the organization, we’re in literally in the October, november timeframe of this year, we’ll get paid for last year, right? Or we’ll, or we’ll have to cut a check for last year depending on how we perform. But, so there’s a, there’s a very long tail on that revenue, right? So we’re in January of 22, we’re starting to record revenue based on what we think we’re gonna get paid in October or November of 23, right? And we’ve got, there’s some metrics along the way that help guide that, but that becomes really hard. So when I think about the first 15 years of my career working in pharmacy, pharmacy’s point of sale, right?
So literally there’s three days at the end of the month where you might not have that data, but you got, you got 90% of the month then. And so you really are tight on your revenue booking, right? Sure. And, and forecasting. Whereas with this, it’s much, there’s a much longer tail. So a heavy involvement with actuaries, obviously that, that we’re dependent on in terms of trying to develop what that incurred but not reported. IBNR you, some folks may have heard of that, but really trying to understand what that looks like and how that’s gonna impact our revenue. So that’s a, that’s probably the biggest one. And then may, maybe another one in this particular side of healthcare, not the hospital system, but in the, within this ACO there’s not a lot of variable head count, right?
So in the pharmacy world or in a widget world, right? If I’m at, if I work at Intel, right? I can sit there and say, I know how many people I need to produce X widgets, right? That’s not really the case over here. And so really managing headcount and managing, you know, that, that ’cause probably 70% of our headcount is fixed. And so really figuring out what’s the right level of headcount. ’cause All everyone in finance knows if you ask an operational person, do they need more heads? Sure. They’re always gonna say yes, right? <Laugh>. So it’s really understanding, okay, how badly do they need it? Right? Really is there a need there? Is this, you know, so those are probably the, the two or three biggest areas of, of difference for me that I see in healthcare.
Paul Barnhurst:
Yeah. And, and when you mentioned the heads and operations, always wanting more people. You know, one of the things I had a boss that was really good at, and I learned was he required every one of ’em. I want a capacity model, and you have to show me that you need a person and you need to help explain why these are the right metrics for your capacity model. And that made it so much easier. When we’d have the conversation, they’d be like, well, can I have this person go, do you really need ’em? And they’re probably not yet. And they knew they couldn’t quite justify ’em in the numbers. Well then, you know the answer, I, if you don’t have the numbers to support it, I can’t give you another person because we’re just, you know, not using resources wisely at that point. Yeah. And so that, that really helped a lot to have those conversations because then they weren’t gut fill or I, well, I think it should be this or that. We could actually look at the data and say, does this make sense?
Rick Warren:
Yeah, yeah. No, it, it, it, it’s really easy on when you’re talking about variable heads, but even, you’re right, even with fixed heads, you can build some of that out. It’s, it’s not as always intuitive. A little bit harder to get to, and honestly, I’ve been here a year and so we’re building out some of that for our fixed heads, but it’s a, that’s a longer, harder road to hoe than, than obviously a variable head wear.
Paul Barnhurst:
Yeah, I totally agree. My mine was much more variable, which makes it much easier. I mean, when you have heavy fixed costs, it’s hard to manage. I mean, look at the airlines. Yep. Especially if you have a lot of competition. Yep. Right. Or, and you have one huge, in their case, one huge input that can vary a lot in oil. That’s a, I mean, that’s not an industry I’d wanna be in. It’s a tough
Rick Warren:
One. <Laugh>. No.
Paul Barnhurst:
So I, I, I could definitely see where that’d be really challenging when you have a very heavy fixed cost of people and then you have, you know, various variation in the revenue and a very long tail.
Rick Warren:
Yeah.
Paul Barnhurst:
That, that could be some things to folks manage. Yeah. Well, you know, that’s what we want. Want job to be fun. We wanna be challenged. Exactly. Nobody wants to go to work and be bored every day. At least I don’t.
Rick Warren:
No, me either. So,
Paul Barnhurst:
You know, speaking of that, I mean, you mentioned the long payment cycle. How does that kind of impact the ability to manage things in the healthcare industry? You know, cash flow and working capital, whether it be a hospital or where you’re at, you know, I know there’s a lot of places where there’s that long tail. So how do, how do the businesses typically manage that?
Rick Warren:
Yeah, so they’ve done a hospital systems have done a pretty good job. Larger ones, right? If you, even the small independents are, are doing better at this, but a big factor is revenue cycle management. So you don’t really hear about that in a lot of other industries, but there’s literally a whole division within a a large hospital system that their total focus is basically minimizing rework to, to simplify it. So it’s getting the medical coding right the first time around, right. Managing denials, right? So insurance companies, some are better at it than others. When I say better, I mean more austere just denying, right? Our first, our first answer is always deny, and that’s not really their attitude, but with some industries, with some you can feel like that. And so managing those denials getting that payment posted automatically. And so in between banner and, and ICPU, which is where I work now, I work for a company called Ascension.
They’re in the Midwest, probably some of your listeners for the, and they’re a hospital, large hospital system spread across several states. They actually outsourced, built an entire independent company around revenue cycle management and now sell that to other people. So there’s a whole industry around trying to optimize that cash flow. Even with that, it’s still, it’s still difficult, right? You have to be judicious about your spend, right? And understand that, you know, revenue recognized day, you, you’re probably not gonna see the cash for, you know, six, six months or so, depending on the procedure and the revenue, right? So
Paul Barnhurst:
Yeah, no, sure. I’ve definitely having, you know, family where we’ve dealt with some medical issues and going through that, whether it be surgeries or therapy and just the long tail and sometimes getting a bill eight months later, because, you know, like one time we told ’em on something of this dental, we don’t have insurance, but they didn’t hear that. They said it to the insurance company. Of course they denied it. And you know, months later we get it. You’re just the one waiting for the cash. I mean, I’ll, I’ll hold onto it till you tell me I need to pay you. I’m not gonna complain, you know? But, so I, I’ve seen that many times on the, on my side, and I’m always good with, Hey, the longer you take it to get it, get it to me, the less I’m gonna complain. But I imagine on, you know, obviously the opposite on their side. They wanna maximize how quickly they can get that. So yeah, it definitely is a, say it’s unique to the healthcare industry. I mean, other industries have a long tail, but it’s a different because of the, the third party, you know, the payer system that we have with both the insurance and the customer and all that. So,
Rick Warren:
Yeah. And that, and that’s you know, I’m not familiar with, you know how other countries you know, sure. Payment cycle works for healthcare. So for, that’s probably fairly unique to the us So some of your listeners may be scratching their heads going, what are you guys talking about? But that, that, that is a, a, a very large and a challenging issue that, that healthcare organizations deal with across the board, be it a hospital system, be it a, a lab, whatever it is, at the old, at the end of the day, the, the insurance company’s the primary payer and they’re the ones that take the longest. So
Paul Barnhurst:
Yeah, no, ma makes sense. And yes, I’m sure, like you said, some of our listeners are probably wondering what we’re talking about. We did have a, we did an episode where we had on someone from the UK talking about the National Healthcare Service over there and the supply chain. And they started their job, I think a week before shutdown. Oh wow. Or like a month or something. And they were on the supply chain side. So you can imagine that was, you know, they were run, they were the head of FP&A for the supply chain for the National Health Service. So that was quite an interesting 18 months. Welcome to your job. Yeah. Moment. Exactly. So, you know, switching gears here a little bit back, you know, kind of to being a CFO, if you have a listener that wants to be a CFO, any advice you would offer them?
Rick Warren:
Yeah, it’s, it, it’s gonna sound redundant. So, so financial acumen is really table stakes when it comes to our, our, our business, right? And everyone should have that. So you’re not gonna differentiate yourself. And I’ll even go this far, right? I am probably the weakest modeler in Excel you’ve ever seen, right? You know, maybe not the weakest, but I’m definitely not. I I’ve listened a few of your episodes and you have some incredible guests who you know, yeah. Are, are high, high end modelers, if you will. And that, that’s not me. You’ll see when you get to one of your last questions you normally ask with how, how rudimentary my, my Excel skills are anyway, so, so all that to say, that’s not what gets you into that C-suite. It’s their strategic thinking and it’s the partnering, right? Those are the biggest parts of my role now are those two.
And so we’re often told right throughout our careers you know, perform like you’re in the job you want, right? And so you need to start now being as much of a strategic partner and a strategic thinker as you can, right? How do you get engaged with the business more than you are? And not just that so that you know that, but that you can influence them, right? And help them make decisions. So I think about a a, you know, a couple of ones in my career, one, one was around a pharmacy that we stood up. We were deciding whether we should continue to outsource it or internalize it. We opted because of some financial modeling, I’ll call it, we, that I did, but wasn’t really robust. But a lot of, a lot of conversations with the COO around internalizing, it went from $600 million to a $2 billion business when we insourced it, right?
So huge opportunity there that we were finally were able to take, take advantage of. And another one, when I was at Banner, when I got there, we the, I’ll just say the the losses within our division were triple digits in the millions, whew. When I left Banner, they were double digit profitability. And so a lot of that was strategic conversations. Is this the right partner? Should we be entering into this business? How do we improve this area of the organization? And I’m not taking credit for that, but through those conversations and my, my involvement in them as a team, we were able to lift that performance. And so really just partnering with the business and being a strategic thinker that’s gonna get you there. Not your finance or, or or Excel skills.
Paul Barnhurst:
Great answer. ’cause The CFO is looked at as a partner for the c e O and the business. And so focus on the strategy, the strategic thinking. And that actually leads perfectly into our next question. So this is kind of about what we call a strategic moment. So can you, can you tell me about a time in your career when you experienced a strategic moment, you know, i e a strategic insight that allowed you to drive change in the organization, kind of empowered the organization?
Rick Warren:
Yeah. And so I probably should have held back on those two examples. ’cause I’m gonna use one again, but, but, and I’ll go a little deeper on Banner. So I, I started there. I, I didn’t know, you know, they weren’t sharing with me what the financial performance of the division was. I, I get to whatever, whenever within probably the first month or first week looking into the financials, I’m like, holy crap, I should probably shouldn’t have come here. We’re losing a hundred over a hundred million dollars <laugh>. So started to talk about how do we move the needle on this, right? And so working with the business, restructuring contracts optimizing some of our performance around, minimizing what I talked about earlier, right? Our admissions, our emergency room visits, et cetera. We even had a contract that was performing so poorly, we decided to sell it.
We decided to sell our half of the interest in the business, right? And that was a, that was probably the big, not probably that was the biggest part of the turnaround, but so multiple levers we had to pull. And I look at that as the, the, probably the greatest strategic accomplishment of my career. Taking it from a hundred million dollars to a little over $20 million profit. Now, I will be fully transparent and say part of that, we got to profitability without Covid, but the $25 million was part of partly Covid, right? Sure. Like I say, we benefited, but, but we would, but a big chunk of it was strategic items that we took action on, which that, that was a ton of fun.
Paul Barnhurst:
Yeah. Whenever you see a turnaround, you see something going from poor numbers to, you know, positive numbers. That’s really neat to see, especially when, you know, you help make some of those decisions and you set in the room and you had the conversations and you see it working. So that great example there. And you know, like I said, COVID benefited some hurt others. That’s just how the world works, you know? That’s right. There’ll be, there’ll be other unfortunate things like that. And there’ll be winners and losers just like AI or the internet or whatever it might be. And if you plan, well, you know, there’s a lot you can do to help ensure you come out on top. Not always. Sometimes life is uncertain for sure, and you get hit with something that you can’t come back from.
Rick Warren:
Yeah. How about you? How about from a strategic perspective?
Paul Barnhurst:
You know, I, I think from a strategic perspective, you know, there are a couple things. One that I really enjoyed being involved in was helping the business make the decision. So I supported American Express and I supported Travelers Checks, which was an extremely profitable business for a long time for American Express, you know, their biggest business for many years. And they had a added travel cards. And I was involved in the decision to shut down that business. And we, we had conversations on travel card. It just, we ne we, we got into it late. We weren’t big there, it just didn’t make sense. It’s, I can remember, you know, just the strategic conversations, Hey, what should we do with Brazil? We looked at selling, it didn’t make sense. We looked, you know, I think we had five different markets that we were in and watching us shut down all those, I think that was strategic.
And also there was a lot of rework we did to, to carve everything out and understand our numbers. ’cause Eventually what happened is they sold off all the prepaid business outside of Traveler’s Check. And so I had left by that point. But being involved in that and seeing the numbers turn around, ’cause that was a business, there was an article that got out about how it wasn’t performing very well and so they did a lot of restructuring. And so seeing, you know, the numbers improve from like one year to the next by like 99%, you know, similar to what you saw, you know, type of thing. Yeah. Because we, you know, there was a year where everything you could put in, you did so to speak, where, you know, accounting would allow you to accelerate some things, all that, get it all out in the open, do restructuring and see that improvement the next year. And also to see an improvement in how we’re able to report and focusing on the important things. That was probably, that experience for me is probably one of those that would have to be toward the top of the list.
Rick Warren:
Oh yeah. That’s awesome.
Paul Barnhurst:
So, alright, so this is a get to Know You section. We’re gonna go through, you get no more than 30 seconds for each answer. Okay. And I have four, four questions we’ll go through and then we’re gonna kind of wrap up here. We’re coming up at the end of our time. So what is something interesting about you that not many people would know, something we wouldn’t find online
Rick Warren:
For your audience? Yeah, I’ve been married for 31 years and we have seven kids as you mentioned. Three girls. Four boys
Paul Barnhurst:
That same in my family. It’s, I grew up with four brother three brothers myself and three, yeah, three sisters. Oh, awesome.
Rick Warren:
So
Paul Barnhurst:
I can relate to the seven <laugh>. Alright. If you could meet one person in the world, dead or alive, who would you meet and why?
Rick Warren:
So we’ll exclude Jesus Christ. So I’ll, I’ll, I’ll go either Mahat Ma Gandhi or mother Teresa. I, I’m fascinated by people who will spend their entire lives giving to other people. I, ’cause that’s not my nature at all, <laugh>. And so I’m fascinated by that. I’d just love to spend some time with them. And
Paul Barnhurst:
We, we haven’t had Mother Theresa before, but she’d be a great one. You’re the third person that’s mentioned. Maha Na Gandhi. He’s definitely a popular one. And I agree. He would be fascinating. Both of those would be amazing to sit with and, and, and talk to.
Rick Warren:
Who’s yours. So,
Paul Barnhurst:
You know, I’ve been asked this before and I’m almost tempted to change the answer again. I’d love Gandhi. I mean, there’s a lot of people. One right now that I would love to sit down and have dinner with is a guy by the name of Davis Smith that runs Cotopaxi.
Rick Warren:
Oh yeah, yeah.
Paul Barnhurst:
For-Profit. one of the Corp Bs out there. I love what he’s doing to try to alleviate poverty and I’d love to sit down and have a conversation with him. So he, he has to be toward the top of my list right now.
Rick Warren:
Yeah, that’s a great one. Yeah, that would be fascinating.
Paul Barnhurst:
Yeah, I’ve, I’ve, I’ve chatted a little bit with him via direct message, but I haven’t had a chance to hear him speak and so I’d like to meet him in
Rick Warren:
Person. You need to get him on your podcast.
Paul Barnhurst:
I got his f p head of FP&A the podcast, but I Oh, did, but I haven’t got him. I did
Rick Warren:
Earlier. I got list Do it <laugh>.
Paul Barnhurst:
So I wanna have him on so that, that is on my bucket list to get him one of these days. So next question, and I’m gonna change it up just a little bit, is what is the last thing you have Googled or used generative AI for? Even looked up on YouTube around finance, you know, FP&A, Excel, something you needed to, to research.
Rick Warren:
So, you know, spoiler alert, Paul sends you send us, you send me the questions beforehand. I racked my brain on this. ’cause As I said, I’m not, I don’t, you know, I don’t, I don’t do a ton. But what I did come back with was I realized I have done some searches on how can I use generative AI in my forecasting, right? How can my team do that? So that’s the last thing, is trying to figure out how do I leverage these AI tools that are becoming so pervasive in our forecasting and and budgeting process.
Paul Barnhurst:
That’s a good one. I like it. I think a lot of people are asking that question right now, which, you know, leads to our next question before we head to the wrap up section. Favorite Excel function feature? What’s your favorite thing about Excel?
Rick Warren:
Yeah, this was the one I told you. I, you’re not gonna be, you’re gonna be underwhelmed. I, you know goal seek, I love goal seek. I just I, I’m a pretty simple guy and so I, you know, you gotta model and say, okay, what, what do I need to do to this variable to get it to go to make this profit right? Or this margin or whatever it is. So,
Paul Barnhurst:
No, I think that’s a great one. It’s one that’s been mentioned before and Goal Seek is great. I remember the one guy who mentioned it, he was, I think our Bryan Lapidus, I think it was the fifth episode we had. He goes, when I realized what Goal Seek could do, I was running around the off cycle, like, look what Goal Seek can do and nobody else was as excited as I was <laugh>. And I just kinda laughed. I remember him explaining it that way ’cause he’s like, oh, this is really cool.
Rick Warren:
That’s funny. So that’s how I feel.
Paul Barnhurst:
<Laugh> no, it, it’s a great, it’s a great tool. I, I’m, I’m with you on that one. So what do
Rick Warren:
For the simpletons y
Paul Barnhurst:
Yes. <Laugh>, no, you know what the reality is is I like to say, and many people have heard me say this, I don’t know if I’ve said it on the show, but I say it a lot is complex is easy, simple is hard.
Rick Warren:
Yep.
Paul Barnhurst:
It’s really easy to make a messy, complex model, but to simplify it so everybody understands it, it’s driver base, it’s easy to update. That takes a lot of experience and skill and that’s true in so many areas. Yep. So keeping it simple is a really good thing. There’s no reason to make things more complicated than they need to be. The process will do that for you. Agreed. You don’t need to do it to yourself.
Rick Warren:
Exactly. Yeah. So,
Paul Barnhurst:
So what do you see as the most critical skill for someone starting out in FP&A today? And I think we talked a little bit about this. I’m gonna guess where you’ll go on this, but what would you say to someone starting
Rick Warren:
Out today? It’s partnering with the business, right? I mean Yep. Learning first you gotta learn the business, right? Yep. But, but again, that, that’s, that’s I think pretty common now with finance folks as well. But then figuring out how do I help Jane Doe or John Doe, leader of this division or this department, whatever it is, improve, right? How do I make them shine? How do we, we become the pillar in our, in our, in our, in our organization. So,
Paul Barnhurst:
Great. So last question. If someone wants to get ahold of you, maybe ask you a question, what’s the best way for them to reach out to you?
Rick Warren:
Yeah, here’s my cell. Not just kidding. <Laugh>,
Paul Barnhurst:
I actually had somebody do that on a show actually. Yeah,
Rick Warren:
Well, we’ll talk to, yeah, probably LinkedIn. You know, I’m, I’m on LinkedIn fairly regularly, so that’s probably the best way.
Paul Barnhurst:
Alright, great. Well thank you so much for joining us, Rick. I really enjoyed chatting with you and getting to know you a little better and I’m excited to share this with our audience.
Rick Warren:
Yeah, thank you Paul.