The importance of innovation is oft-discussed – in media, books and, perhaps most importantly, in the boardroom. What’s little discussed, however, is how to execute on that innovation and who to partner with to get it done. At Blue Shield of California (BSC), a symbiotic relationship has formed between the finance and innovation teams, highlighting the benefits of working closely together for business efficiency. This month I spoke with BSC CFO, Sandra Clarke, to learn more about her perspective on innovation, how she works with the chief innovation officer and why finance and innovation ultimately go hand in hand.
Jeffrey Thomson: You recently assumed the role of CFO at Blue Shield of California (BSC), previously serving as CFO at Daiichi Sankyo’s U.S. subsidiary, a global pharmaceutical company. What do you like about working in the healthcare industry? What unique challenges does the finance and accounting function face in this competitive, highly regulated industry?
Sandra Clarke: I really like being able to contribute to the health and well-being of our society and the opportunity to innovate in an industry that touches every person in our country. Our mission at Blue Shield is to provide access to high quality healthcare that is worthy of our family and friends, and that is sustainably affordable. We have a lot of work to do to achieve that goal. But I like a challenge, and I’m energized by what lies ahead.
Being part of a nonprofit healthcare organization also really resonated with me. We are driven by the needs of our members, not the returns for shareholders. We voluntarily cap our net income at two percent of revenue, returning anything above that to our customers and the community. From a finance perspective, this somewhat limits our access to capital for the investments we need to make to change the way care is delivered, but there are also benefits. Because we are focused on the satisfaction of our members and not on the satisfaction of investors, we can make long-term investments that will improve the member experience, healthcare quality and affordability without having to worry as much about their initial impact on quarterly earnings.
Thomson: When you were hired, Blue Shield of California also created a new chief innovation officer role. How does finance support innovation at BSC? What is the best way finance and accounting professionals can make themselves distinct and add value to their organizations?
Clarke: Jeff Semenchuk, the chief innovation officer, and I are both new to the organization, but we’ve already worked on a few projects together. I think finance and innovation go hand in hand. We both want what’s best for the business, but we approach problems from different angles. When we work together, we’re more likely to find the creative, cost-effective solutions we need to solve our challenges. In finance, we should also be looking for every opportunity to be more efficient as a business. My goal is to save $100 million in administration costs over the next three years to help fund investments in innovation and efforts to manage healthcare costs.
The best way for finance and accounting professionals to bring value to an organization is to be a good business partner, be curious, and, ultimately, be aware that the numbers are retrospective outcomes of business initiatives. When you understand that, you can differentiate yourself by using the numbers to predict outcomes and support the business in a meaningful way.
Thomson: You’ve previously mentioned it’s a “dynamic time” for U.S. healthcare, however, many would argue it’s also a volatile time. Blue Shield of California strongly supports affordable healthcare for consumers. How does the finance and accounting department contribute to this vision and mission? Do data analytics and customer segmentation play a large role in your ability to deliver affordable healthcare?
Clarke: The wonderful thing about our mission is that everyone at Blue Shield can contribute to it some way. In finance and accounting, we can contribute by making sure we’re thinking creatively and appropriately about how to ensure we run our business effectively to keep premiums as low as possible and to finance the innovation necessary to support our mission. We can collaborate with the innovation team to come up with partnerships and investments that drive cost down and improve care quality. Data analytics plays a huge role in our ability to provide sustainable affordable health care by providing us with the information to we need to identify and prioritize areas of improvement within the system.
Thomson: In 2011, Blue Shield became the first health plan in the nation to voluntarily limit net income to two percent of revenue. Any year in which Blue Shield earns more than two percent, the company will return the difference to its customers and the community. Does BSC’s focus on community make it easier to recruit sustainability-minded millennials and other finance talent? How important is it to be able to recruit high quality candidates? What are the competencies you look for in finance talent?
Clarke: In addition to our two percent pledge, we also have invested more than $500 million dollars in the community since 2002 through the Blue Shield of California Foundation. We believe our commitment to the community certainly attracts mission-minded individuals, and that’s just what we need. When you’re on a journey to change healthcare as fast and as profoundly as we are, you want the best people who believe in the mission to come along with you. There’s a lot of competition for talent in the Bay Area, where we are headquartered, but our mission and commitment to the community have helped us attract and retain employees that identify and align with our vision and company culture.
To me, a good finance person is a good business person. I look for people that are curious, passionate, flexible, open to change and that are a good cultural fit. Artificial intelligence and robotics are rapidly changing finance. If you want to keep closing the books the way you’ve always closed the books, you won’t be happy.
Thomson: Digitization has changed healthcare delivery in many ways, giving consumers more tools to manage their lifestyles and to reach out with questions. Your Wellvolution® program (with virtual consults) and 24/7 Nurse line are good examples of how successful healthcare companies offer accessibility and convenience to consumers. As the pace of new technology increases, what role will artificial intelligence or intelligent process automation play in healthcare delivery? What do you anticipate its role will be in the finance function itself?
Clarke: There’s a lot of potential in both healthcare delivery and finance for artificial intelligence and automation to take on rote tasks, enabling people to focus more on meaningful touchpoints. We are using it in some of our actuarial analysis now. In addition, we are investing, directly and in partnership with other Blue Cross Blue Shield plans, in companies that are using these technologies to make sustainable and measurable changes for members and providers. I think there will always be a high human touch in healthcare delivery, but the more we can use technology to reduce stress and paperwork for providers, the more they can focus on improving the health and well-being of the patient.