Pursuing excellence: What’s
next for finance in healthcare?
The role of a center of excellence for finance operations
in delivering healthcare value

July 2021

Content
Executive summary

3

1. Healthcare value excellence is the goal4

2. Clinical excellence has more prominent structures than finance excellence5

3. Get inspiration from the success of other non-patient-facing functions

6

4. Select an area of primary focus for the finance CoE

7

5. Set up finance CoEs to effectively disseminate finance expertise8

6. Create a finance CoE to ensure delivery of healthcare value

10

Authors:

Vikas Kharbanda

Emmanuel Aisabokhae

Partner 				Healthcare & Life Sciences
Arthur D. Little, Middle East
kharbanda.vikas@adlittle.com

Manager
Healthcare & Life Sciences
Arthur D. Little, Middle Eastaisabokhae.emmanuel@adlittle.com

Matthew Chandler*
Senior Locality Finance Manager
NHS England & NHS Improvement
matthew.chandler@nhs.net*Matthew Chandler contributed to this report in a personal capacity; this report does not necessarily represent the positions,strategies, or opinions of his employer or the UK’s National Health Service.

Executive summary
Today’s healthcare organizations have a very challenging role: deliver excellent
healthcare for every patient at an optimal cost. The emphasis for healthcare
providers has been on improving healthcare delivery processes and models.
Health outcomes and, to a certain extent, cost structures, have improved as aresult. While this pattern is to be encouraged, healthcare organizations must also
focus on achieving operational finance excellence. Operational finance excellence
refers to the use of tools, methodologies, systems, and so on, to provide best-inclass financial analysis, reporting, and management of resources for the deliveryof healthcare.
A finance center of excellence (CoE) is an organization that assumes responsibility
to develop the healthcare system’s operational finance excellence. With theright focus and structure, a finance CoE can be an effective vehicle for national
healthcare systems to drive operational finance excellence and achieve improved
healthcare value. This focus on operational finance excellence is even morepressing now, as the requirements for success in healthcare have been further
complicated by the expanding need for innovation, agility, resilience, andintegration.

3

1. Healthcare value excellence is the goal
“Excellence is doing ordinary things extraordinarily well” –according to John W. Gardner, US Secretary of State for Health,
Education, and Welfare in the mid-1960s. A culture of doing
ordinary things extraordinarily well is a goal all organizations
should strive for. One way to ensure that operations arecontinuously done extraordinarily well is to identify the bestprocess for achieving a desired outcome and then replicate thisestablished process anywhere and anytime the outcome inquestion is required. This exercise of identifying and propagating
best practice is best carried out by a CoE, which organizations
can use as a place to consider philosophies, approaches, andtheories, and to develop, curate, and disseminate knowledge
effectively within a system to achieve improvements.

Excellence in a changing health landscape
Healthcare delivery is changing and the need to pursue overall
operational excellence is more acute than ever, having quickly
shifted from seeking the best value for patients in normal
business times to getting the best value for patients in very
uncertain times. Today’s new normal requires innovation, agility,
resilience, and integration within the healthcare ecosystem.
Services like telemedicine, previously on the fringes ofhealthcare, are now moving toward the center of service
delivery. Improved overall integration between primary care andsecondary care continues to be a necessary goal. Healthcare
systems must routinely seriously consider strategies forresilience in their normal planning cycle. All these advances
must be performed while delivering best-value healthcare,particularly in the public sector, where significant attention
is paid to the stewardship of public resources.1

1
2

4

Defining healthcare value
A classic economic definition of value, from Harvard Business
School Professor Michael E. Porter, is outcomes relative to cost(see Figure 1). Given that measure, to be excellent in deliveringvalue, the excellent delivery of outcomes must be done at an
optimal cost. Value has been a fundamental consideration for
healthcare systems, especially where resource constraints
require particular emphasis on the need for optimizing treatment
pathways.2 Determining the best way to balance the relatively
straightforward total, or average cost of delivery, compared to
the far less straightforward valuation of patient and population
outcomes sits at the heart of the debate on healthcare value,
particularly in public healthcare systems. It is a debate thathighlights the need for operational finance excellence – the useof tools, methodologies, systems, and so on, to provide best-inclass financial analysis, reporting, and management of resources
for the delivery of healthcare.
Figure 1:

Porter’s definition of value

Value

Outcomes relative to cost
Source: Harvard Business School, Professor Michael E. Porter

Source: Bennington, John, and Mark H. Moore, Public Value: Theory and Practice, 2011
Source: “BRICS seek value for money as health-care costs rise,” Bulletin of the World Health Organization, 2014

2. Clinical excellence has more prominent
structures than finance excellence
The existing setup in the delivery of healthcare is more favorable
to the achievement of excellence in health outcomes than forachieving operational finance excellence. Healthcare systems
tend to be organized in such a way that healthcare expertise for
specific diseases is developed in a central place and cascaded
down to where the knowledge is needed. A good example ofthis is organization by specialty, along with the referral system,with knowledge moving downstream and patients moving
upstream. This setup is well recognized by medical practitioners
from a very early point in their training. Indeed, medical
specialties have associations, academies, and colleges whereknowledge is developed and cascaded down or out to thebroader profession. In this way, these “centers of knowledge”
serve as “centers of health outcomes excellence” for specificmedical specialties.

The healthcare referral system
Healthcare delivery is often organized in three layers – primary,secondary, and tertiary – with increasing levels of knowledge
residing in each layer as you approach the tertiary layer. In thissystem, patients are initially seen in primary care and only
escalated to secondary care if their condition requires a higher
level of medical knowledge for the specific condition. Those
cases are then treated in secondary care and only referred totertiary care if an even higher degree of knowledge is required
to address the patient’s condition. In this system of healthcare
referral, specialist knowledge is at its highest concentrationin the tertiary centers. The experts develop the knowledge
and cascade it down to the rest of the healthcare system(via publications, formularies, seminars, medical advice, etc.)
such that their colleagues can manage routine/ordinary cases
extraordinarily well and refer only unique cases up the chainof expertise. This arrangement supports the concentration ofknowledge in centers of health outcomes excellence.

Finance in healthcare
In comparison with the setup that supports health outcomes
excellence, operational finance excellence, particularly indeveloping healthcare systems, may not have a structure inwhich to generate and cascade knowledge. Better structures
are often present in more mature healthcare systems, perhaps
at the regional or local level, and work effectively. However,there may be issues with the visibility and prominence of thesestructures. The UK’s Future-Focused Finance (FFF) program,for example, is the most visible structure for developing andsharing financial expertise within the UK’s National HealthService (NHS); it shares myriad excellent features present inclinical specialties. However, given that FFF is a product of its
environment, it does not hold a monopoly on financial expertise,and engagement with FFF is largely optional. In mature
healthcare systems, finance expertise undoubtedly exists in thesystem, but the knowledge is not always as readily accessible
as it is with health outcomes delivery.
The consequence of the way operational finance healthcare
expertise is organized in some highly mature systems is that,while it can meet the need for expertise development andsharing within its own context, it rarely offers a cohesive modelthat can be readily emulated in developing healthcare systems.
Where there is no strategic effort to set up a functioning CoE,
expertise cannot be harnessed, replicated, or disseminated in an
efficient way; thus, the goal of achieving value excellence may
be more difficult to achieve. This situation is further exacerbatedby the changing demands of healthcare, which require adynamic operational finance healthcare professional who canwork effectively with healthcare colleagues to deliver value ina system that requires more innovation, agility, resilience, andintegration.

5

3. Get inspiration from the success ofother non-patient-facing functions
The delivery of healthcare is enabled by many important
specialist functions, such as finance, that are not patient-facing
but are integral, nevertheless, to its success. These functions
include facilities management, legal, human resources,
procurement, and more. While finance has long been a key
corporate function in healthcare organizations, other functions
have emerged more recently, as the delivery of healthcare
has become more complex with new requirements to meetchanging needs. Of these functions, procurement has madesignificant strides over the years and can serve as inspiration
for the development of operational finance excellence.

Procurement can be an inspiration for finance
Procurement in healthcare has developed over the years,
necessitated in part by the growing cost of healthcare delivery
and the increasing number of options to achieve improved
health outcomes. In some countries, the procurement functionin healthcare has developed thanks to the creation of a national
body to drive excellence. For example, in the early 1990s, theUK government established the NHS Supplies Authority toensure an effective, efficient, and economic purchasing andsupplies logistics service for the whole of the NHS. This national
body included training and data teams that sought to develop
procurement expertise across the country’s healthcare system.
The NHS Supplies Authority also developed and disseminatedsupply chain frameworks for healthcare organizations and put inplace regional bodies to serve as interfaces with local hospitals.

6

The national body for procurement excellence in the UK
healthcare system has undergone several changes over theyears, in accordance with the healthcare agenda and otherdemands of the system. For example, there has been a movein England toward less control from the center (unlike in otherUK nations); nonetheless, the current national body, NHS Supply
Chain, continues to be a source of procurement excellence
support to regional and local healthcare bodies, and some of its
successes provide inspiration for operational finance excellencein healthcare.
Reflecting on the state of healthcare procurement expertise in
NHS, Simon Walsh (Group Procurement Director, Manchester
University, NHS Foundation Trust), who has worked in NHS
procurement for decades, supports the idea of a strong
national body that coordinates and develops expertise acrossthe healthcare system, with some delegation of duties to theregions. He observes that there will always be a debate overwhat should be done nationally, regionally, and locally. However,
all things considered, in his experience, the presence of anational body has been good for improving procurement skills
across the UK healthcare system.

4. Select an area of primary focus for thefinance CoE
A CoE for operational finance can serve as a place where
finance and accounting theories, standards, approaches, andso on, can be considered, and where operational financeintellectual capital can be developed and curated for effective
dissemination within a system to achieve improvements.
There are several areas of primary focus in which an
operational finance CoE can seek to develop expertise. These
include but are not restricted to: (1) processing efficiency, (2)benchmarking, and (3) knowledge/best practice development
and dissemination:n Processing efficiency. Finance CoEs can focus onprocessing efficiency, in which case the goal is toconsolidate standardized processes and carry them out inthe most efficient way possible. This focus is ideal where
the need is to process high volumes of transactions at alow cost. While the focus on processing transactions isimportant – and the reduction of cost is always part of thehealthcare discourse – the drive toward value excellence
requires a greater level of engagement from finance beyond
transaction processing. Therefore, a finance CoE in a
dynamic and evolving healthcare system may have to pursue
a primary focus that goes beyond processing efficiency.
n Benchmarking. A CoE for operational finance can also focus
on benchmarking organizations across the healthcare systemin such a way that healthcare organizations can compare
their own management of financial resources with that of
their counterparts. This is a very important function, as it
encourages healthy competition in the healthcare system.
While benchmarking is good at showing performance andranking organizations against each other, it may not be aseffective in showing how performance is achieved and how
exceptional circumstances can be managed. Benchmarking
may serve as a good secondary focus for a finance CoE, but
it may be lacking as a compelling force for effective change
in driving value excellence.

n Knowledge/best practice development and dissemination.
An operational finance CoE can operate with a primary
focus on improving finance competence in the system. This
involves the generation (e.g., through research), curation(e.g., arrangements according to operational financeprocesses), and dissemination of operational financeknowledge, combined with the support for adoption ofbest practice across the healthcare system. This focus ismost suited to a healthcare system that seeks to promotecompetence in a uniform way, ensure national or regional
standardization where possible, and cater for anomalies
in a dynamic way. This focus is ideal for providing support
from a national level to organizations carrying out financial
processes of varying complexity and where regional andlocal differences may need to be accommodated.

Healthcare value should guide the focus
Looking at the setup for healthcare delivery in countries where
healthcare is organized at a national level, local healthcareorganizations receive advice and guidance from the experts,
but local healthcare organizations ultimately are responsiblefor implementing the advice and delivering patient outcomes.
This model supports accountability and local ownership ofactions and results. Under this model, finance CoEs that focus
on effective dissemination of knowledge and adoption of bestpractice, with accountability remaining with local healthcareorganizations, are the best choice to support finance excellenceand balance out the value equation.

7

5. Set up finance CoEs to effectively
disseminate finance expertise
As with the three-layer system that supports the advancementof healthcare delivery excellence (i.e., primary, secondary,and tertiary), a system with a gradient of knowledge flowing
downstream from the center and queries flowing back up to thecenter is an efficient design structure for the dissemination ofknowledge. In such a system for operational finance excellence,a national CoE can concentrate knowledge in the center andsupport finance teams in hospitals via regional enablers (seeFigure 2). (Note: this is mainly applicable to countries withnational public healthcare systems.)

Finance experts at the center
For national healthcare systems, the finance CoE canconcentrate its expertise at the national level to ensure that it iscatering effectively to the wider needs of the national healthcare
ecosystem.
Figure 2:

To enable efficiency, a knowledge hub can be used to house
all the models, frameworks, answers to frequently asked
questions, and so forth. This hub can be designed to enableself-service by finance staff in the national healthcare system.
Within the finance CoE, expertise should aim to mirror (as muchas possible) the specializations present in finance operationsin healthcare organizations. These include general accounting,payables, receivables, fixed assets, costing, budgeting, andthe like. National experts should be able to draw on experienceand best practice to design frameworks for routine finance andaccounting work, interpret finance and accounting regulation tomeet the needs of the healthcare system, and provide advice
for unique cases that healthcare finance practitioners encounter.
The experts at the center should work closely with regional staff,
who should be the interface with the local teams.

Finance CoE operating model

Knowledge hub

National &regional setup

Finance experts

National actors withhealthcare interests
Ministry of HealthRegional teams

Payer organization(s)Local healthcareorganizations

Public healthorganization(s)

A

B

C

`

D

E

F

National insuranceorganization(s)Social careorganization(s)Knowledge capture

Knowledge transfer & capability development

Finance advisory services

Source: Arthur D. Little analysis

82Regional liaison managers
The regional teams can be set up as liaison managers withthe local healthcare organizations. Liaison managers are notsubject matter experts but rather relationship managers. Theirrole should be to understand the needs of the local healthcare
finance teams and convey those needs to the central body ofthe finance CoE. The chief financial officer and heads of financedepartments in the local healthcare bodies are the main pointsof regular contact for the regional teams.

The regional teams play a very significant role in ensuring that
feedback from local teams is received and acted upon by thecentral team of finance experts. For example, a topic that has
been addressed in the knowledge hub by the central team may
still require further training and discussion to entrench goodpractice. The regional teams will be able to convey that pieceof intelligence to the central team and arrange training sessions,where the central expert meets with teams across the country
to discuss the centrally designed tools/frameworks and provides
advice on how to get the best out of the teams.

96. Create a finance CoE to ensure deliveryof healthcare value
Since healthcare value is delivered only if health outcomes andoptimum cost are achieved, it is only partly effective to focus on
excellence in delivering health outcomes. With health outcomes
excellence already receiving significant attention and support
from existing, well-defined structures, the time is right to focus
on achieving operational finance excellence.
Healthcare organizations can achieve operational financeexcellence by setting up a finance CoE and mandating thecreation, curation, and dissemination of knowledge in a waythat will: (1) effectively cater to the needs of the entire
healthcare system and (2) ingrain the behaviors needed tosupport the delivery of healthcare value in these changing times.
For countries with developing national healthcare systems, thisis an imperative for the realization of healthcare value.
Figure 3:

A badge of excellence
Most corporate functions are assessed by what it costs to
run the function. In addition to delivering increased healthcare
value, a CoE for operational finance may bring the added
benefit of changing how corporate functions are assessed.
By delivering excellence in operational finance and improving
healthcare value, effective finance CoEs may succeed inmoving healthcare executives away from a focus on the costof running a corporate function to assessing how the corporate
function has contributed to the achievement of healthcare value
excellence (see Figure 3). This is no small feat. Therefore, if
achieved, healthcare finance operations will deserve a badge of
excellence – an honor reserved only for healthcare functions that
do ordinary things extraordinarily well.

Healthcare finance CoE summary

Description

 A place where operational finance philosophies, theories, approaches, and methodologies to enable healthcaredelivery can be considered for knowledge development, curation, and dissemination across the health economy

Overall goal To achieve optimal healthcare value in a system requiring innovation, agility, resilience, and integration

Strategic focus

 Increase healthcare value by driving operational finance excellence

Operational role

 Develop operational finance competency in the healthcare system

Operational
structure Finance experts in the center enabled by liaison managers in the regions to develop competence in local healthcare
finance teams

Source: Arthur D. Little analysis

103Contacts
If you would like more information or to arrange an informal discussion on the issues raised here andhow they affect your business, please contact:

Austria
Bela Viragvirag.bela@adlittle.com

Japan
Ryo Hanamura
hanamura.ryo@adlittle.com

Singapore
Maki Kurosawa
kurosawa.maki@adlittle.com

Belgium
Vincent Bamberger
bamberger.vincent@adlittle.com

Korea
Kevin Lee
lee.kevin@adlittle.com

Spain
Carlos Mira
mira.carlos@adlittle.com

China
Ryo Hanamura
hanamura.ryo@adlittle.com

Latin America
Rodolfo Guzman
guzman.rodolfo@adlittle.com

SwedenUlrica Sehlstedt
sehlstedt.ulrica@adlittle.com

Czech Republic
Jiri Steif
steif.jiri@adlittle.com

Middle East
Vikas Kharbanda
kharbanda.vikas@adlittle.com

Switzerland
Franziska Thomas
thomas.franziska@adlittle.com

FranceVincent Bamberger
bamberger.vincent@adlittle.com

The Netherlands
Martijn Eikelenboom
eikelenboom.martijn@adlittle.com

TurkeyCoskun Baban
baban.coskun@adlittle.com

Germany
Franziska Thomas
thomas.franziska@adlittle.com

NorwayUlrica Sehlstedt
sehlstedt.ulrica@adlittle.com

UK
Ben Enejo
enejo.ben@adlittle.com

India
Vikas Kharbanda
kharbanda.vikas@adlittle.com

PolandPiotr Baranowski
baranowski.piotr@adlittle.com

USA
Craig Wylie
wylie.craig@adlittle.com

Italy
Mario Nico
nico.mario@adlittle.com

Russian Federation
Alexander Ovanesov
ovanesov.alexander@adlittle.com

Pursuing excellence: What’s next for finance inhealthcare?
The role of a center of excellence for finance
operations in delivering healthcare value

Arthur D. Little
Arthur D. Little has been at the forefront of innovation since1886. We are an acknowledged thought leader in linking
strategy, innovation and transformation in technology-intensive
and converging industries. We navigate our clients throughchanging business ecosystems to uncover new growth
opportunities. We enable our clients to build innovation
capabilities and transform their organizations.
Our consultants have strong practical industry experience
combined with excellent knowledge of key trends anddynamics. ADL is present in the most important businesscenters around the world. We are proud to serve most of theFortune 1000 companies, in addition to other leading firms andpublic sector organizations.
For further information please visit www.adlittle.com or
www.adl.com.
Copyright © Arthur D. Little Luxembourg S.A. 2021.
All rights reserved.

www.adl.com/HealthcareFinance