The Essential Need for CFO Succession Planning in Healthcare

In this environment, a wait-and-see approach to CFO succession planning could prove disastrous for healthcare organizations. With increased competition for a limited number of candidates, organizations need to understand what departing CFOs prioritize in their successors—and move quickly to develop or attract leaders who possess these critical capabilities.

Current healthcare CFOs consistently prioritize four key areas when evaluating potential successors:

• A strategic mindset paired with rigorous capital stewardship
• Deep experience navigating healthcare's unique regulatory and payer landscape
• Financial innovation capabilities, including digital transformation expertise
• Leadership traits that emphasize communication, adaptability, and crisis readiness

Understanding the values of CFOs can help the healthcare industry develop its profile of the ideal candidate. They can find someone with those qualifications, plus a genuine passion for quality patient care and organizational mission.

Healthcare Industry Snapshot

One reason that many large healthcare systems operate without structured succession plans is the industry's historic focus on short-term financial survival rather than long-term strategic planning.

"Healthcare organizations operate on small margins, historically, which makes mid-and-long range financial strategic planning challenging," Jeff Parker, a Boyden Partner within the U.S. Healthcare & Life Sciences Practice, explains.

This margin pressure intensifies when combined with what Parker calls a "hyperbolic overlap of economic headwinds," including:

• Federal reimbursement cuts by CMS.
• Care delivery shifts away from expensive hospital settings toward outpatient and in-home environments.
• Dramatically increased labor costs that were spurred by the COVID pandemic.

The implications for organizational stability, corporate governance, and executive recruitment are severe.

Gilbert J. Carrara, MD, Managing Partner within Boyden's Healthcare & Life Sciences Practice, says the industry's unique complexities compound succession challenges.

High CFO turnover rates are affecting many industries. Carrara notes, however, that the healthcare industry demands "very deep regulatory knowledge, reimbursement knowledge," and understanding of intricate operational frameworks that few candidates possess.

Kathy Pattillo is a Boyden Managing Partner, United States, and Global Practice Leader, Financial Officers Practice. She points out another aspect of the healthcare industry that complicates matters: The differences between running a for-profit organization and a non-profit.

"The CFO of a non-profit organization needs a different set of skills. They need a fundraising type of CFO," she explains.

Without formal succession planning, organizations face extended leadership gaps during critical transition periods. These gaps can undermine stakeholder confidence, disrupt strategic initiatives, and compromise financial performance.

Essential CFO Capabilities in Healthcare

To excel in today's healthcare environment, CFOs need a rare combination of traditional financial expertise and industry-specific knowledge. Carrara and Pattillo say they must:

• Understand revenue cycle management systems that differ fundamentally from other industries.
• Navigate complex regulatory requirements that change annually.
• Manage the delicate balance between nonprofit mission-driven goals and financial sustainability.
• Balancing other pressures, for instance, wanting the beds of a hospital filled and delivering effective care that gets patients home as quickly as possible.Balance other pressures. For instance, wanting the beds of a hospital filled while delivering effective care that gets patients home as quickly as possible. 

Pattillo emphasizes the strategic evolution of the role: "The biggest gap is being able to take somebody who tactically understands the accounting and then get them to think more strategically."

This transformation accelerated during COVID-19, when CFOs were suddenly required to contribute to strategic decision-making rather than simply implement predetermined financial plans.

Recent surveys indicate that CFOs are taking increasingly prominent roles in hiring decisions amid the current talent shortage. This expanded influence reflects their deeper involvement in organizational strategy and operations. Boards and leadership teams recognize that financial leadership directly impacts all aspects of healthcare delivery and organizational performance.

What Outgoing CFOs Prioritize in Successors

Let's take a deeper look at four four key areas that CFOs prioritize when evaluating potential successors.

Strategic Mindset and Capital Stewardship

Healthcare CFOs look for successors who can think strategically while maintaining rigorous fiscal discipline. "CFOs are dealing with a perfect storm of eroding revenue, reimbursement cuts, and shrinking margins that are already anemic to begin with," Parker explains. The next generation of CFOs must be capable of preserving margin while remaining "proactively strategic vs. reactive."

This requires:

• Knowing how to extend cash reserves.
• Developing future investment plans that generate new revenue streams.
• Making difficult decisions about leveraging bond markets or seeking strategic partnerships when traditional financial levers prove insufficient.

Successful candidates must demonstrate the ability to balance immediate financial pressures with long-term fiscal responsibility.

Experience with Healthcare Regulations and Payer Complexity

The regulatory landscape in healthcare remains in flux. Every year brings coding changes, shifting reimbursement models, and complex regulatory compliance demands at federal, state, and local levels. CFOs seek successors who can both understand current regulations and anticipate and adapt to future changes.

Equally important is deep knowledge of payer relationships and reimbursement optimization. This includes:

• Understanding various government programs.
• Negotiating with private insurers.
• Identifying new funding sources.

That last item is particularly crucial for nonprofit organizations that must balance mission-driven care with financial viability.

Financial Innovation and ESG Fluency

Modern healthcare CFOs must be comfortable with technology transformation and data-driven decision making. Successors need an understanding of artificial intelligence applications in healthcare finance, cloud-based systems integration, and the cybersecurity implications of interconnected medical devices and financial systems.

ESG (environmental, social, and governance) considerations are becoming increasingly important for healthcare organizations. This is particularly true for organizations seeking capital market access or managing relationships with socially conscious investors. CFOs prioritize successors who can navigate these requirements while maintaining focus on core healthcare delivery missions.

Leadership Traits: Communication, Adaptability, Crisis-Readiness

Perhaps most critically, current CFOs seek successors who possess exceptional communication skills and can adapt quickly to unprecedented challenges.

"Healthcare CFOs are being asked to predict the future, look around corners, be uber strategic, and operate at the top of their role and beyond," Parker says. "They are demanded to get creative and simply 'figure it out' without any input or assistance by their board of directors, or their C-suite peers."

This requires leaders who excel at stakeholder communication—comfortable with physician leadership, board members, regulatory agencies, and others. The ideal candidates have shown the ability to maintain composure during crisis situations. They must be able to translate complex financial information into actionable insights for non-financial audiences.

Most importantly, Parker says, CFOs prioritize successors who demonstrate "passion for quality care, safety, reduced hospital readmissions, and ultimately the organization's commitment to serving their mission and the patient."

Takeaways for Healthcare Organizations

In the competitive search for qualified CFO talent, healthcare organizations that take proactive, strategic approaches to succession planning will have significant advantages over those that wait until leadership transitions become urgent.

Identifying and Developing Internal Finance Talent

Organizations should "invest in assessment to identify high potential/high performers within the finance team and provide coaching to ramp up growth and development to ready a pipeline of the next generation," Jeff Parker recommends.

This requires systematic evaluation of current finance team capabilities and structured executive development programs that expose promising candidates to strategic decision-making processes.

Internal talent management programs should focus on bridging the gap between tactical financial skills and strategic leadership capabilities. This includes exposure to board interactions, participation in strategic planning processes, and cross-functional collaboration that builds understanding of healthcare operations beyond finance.

Proactive vs. Reactive Succession Planning

Proactive succession planning begins years before anticipated CFO leadership transitions. Organizations need to allow time for candidate development, knowledge transfer, and smooth transitions that maintain organizational continuity.

Organizations should consider whether they are in good standing with a solid position for survivability and merely planning for a legacy leader transition, or struggling and simply making a change due to performance.

These different scenarios require different approaches to succession planning and executive search, though both benefit from early intervention and strategic planning.

One innovative approach involves hiring a seasoned interim CFO or fractional CFO to provide business continuity or even a course correction before hiring the next full-time CFO, Parker says.

This strategy helps prepare organizations for permanent hires, improving the probability of successful executive transitions.

The Role of Executive Search and Leadership Consulting

Professional executive search and leadership consulting firms bring critical expertise to healthcare CFO succession planning.

They provide market intelligence about:

• Available talent.
• Realistic assessment of organizational needs versus candidate capabilities.
• Structured processes that improve hiring outcomes.

Boyden's integrated approach combines executive search, interim management, and leadership consulting to address the full spectrum of succession planning needs.

This comprehensive service model helps organizations avoid what Carrara calls the "unicorn" trap—seeking candidates with impossible combinations of skills—while building realistic succession strategies that account for organizational context and market realities.

CFO Succession Planning in Healthcare

CFO turnover in healthcare can represent either a significant threat or a strategic opportunity, depending entirely on organizational preparedness.

The question is not whether CFO transitions will occur, but whether organizations will be prepared to manage them strategically.

Organizations can navigate leadership transitions successfully when they:

• Invest in proactive succession planning.
• Develop internal talent pipelines
• Work with experienced advisory partners.

With the right processes and advisory partnerships, healthcare organizations can future-proof their financial leadership while building organizational resilience that serves patients, stakeholders, and their community missions.

For healthcare organizations navigating financial officer leadership and succession, Boyden’s Financial Officers and Healthcare & Life Sciences Practices bring global expertise and local insight to identify, evaluate, and support leaders—whether through executive search, succession planning, or leadership consulting.