Count Fredrik Eliasson as one who thinks CFO skills are highly transportable across industries.
Not everyone agrees. Indeed, it’s fairly common for finance executives to stay in a single industry for their entire careers. For others, the time comes when they just want a change.
Eliasson, 46, is among the latter. After 20 years with railroad company CSX, he switched industries in a big way by signing on in March to run finance at Change Healthcare. The firm provides software, analytics, network solutions, and other technology-enabled services for health-care payers and providers.
The company was formed in March 2017 through a merger of Change Healthcare Holdings and a majority of McKesson’s technology solutions business unit. It’s privately held, owned jointly by McKesson and Blackstone Group, but when the deal was announced in June 2016 the merger partners said they had pro forma combined revenue of $3.4 billion for their most recent fiscal year.
Eliasson left CSX late last year without knowing what his next move would be. “I felt I wanted to do something different from what I’d done in the past in the industrial transportation space,” he says.
When the opportunity at Change Healthcare arose, it certainly checked that box. CSX, aside from being in a much different industry, is a publicly held company that’s much larger, with a topline of $11.4 billion for its 2017 fiscal year.
Change Healthcare, in contrast, is a private company that Eliasson could help take public at some point. “The opportunity set itself is different,” he says.
In seeking a new job, Eliasson had a broader skill set to work with than some other CFOs. After serving as CSX’s finance chief from 2012 to 2015, he spent his last two years with the company as chief sales and marketing officer.
If that sounds like it was a step down, it wasn’t. “For a railroad, and some other organizations, the two most important jobs under the CEO are the chief operating officer and the chief sales and marketing officer,” Eliasson says. “They have a more direct influence on the business than the CFO does.”
He also had a previous sales role at CSX, in between serving in other finance roles. “But I felt my CFO skills were probably the most transferable,” he says.
Just two weeks after joining his new employer, Eliasson understandably has his hands full negotiating the learning curve. “It’s drinking from a fire hose,” he says. “I have a lot to learn from my finance team, and from the organization, about Change Healthcare and the health-care industry.”
Still, he stresses that he knows what it takes to run “a great finance organization.”
He has a two-fold definition of success for finance. For one, it’s about making core processes — processing receivables, closing the books, forecasting results, etc. — better, faster, and cheaper. Two, it’s about influencing the finance team to be “positive, challenging partners to the people running the businesses.”
“If you approach finance with those sorts of objectives, then CFO skills are very much transferable,” Eliasson says.
In fact, a top executive newly brought in from outside can be just the tonic some companies need.
“You have a license to ask dumb questions for an extended period of time,” he observes. “Group-think is a common enemy for a lot of leaders. They’ve done something for a long time and everybody in the organization believes that’s the right way. But coming in with different experiences, I’m already questioning whether several things are still right, now that there’s a new organization after the merger.”
At Change Healthcare, Eliasson has five subordinate CFOs reporting to him: one each for the company’s four business units, and another person who serves as finance chief for the sales and marketing function.
Dedicating a finance executive to that latter role makes perfect sense to Eliasson. It’s a product of the same factors that enabled him to switch back and forth between finance and sales and marketing at CSX.
“What you want finance people to do is use their analytical skills to figure out ways to make more money for the company,” he says. “You also need to be able to influence people and sell those ideas internally — one without the other doesn’t really work. And an analytical skill set helps you no matter what you’re doing. So to me it’s less of a stretch to put a finance person into sales and marketing than one might think.”
Meanwhile, what are some of the elements of Change Healthcare’s business that Eliasson is in the process of absorbing?
For one, there’s the company’s multi-tiered revenue model. Software solutions are typically offered as software-as-a-service subscriptions. Other services have a volume-based pricing model.
But a key aspect of Change Healthcare’s business is its contingency-based pricing model, where the company earns revenue only when customers derive value in the form of, for example, cost savings, enhanced revenue, or other financial results.
Then there’s the product set. The company’s Intelligent Healthcare Network processes clinical, administrative, and financial transactions for hundreds of thousands of physicians, hospitals, and other providers, as well as commercial and government payers. The value of claims processed through the network tops $2 trillion annually.
Another service helps insurance companies determine eligibility and enroll members for Medicare, Medicaid, and dual eligible programs.
While the company’s direct customers are medical providers and healthcare payers, some of its solutions power consumer-engagement initiatives.
For example, insurance companies offer pricing transparency to help members understand what costs are going to be for various medical services, enabling them to make informed decisions about their care.
Also, the Department of Defense uses the company’s secure messaging service, allowing 1.4 million military members and their families to easily communicate with doctors and other caregivers in a secure environment.
Eliasson isn’t wasting time worrying about all the details. “I don’t yet know specifics about some of the intricacies of the business,” says Eliasson. “But it might be less challenging to get up to speed than you might think. Ultimately, it’s about creating value and [applying] common sense.”