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Haley

While there are many effective approaches to budgeting and financial forecasting, it is important for healthcare leaders to identify the approach that works best for their organization. Research has shown that more organizations are looking to incorporate service line analytics to refine their projections. This approach is becoming more popular because it allows healthcare organizations to incorporate patient-centric data into their planning in order to create more accurate workload projections (Kaufman Hall, n.d.). Competition within the healthcare sector is requiring leaders to find innovative ways to remain transparent to consumers by displaying measures such as volume, revenue, cost, quality, and satisfaction (Spence, 2018).

Service line analytics have been utilized in the healthcare sector since the 1980s and this method is continuing to grow in popularity. The data produced in service line analytics can help leaders identify performance challenges. The data can also show potential risk areas and provide guidance for process improvement teams. Many organizations choose to implement a service line leader that acts as an executive to track trends and help the organization achieve operational goals. The data provided in this method has the potential to support decision making regarding strategic investment of capital dollars, impacts to revenue contracts, and growth and service rationalization (Spence, 2018).

In summary, incorporating service line analytics into healthcare organizations has been proven to be an effective budgeting and financial forecasting method. The data provided in this method helps guide leaders to make effective strategic decisions regarding investment opportunities. Overall, this method should be considered for widespread use in healthcare organizations.

 

References

Kaufman Hall. (n.d.).  5 Approaches to effective budgeting and forecasting in healthcare. Kaufman Hall. Retrieved October 1, 2022, from https://learn.umgc.edu/d2l/le/content/718321/viewContent/26792840/View

Spence, J. (2018, June 11).  Service line analytics: Sound decision-making starts with reliable data. HMFA. Retrieved October 1, 2022, from https://www.hfma.org/topics/article/60945.html

Marc

Effective budgeting is an important aspect of meeting the organization's strategic objectives. With healthcare reform targeting lowered reimbursements and healthcare crises like COVID realigning objectives and priorities across the spectrum of care, traditional budgeting techniques are proving to be inadequate to keep up with the changing landscape. For this reason, rolling forecasting may be one of the most effective tools in keeping a healthy budget.

Annual budgets are still the gold standard for developing budgets as they are still widely required for financial planning and lenders. However, they are time-consuming with over 50% of healthcare organizations developing these budgets over a period of six months or more (Randa, 2020). Based on a forecast of up to twelve quarters (36 months), rolling forecasting allows for a trended view of performance that applies current data to project long-range forecasts and operational plans. A rolling budget also reduces the workload of the traditional budget development process by spreading tasks throughout the year and leverages repetition and efficiency (Gragg, 2018). For example, a system can monitor daily tasks to measure changes in procedures and labor. At the Scripps health system, during COVID, they noticed a 37% drop in the volume of elective procedures and were able to apply those changes to weekly and quarterly projections (Randa, 2020). As volumes increased, they were able to make the appropriate staffing and supply adjustments and projected new quarterly figures based on the new data. With traditional annual forecasting, this granularity and ability to adapt on the fly would be near impossible to perform with precision.

While traditional budget and forecasting still has its place in the healthcare organization, the ability to apply ever-changing data to a rolling forecast may be just as important to service-line managers. As unknown variables, like pandemics and reimbursement changes affecting organizations, it is critical to impart wisdom from trending data and apply it to forecasting models on the fly. Waiting for the annual budgeting process may be disastrous for an organization in the long-term without appropriate planning.

References

Gragg, J. (2018). The next generation of budgeting for healthcare. Healthcare Financial Management Association.  https://www.hfma.org/topics/article/62571.html

Randa, K. (2020). Annual budgets or rolling forecasting? Healthcare organizations need both. HealthIT Answers.  https://www.healthitanswers.net/annual-budgets-or-rolling-forecasting-healthcare-organizations-need-both/

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