Hospitals and health systems are still working to understand the roller-coaster effects of the global pandemic, meet the needs of local markets, and chart a path forward.
Finance leaders understand the critical role that data plays in making those financial, clinical, and operational decisions — both internal data and macroeconomic information and the interplay among datasets. But using data to drive action hinges on the ability to bring timely and accurate data together in a meaningful way.
Rolling forecasting allows quick pivots
Like all healthcare providers, Banner Health struggled initially to understand how government, business, and societal shutdowns could impact its operations across markets, notes John Groesbeck, Vice President of the Finance Division for Banner Health Community Delivery Hospital Divisions. Community response and how quickly or fully markets began to open up created numerous possible scenarios that Finance leaders needed to digest.
“The curveball that came with COVID-19 was something for which we were not analytically prepared,” Groesbeck says. “It took us a month or two to get our arms around how we begin to forecast and deal with different aspects of the pandemic and different communities that we serve.”
Greg Hoffman, CFO at Providence, says when the pandemic first began impacting operations, the issue wasn’t lack of data but quickly turning that data into actionable insight.
“Being able to allocate PPE and other scarce resources required bringing in information and making daily decisions around delivering those resources to the ministries where they were needed the most,” Hoffman says. “We very rapidly had to develop new sets of algorithms to predict what our 14-day COVID-19 bed counts would be. It became a very iterative process.”
To examine the full scope of impacts, Providence turned to “now, near, far” methodology, which emphasizes that current events also impact organizations’ medium- and long-range plans. Much like 2020 budgets were rendered useless as the pandemic struck, those same events impacted longer-range goals and initiatives.
Providence began using rolling forecasting, which focuses on a single month or quarter, adjusting longer-range plans based on current conditions. Some hospitals and health systems rely on a rolling forecast to supplement annual budgeting while others have replaced the annual budget process.
“We’re focused on taking it one quarter at a time, one month at a time,” Hoffman says, “and then factoring future resource allocation decisions based on that. As we contemplate different scenarios, we don't know what the new baseline will be — either from a payer mix perspective a year from now or procedure mix perspective.”
Banner started its journey toward rolling forecasts when the pandemic hit, underscoring its potential utility to budget more accurately and in a more timely manner. “It’s clear we made the right decision,” Groesbeck says. “We've developed tools that are transitioning us into the 2021 rolling forecast. And our expectation is that quarterly now in '21 we will be in a rolling forecast scenario, as opposed to a traditional budget.”
Model scenarios based on current conditions
Bringing data closer to the decision-making process increases the accuracy of scenario models, allowing organizations to see the downstream impacts of market conditions, operational decisions, and a range of potential outcomes.
Groesbeck says Banner has recognized the benefit of partnering more closely with its clinical data analytics teams to understand potential care scenarios. “The reliance we have on their expertise and their ability to model disease and illness burden is really critical,” Groesbeck says. “Service line planning and scenario modeling are really where we’re finding the greatest amount of need for agility and flexibility in our planning tools.”
Providence has been closely monitoring unemployment and economic decline from a volume perspective and from a payer mix perspective to better understand potential recovery scenarios.
“We’re looking at past patterns we've seen through the Great Recession of 2009 and what those trends are,” Hoffman says. “How did that manifest itself in terms of payer mix and volume as an anchor or grounding point? That helps provide the range of outcomes at a top level. At a micro level, it’s very important to de-average business as well.”
The degree to which an organization parses micro trends can help shape and inform scenarios going forward. Hospitals and health systems must strike a delicate balance when collecting data and creating scenarios, however.
“The key to this is that you can't get too far in the weeds, or you won’t be nimble,” Groesbeck says. “But you have to be far enough in the weeds that you can play off the trends that will occur within each of those clinical service lines.”
To learn more, watch the on-demand webinar: Bringing Healthcare Finance into the Digital Age.