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Quick Tips for Effective Forecasting
- Take on forecasting at least once or twice a year or as certain market fundamentals change. For a small community hospital that relies on a few surgeons for a large percentage of admissions, one doctor’s retirement can leave the hospital potentially vulnerable. Forecasting can help administrators look at the potential short- and long-term impacts of this market change, and then make strategic decisions—such as recruiting new MDs.
- Use at least two years of historical data when forecasting. Three to five years of data on each assumption driver is even better.
- Plan your horizon according to your project. Three- to five-year projections are the standard, but they won’t work for new facilities or other major construction projects. Push your planning horizon farther ahead.
- Third-party data can help set benchmarks as planning moves forward. Good sources are published guidelines from medical organizations, statewide databases, government census and labor data, and consultants.
- Because forecasting is really a planning tool, it’s important to involve as many constituents as possible. When forecasting volume, finance managers need to involve planning personnel to get market research data. When forecasting reimbursement, they need managed care planning involved. For predictions that involve expense structures like staffing and salaries, finance should reach out to the CNO or Human Resources.
- Be pragmatic. Some executives may push for change for the sake of change. You can use your projections to offer a reality check on new ideas that could put the organization in jeopardy.
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