The Future of Healthcare Budgets Starts with Strategy
By Dr. Imran Andrabi and Dan Scher
Healthcare is a constantly changing industry. Whether a healthcare organization is managing a small network of rural community health centers, a national network of acute care hospitals or everything in between, healthcare leadership teams must prepare for the future of healthcare today by meeting patients where they are and understanding the ways in which they will most need care.
Traditionally, leadership teams prepare for change by building a budget: How much money does our organization have to spend? What will be the best way to allocate those funds? Yet, if healthcare is changing, and what we’re budgeting for is changing, then how we budget must also change. This is why an organization’s budget must reflect its business strategy, rather than crafting the strategy around the budget, to anticipate new developments and prepare for long-term needs.
1. Start with strategy.
Strategy and budget conversations should start with considering the big picture and the organization’s overall goals. Where are we going? Where do we want to deploy our assets? How do we want to operate? What outcomes are we looking for? Understanding what your organization wants to achieve as a whole is vital to know how to achieve it. Only after these questions are answered should we ask budgeting questions: What is the cost associated with executing the strategic plan we developed?
While this looks simple on paper, your budget will inevitably see challenges. However, by building the strategy first, long-term goals can act as a guide for any necessary adjustments.
2. Anticipate challenges.
Building a strategy is not a one-and-done activity. Neither, for that matter, is budgeting. Continuous conversations are necessary, and budget adjustments should center on adopting new, strategic priorities and adapting to environmental changes.
One challenge that doesn’t seem to fit this rule is when an organization’s proposed budget and the preconceived notion of what something costs are mismatched. After formulating a budget, leaders may find the actual cost of executing a strategic goal exceeds what they had initially anticipated. At first glance, this appears to challenge just the budget and may prompt leaders to calculate what they can do with a lesser amount of money, leading to an unproductive loop of juggling numbers and adjusting tactics to make the numbers work.
Instead, revisit the strategy and the reasons why this project and this budget were proposed. From there, adjust the high-cost program or project to work within the available resources to generate improved outcomes in the long run.
Reviewing priorities, examining changes in the environment or program scope, and identifying new goals to consider is a dynamic learning and adjusting exercise that healthcare organizations should conduct year-round. At the end of the day, though, any changes to the budget must tie back into the strategy.
3. Prepare for the long term.
Understanding and optimizing population health is an essential aspect of providing reliable community care. As populations and communities transform, previously successful investment approaches will yield different outcomes in the future. Healthcare organizations must align their long-term investments with their community’s needs and overall organizational goals. Certain tactics in the past have regularly and reliably increased revenue for organizations. However, without taking into consideration patients’ changing medical needs, those traditional means of increasing revenue may not remain profitable.
This outlook will change how organizations plan for the long term. For example, if your organization has several facilities where the local population is aging, surgeries may be the most prominent services provided. However, if the population is primarily families with young children, facilities may need to plan for more pediatric care. The larger your organization, the more likely it is to need to take both of these communities into consideration. Recognizing these population trends will allow healthcare leaders to identify investments for long-term gains.
Healthcare leaders have a unique opportunity to develop plans to succeed and provide the necessary care in a constantly developing healthcare environment. We are the changemakers who can align our strategies with the current and future needs of our communities. Only when we establish what we need to accomplish for our patients can we build the framework to make it happen.
Imran A. Andrabi, MD, FAAFP, is the president and chief executive officer of ThedaCare, a community, not-for-profit health system consisting of eight hospitals, 7,000 team members and more than 180 points of care in Northeast and Central Wisconsin.
Dan Scher currently serves as the Vice President of Strategic Planning & Environmental Stewardship for Medxcel, leading master planning, facility design and the Environmental Stewardship Program.