Many other hospital financial leaders stopped at that point. They reigned in their costs and then covered their heads and sat tight. South Nassau looked at trends. Realizing that they still needed to grow market share in order to survive, they also needed to forecast. However, they also recognized that predicting market share based on historical and current admissions data wouldn't provide them with enough data to weather and overtake the storm.
"We said if this trend continues with our investments and the entire economy in decline, then governmental payment reductions may soon trip us up even more," Bogen says.
They didn't go high-tech to gather the trend data—I point that out for all the naysayers who claim that financial forecasting has to be expensive—instead they used their Excel spreadsheets and created monthly dashboards for areas they needed to track. They also turned to product line forecasting. They used overall assumptions and created budgets with P&L contributions on a margin basis for all the larger programs. They started using these tools to help them look at their programs on a quarterly basis so they could correct their course quickly.
"All our department managers have this information and we recognize by looking at trends that some of our product likes are physician-driven; others are inpatient driven, and even if we aren't numerically correct down to the dollar, the forecast helps us focus in on where we potentially are making money or not making money," Bogen explains.
"We're not proponents of updating our budget every month, you do these dashboards to help you compare actual results to the budget," he says. "If you don't take the combination of the budget and a forecast into consideration you'll run aground or miss opportunity. The forecast is another tool, but it's not an exact science."
South Nassau didn't save millions of dollars by forecasting, but they also didn't lose millions—that's the point. It isn't the largest facility in the United States, nor is South Nassau the busiest hospital, but that's what makes it such a great example. All facilities should be using financial forecasting to look much further down the road than the next year. If your facility can afford to purchase a high-tech program that offers you hundreds of best- and worst-case scenarios for your financial concerns, that's great. If not, it's important to recognize the value of good old-fashioned spreadsheets and getting the help of your entire hospital team, not just the finance division.
More than a few financial leaders remark to me that they are just too small or they don't have the funds or the staff to pursue financial forecasting. To them I say, that's just an excuse. Take the "towel" off your "treadmill" and embrace the future that lay ahead—better yet, plan for it.