Forget Predictive Modeling, Try Leadership Forecasting
"Predicting is trend analysis," he says. "You have databases, you look at past data, find a mathematical equation that fits it, and use that to extrapolate into the future. You look at how the relationships have worked in the past and you come up with your prediction."
But data from the past quickly becomes obsolete in the rapidly changing healthcare business environment. From changes in reimbursement protocols to the advent of the Obamacare exchanges to a multitude of other drastic changes in how healthcare services are paid for and evaluated, predicting has lost its efficacy, Bauer argues.
"If the underlying circumstances that created that data have changed, then extrapolating from that data gives you stupid answers," he says.
Instead of attempting to predict outcomes based on old data, healthcare leaders should rely more heavily on forecasting, which is less precise but a more accurate gauge of how a particular innovation in care protocols or basic business strategy is likely to pay off.
Using forecasting is more helpful in both healthcare transformation as well as with the weather because there are too many variables involved to accurately predict an outcome.
"Weather is literally unpredictable, so you need a different way to look at it, which is by estimating probabilities and possibilities and weighing them," he says.
A Realm of Possibilities
The forecaster approaches the future as a realm of possibilities that can go any number of different ways. That results in a less specific glance at a possible future, but a much more accurate one, that will prevent unwise decision-making.
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