During a Becker’s Hospital Review webinar sponsored by Syntellis, Jay Spence, vice president of healthcare strategic solutions at Syntellis, and Dan Majka, managing director and practice leader for financial planning at Kaufman Hall, discussed what organizations can and must do to achieve their goals.
Three key insights were:
- Organizations are rethinking their financial planning strategies. Pandemic-induced labor shortages and increased labor costs, coupled with inflationary pressures and stagnating reimbursement rates, have negatively impacted provider organizations’ bottom lines.
While operating margins are starting to bounce back — a little — finance leaders must maintain this positive momentum by designing and executing a financial planning process that is optimized for managing costs, becoming consumer-centric and transforming care delivery. In a recent Syntellis CFO survey, 72 percent of respondents said there is increased demand for analytics that can inform decision-making around financial planning. “This is not the time for gut decisions or false confidence,” Mr. Majka said. “This requires a rigorous look at the data and rethinking how planning processes work within our organizations.”
- Contemporary planning can help organizations navigate industry challenges. Contemporary planning frameworks must evaluate the cash flow implications of three key business and financial questions:
- What market forces will affect our future?
- Where are potential opportunities to grow or scale the business?
- How does this impact rolling and long-range forecasting?
In line with these considerations, the elements of a contemporary planning process entail:
- Identifying relevant macro-market forces and scenarios.
- Quantifying business model impacts (demand, cost, revenue, resources).
- Modeling potential outcomes and stress testing the strategy.
- Establishing operational budgets and capital plans.
- Monitoring actual performance and market developments.
- Managing for long-term resiliency and viability.
The goal is to understand the potential range of scenarios and whether organizations have enough altitude in their performance to weather different scenarios, Mr. Majka emphasized.
- Tools and frameworks that enable integrated financial planning can support strategic agility. The goals of implementing such advanced processes includes:
- Measuring what matters. “Given that there’s more data than ever before, it’s important that we have a framework to structure that data,” Mr. Spence said.
- Knowing where to grow. The stakes are high for strategy and finance teams to rationalize investments across clinical service lines.
- Modeling scenarios and financial impacts. This involves leveraging tools to quantify the financial impact and opportunity across any combination of go-forward strategies.
- Establishing continuous planning via rolling forecasting. Organizations can plan with greater agility by using actionable short-term goals, evaluating current progress against those goals and course-correcting as needed.
- Supporting ongoing value creation. This is achieved by creating sufficient cash flow to not only meet “survival needs” (e.g., replace working capital and make principal payments), but also increase debt capacity, liquidity and ultimately strategic flexibility.
The bottom line: Tools that modernize the FP&A function will pay dividends through building performance feedback loops, establishing greater collaboration, advancing scenario modeling capabilities, and improving insights into where to grow and improve.
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