• Politics
  • Diversity, equity and inclusion
  • Financial Decision Making
  • Telehealth
  • Patient Experience
  • Leadership
  • Point of Care Tools
  • Product Solutions
  • Management
  • Technology
  • Healthcare Transformation
  • Data + Technology
  • Safer Hospitals
  • Business
  • Providers in Practice
  • Mergers and Acquisitions
  • AI & Data Analytics
  • Cybersecurity
  • Interoperability & EHRs
  • Medical Devices
  • Pop Health Tech
  • Precision Medicine
  • Virtual Care
  • Health equity

Using strategy to shape your budget | Viewpoint

Article

Healthcare is changing and how we prepare for the future of healthcare must change. Your budget should reflect your organization's business strategy – not the other way around.

Managing a healthcare organization’s budget is no small task, whether it’s a single ambulatory surgery center or a national network of acute care hospitals.

Traditionally, leadership teams build budgets by finding out how much money they have to spend and allocate it as best as they can. As traditions go, this is outdated.

Healthcare is changing, how and where we provide care is changing, and how we prepare for the future of healthcare must also change. That is why your budget should be a reflection of your organization's business strategy – not the other way around – to allow healthcare organizations to see and plan for the long term.

Input strategy, output budget.

From a capital planning standpoint, strategy is an input. It is about what the organization wants to achieve, whereas the budget is simply an output, the cost to execute the strategic plan the organization has developed.

Strategy is key to knowing where an organization is going, where you want to deploy your assets, how you want to operate, and what outcomes you seek. Only once those elements are identified should the budget come together to reflect those goals.

Because the world is dynamic and change is constant, it’s inevitable that there will be challenges to the budget. If the strategy was built first, the challenges to the budget should not be from the strategy itself. Prioritization conversations are necessary, but questions should arise not from how the budget has changed, but rather, how the strategy has changed.

Ask what the new priority is, examine what in the environment changed, and examine what new goals need to be taken into consideration. This learning and adjusting is a dynamic activity that goes on throughout the year, but it should stem from new goals to yield dollar signs.

Navigating external challenges.

One area healthcare organizations can expect to see conflict with a proposed budget is the preconceived notion of what something costs. After building a strategy, as you are outputting the budget to address your goals, you may come to find that the true cost to execute your goal exceeds what you had initially anticipated. The “easy” solution is to ask, “What can we do for X amount then?”

This creates an unproductive loop of juggling numbers and adjusting tactics, moving money from column A to column B and back. It is far more productive to reconnect to the strategy and thoughtfully re-scope the high-cost program to make sure it works within the available resources.

This will yield much better outcomes in the long run for the organization and is the approach leadership should take when encountering all budget challenges.

Investing for long-term gains.

Will the investment approach that has been successful in the past continue to yield the same outcomes in the future?

As population health models change over time, we must make long-term investments that align with the community and the healthcare organization’s overall goals. Profitability is important, but if your traditional means of increasing revenue (such as surgeries) do not match your patients’ medical needs, they simply will not be profitable.

This outlook shifts the questions necessary when planning long-term. Ask, “Do we have an aging population that is likely to need more surgeries?” If so, what kinds of services should be incorporated into your long-term planning? Alternatively, if there's a high number of families in the area, ask, “Should we start planning for more pediatric care?” Only then, within the context of community needs and organizational goals, can you invest in long-term gains.

As healthcare leaders, we have an opportunity to engage directly with the changing healthcare environment and strategically align with the current and future needs of the community. “Budget” is not the question. It’s the framework for an answer.

The most important question is: What do you want to accomplish?

Imran A. Andrabi is the president and chief executive officer of ThedaCare, a community, not-for-profit health system consisting of eight hospitals in Wisconsin.

Dan Scher currently serves as the vice president of strategic planning & environmental stewardship for Medxcel.

Related Videos
Image: Ron Southwick, Chief Healthcare Executive
Image credit: HIMSS
Related Content
© 2024 MJH Life Sciences

All rights reserved.