Forecasting model for strategic and operations planning of a nonprofit health care organization

The article is a description of the real-life experience based on the implementation of a financial forecasting model to inform budgeting and strategic planning. The organization is a charity-based health system that has hospitals and medical centers that provide care to the community. The health system performs a central budgeting process which is typically based on aggregation of individual budgets from the various hospitals and medical centers within the system. All financial data are reported to a central financial information system. Traditionally budgeting was done based on prior year's financial performance with a slight adjustment based on the hospital or medical center finance department's educated guess. This article describes the new forecasting method instituted to predict revenue and expenses, and to improve the budget planning process. Finally, the forecasts from the model are compared with real data to demonstrate accuracy of the financial forecasts. The model is since then being used in the budgeting process.