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6 Healthcare EPM Trends: #3 De-Mystifying the Budget Process

Healthcare EPM Trends De-Mystifying the Budget Process


Budgets have traditionally been an aggregation of numbers molded into a financial statement to measure margins and then asking business leaders to explain actual-to-budget variances. Healthcare leaders are now building strategies to mature this process into a compilation of metrics that are representative of the business. These key performance indicators can be used to automate much of the budget process in addition to enabling transparency and more focus on long-term planning. In today’s healthcare ecosystem we are not just talking about payer mix, reimbursement rates, or relative value unit (RVU) but also drivers such as clinical effort, services ordered, and new and established patients served (to understand variations in service, costs per unit of service or labor costs as a percent of operating revenue, for example).

As healthcare providers begin to examine these drivers from an actual to plan perspective alongside the income statement and then correlate them to margin, they are able to begin to really understand the business, identify up-stream and down-stream revenue cause effect, and explore expenses in light of services provided. Once we see the data, we can then apply performance improvement initiatives to challenge our assumptions for growth as well as our quality and outcomes to gain efficiencies to allocate resources more effectively.

Many experts predict that sticking with the traditional fee for service approach or placing all your bets on the ACA are both recipes for disaster. Pervasive “performance improvement innovations” are a vital component to navigating these rough waters. Performance improvement initiatives are not new to healthcare and they have certainly been focused on cutting waste of the production process but there has been no real effort to link this to performance management. Assuming that 30 cents of every medical dollar is wasted, identifying and reallocating wasted resources is the only affordable source of capital for staying in business.1

This level of change requires a partnership with operations to ensure that the correct metrics are correlated within the budget process and that agile techniques are engaged to continue to improve the drivers and ratios to create a closed loop strategic process for performance management. These partnerships have historically been territorial and politically risky but there is an enormous opportunity to reset given the ability to apply technologies to automate and provide transparency.

This is just one of the healthcare enterprise performance management trends. In our new guide, we take a look at six performance management trends healthcare executives need to be thinking about in 2016 and beyond. We’ll identify technology strategies and solutions that will help healthcare organizations succeed in a data-driven, cost-management culture.

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Terie McClintock

Terie McClintock is the Oracle Healthcare Practice Director at Perficient, Inc. where she is responsible for providing healthcare subject matter expertise to the Perficient Oracle National Business Unit while also cultivating and managing the partnership with Oracle’s Healthcare Vertical and Horizontal Business Units. Terie has more than 25 years of IT experience. Prior to joining Perficient, Terie contributed over 13 years at M.D. Anderson Cancer Center with the most recent title of Director, Data Management Services. Prior to M.D. Anderson, Terie worked for IBM as a Senior Consultant.

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