Financial Forecasting in Healthcare Facilities

Running head: FINANCIAL FORECASTING 1
Financial Forecasting
Name
Institution

FINANCIAL FORECASTING 2
Forecasting refers to the financial concept of estimating the current and future
financial information of an entity based on the based and the present trends. Forecasting is
important to a healthcare's budgeting process because it helps to maintain financial discipline,
improve strategic goals, and deliver quality services to patients. However, there are several
factors that make it difficult for healthcare facilities to accurately forecast their annual
revenue and expenses.
First, the complex nature of services provided by healthcare facilities makes it
difficult for accurate forecasting. Service delivery involves different resources such as
equipment, personnel, supplies, and spaces-each resource has its costs and capabilities
(Langabeer & Helton, 2015). Resource usage start when a patient makes the first contact
through the administrative, consultation and treatment processes and end with the last contact
with the facility. The treatment process depends on a patient's medical conditions and the
proposed treatment process. Therefore, accurate forecasting is difficult where there is no
uniformity in the treatment process because of the lack of a standardized system (Harrington,
2015).
Second, the nature of forecasting systems and healthcare facilities also influence the
accuracy of the forecasting process. Costing of medical services is micromanaged- each
department is required to have its own forecasting process. Micromanagement nature of
forecasting does little to improve the value of services or reduce the total cost incurred to
offer such services (Kahraman & Topcu, 2017). The objective of implementing forecasting in
a healthcare is to improve the efficiency and effectiveness of service delivery while keeping
the cost at the lowest level. There are three myths that influence the accuracy of forecasting
in healthcare centers. One, costs payable by patients is a good reflection of the services
provided to them. However, in a real sense such costs are based on estimations. Two, services