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Scenario Planning: Being Proactive in a Changing Environment

In light of the challenging events of the past few months, many health centers are wondering what they can do to become better prepared for the future. Whether it is a natural disaster or a policy change, preparing as much as possible for an adverse event is critical to being able to respond quickly and remain resilient. Scenario planning is a strategic planning method that can help you establish assumptions about the future to inform decision-making and long-term strategic business plans.

Estimating the impacts of potential future events, provides you with an opportunity to proactively plan for change, reducing reactionary responses and conserving resources in the long run. The key to scenario planning is understanding that your assumptions do not have to be precise to give you a better idea of the consequences to certain events, and often it’s helpful to limit variables so you don’t end up with “paralysis by analysis”.

Scenario Planning Activities and Tools

The following scenario planning examples can help you establish productive action steps in times of uncertainty.

“Back of the Envelope” Estimates: This simple method helps you establish assumptions to inform decision-making by creating baseline calculations with data you have on hand. For example, if your health center has the goal of increasing market share of the low-income population in your service area by 5%, you can quickly calculate a rough estimate of how much this might cost based on your historic UDS data. The resulting estimate may not be 100% accurate, but it provides enough information to begin to answer pressing questions such as does your health center have enough space to serve additional patients, do you need to recruit more providers, etc.

Financial Forecasting/Modeling: Financial forecasting and financial modeling use current and historical financial performance metrics in order to provide health centers with a reasonable projection of the effects of an event or policy change on the bottom line. Capital Link frequently provides financial forecasts to health centers planning capital projects, and financial modeling services to measure and evaluate the impact of alternative payment structures. These activities help health centers plan for potential impacts on operations and determine a comfortable level of risk.

Predictive Analytics: Predictive analytics takes scenario planning to the next level by using advancing technology and algorithms to model actions and consequences. Predictive analytics considers the vast number of possibilities and provides a real-time estimate of the probability of their occurrence, allowing for better planning and management.

Economic Impact Analyses: Economic impact analyses, including Capital Link’s Value + Impact report, use IMPLAN, an integrated economic modeling software, to estimate the impact of projects and expenditures on the local economy. By extrapolating current and historic data to calculate assumptions about the near future, these reports illustrate the value health centers have on the communities they serve. Capital Link has also used IMPLAN to illustrate the value and impact of a health center both before and after a potential rollback to pre-ACA levels of Medicaid eligibility and insurance subsidies, and cuts to federal operating support.

UDS Mapper Analysis: UDS Mapper is an example of a publicly available resource that allows health centers the ability to calculate various scenarios based on changing variables. The Explore Service Area tool on the website, allows health centers to plug in assumptions of total patients served, total new patients to be served, and new low income patients to be served and receive estimates of unserved populations target and other helpful data. The UDS also provides detailed market data on federally funded health centers down to the zip-code level, which is useful for exploring expansion and contraction scenarios.

NACHC’s Medicaid Impact Statement: Also readily available online, this interactive tool provides an organization-level and state-level summary of Medicaid's significance to health centers and patients.

Estimating Impact of Funding Cuts: Most health centers are considering the impact of a potential 70% cut to HRSA Section 330 grant funds, absent Congressional action to fix the health center funding cliff. You can model the impact of this potential cut, and any others that may arise in your local environment, using NACHC’s Funding Cliff Impact Estimator and Capital Link’s more detailed financial modeling based on your health center’s historical data.

While scenario planning cannot predict the future, it can help you understand the severity of potential negative impacts and the “upside” of positive impacts, narrow down your options, establish ranges in which to test thresholds, and provide a level of confidence in your ability to handle a given situation.