Using scenario analysis to determine managed care strategy.

Abstract

In today's volatile healthcare environment, traditional planning tools are inadequate to guide financial managers of provider organizations in developing managed care strategies. These tools often disregard the uncertainty surrounding market forces such as employee benefit structure, the future of Medicare managed care, and the impact of consumer behavior. Scenario analysis overcomes this limitation by acknowledging the uncertain healthcare environment and articulating a set of plausible alternative futures, thus supplying financial executives with the perspective to craft strategies that can improve the market position of their organizations. By being alert for trigger points that might signal the rise of a specific scenario, financial managers can increase their preparedness for changes in market forces.