Beyond Budgeting Round Table
Forecasting at
M. D. Anderson Cancer Center
April 2012
Juan C. Castro
AVP, Financial Planning & Analysis
About M.D. Anderson
Who We Are
• The mission of The University of Texas M. D. Anderson Cancer Center is
to eliminate cancer in Texas, the nation and the world through
outstanding programs that integrate patient care, research and
prevention, and through education for undergraduate and graduate
students, trainees, professionals, employees and the public.
• Marking nearly seven decades of Making Cancer History®, M. D.
Anderson is located in Houston on the campus of the Texas Medical
Center. We are proud to be one of the world’s most respected centers
devoted exclusively to cancer patient care, research, education and
prevention.
• The Texas Legislature created M. D. Anderson in 1941 as a component of
The University of Texas System. The institution is one of the nation’s
original three comprehensive cancer centers designated by the National
Cancer Act of 1971.
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Who We Are
• Patient Care - In Fiscal Year 2009, more than 96,000 people – over onethird of them new patients – sought the high quality care that has made
M. D. Anderson so widely respected. Of those patients, more that 11,000
participated in clinical trials exploring novel treatments, the largest such
program in the nation.
• Research - At M. D. Anderson, important scientific knowledge gained in the
laboratory is rapidly translated into clinical care. The research program is
considered one of the most productive in the world aimed solely at cancer.
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Who We Are
• Education - More than 6,300 trainees, including physicians, scientists,
nurses and allied health professionals, took part in educational programs
at M. D. Anderson in FY09. The institution awards bachelors degrees in
seven allied health disciplines and, in collaboration with the UT Health
Science Center at Houston, awards M.S. and Ph.D. degrees at the UT
Graduate School of Biomedical Sciences.
• In addition, thousands of health professionals participate in continuing
education and distance-learning opportunities. M. D. Anderson also
provides education programs for healthy individuals, those at risk of
cancer, patients, survivors and caregivers.
• Prevention - The Division of Cancer Prevention and Population Sciences at
M. D. Anderson continues to set the standard in cancer prevention
research and the translation of new knowledge into innovative,
multidisciplinary care for patients, survivors and people at average of
elevated risk of developing cancer.
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Financial Planning Process
Financial & Capital Planning Process
Economic Forecasting Model
Regents’ Budget
Long
Range
Plan
Process begins August and
culminates in December
Business
Strategy
Validation
Process begins August and
culminates in December
Targets
assigned
/aligned
Quarterly
Rolling
Forecasts
Timely
allocation
of resources
Long-Term Capital Plan
Process begins February/March
and culminates in March/April
depending on legislative session
Adjust
Strategy
Ongoing
Investment
Optimization
decision
Annual
Plan
Timely
allocation
of resources
Annual Operating & Capital Budget
Process begins June and culminates in
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August
Guiding Principles
M. D. Anderson Framework for Planning
• Make data-driven decisions
• Focus investments on core mission areas
• Maintain optimal patient care/research balance
• Ensure supporting cash flows are adequate prior to making obligations for nonmargin producing expenditures
• Plan for the long term; ensure financial stability: balance expenditures on core
operational and capital projects with investments to strengthen our financial
position (liquidity ratios)
• Ensure approved assumptions are implemented and key performance indicators
follow desired trends
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Traditional Annual Budget Approach
Traditional Annual Budget Process
• “If you don’t spend it…you’ll lose it”
• Time-consuming process that creates an inflexible 12-month contracted
goal – work towards the goal, not the current business problems
• In today’s fast changing and highly competitive environment, annual
budgets rapidly become obsolete
• Discussions usually center on the justification of budget increases over
prior year
• The annual budget process doesn’t motivate the right behavior
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Rolling Forecasts
Rolling Forecasts Benefits
• Driver-based quarterly rolling forecasts will facilitate performance
analysis
• Allows the modeling of corrective actions to be taken or recovery plans
to be implemented during the current year
• Allows for targets to move as conditions change
• Quarterly rolling forecasts will confirm, validate, & ultimately drive the
Economic Forecasting Model
• Eliminates the annual mindset and emphasizes business functions as an
ongoing process
• The annual budget gets set based on the rolling forecasts
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Rolling Forecasts Challenges
• New process represents major culture change
• End user acceptance & support
• Framing well-defined calendar & establishing process guidelines to
accommodate continuous planning
• Obtaining management approval & input on a continuous basis for
completed forecasts
• Technology: System enhancements and performance
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Rolling Forecasts
Current Process
• Refresh 6-year forecasting model of key clinical metrics and drivers on a
quarterly basis (EFM)
• Refresh a monthly forecasting model of daily key clinical metrics and
drivers on a weekly basis
• Refresh a rolling 12-month trend model of key clinical metrics and drivers
• Focus on divisional driver-based metrics and performance ratios
• Forecast assumptions and results are communicated with division
leadership
• Annual budget targets are developed based on metric-based forecasts
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Rolling Forecasts
Quarterly EFM Refresh
EFM Sample Template
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EFM Sample Template (cont’d)
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EFM Sample Report
Operational Efficiency
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EFM Sample Report
Key Performance indicators
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Rolling Forecasts
Weekly Clinical Metric Refresh
Forecast Template Sample
Daily Clinical Metrics
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Forecast Template Sample (cont’d)
Daily Clinical Metrics
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Forecast Report Sample
Clinical Metrics
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Rolling Forecasts
KPI – Monthly Trend Graphs
Forecast Report Sample
KPI – Monthly Trends
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Annual Budgets vs. Rolling Forecasts
Rolling Forecasts
Traditional Annual Budgeting
Annual Process (12 months only)
vs.
Continuous Monitoring
Focuses on $ Margin Target
vs.
Focuses on Performance Indicators
Limits flexibility
vs.
Flexibility to Model as business
conditions change
Usually results in a % Inc over PY
vs.
Facilitates Performance Analysis
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