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Scenario Planning: Preparing for Unforeseen Events

Future uncertainty of the health care environment is creating unprecedented challenges for health care organizations. To manage  risk in uncertain times, scenario planning, which helps organizations adapt more successfully to unexpected future conditions, is an effective tool to incorporate into the strategic planning process.

There are two potential approaches to incorporate scenario planning into the strategic planning process, listed below:

  • What-if” scenarios: Developed during the environment assessment phase, “what-if” scenarios assess several future environmental situations that vary from the status quo and each other.  Once key external factors likely to have a significant impact on future strategies have been identified (e.g., market consolidation, physician alignment, payor innovation), the degree to which these factors are likely to affect the organization should be tested.  For example, a broad base of stakeholders can be engaged to discuss, based on quantitative and qualitative data points, how much they think the market is likely to consolidate in the next three to five years: not at all, a little, a lot.  By testing various “what-if” scenarios, organizations will able to determine which potential scenario is most likely to occur and, importantly, adapt if an unexpected scenario emerges.
  • Contingency strategies: Exploring contingency strategies during the strategy formulation phase will allow health care providers to more easily adapt to external market changes.  Contingency strategies allow the organization to address one or more single uncertainties and develop “back-up” strategies if a particular event does not occur (e.g., unable to secure external capital to fund implementation of a specific strategy).  This allows for the development of solid strategies while still having a back-up plan in place for particular strategies where successful implementation relies on external, uncontrollable variables.

Conducting scenario planning during the strategic planning process enables health care providers to be more attuned to current and future threats. Additionally, considering strategies to pursue for various scenarios will help minimize risk and allow providers to remain nimble in an uncertain environment.

How does your organization assess the risk of unforeseen events in the strategic planning process?