Designed by Kelly Emrick, DHSc, PhD, MBA

See Whitepaper at:

finance/https://kellyemrick.org/2025/11/30/predictive-modeling-finance/

Use the above simulator as a dynamic planning tool rather than just a static calculator. Begin by choosing a single representative patient encounter or episode of care, such as a typical DRG, a high-cost oncology case, or a specialty bundle you are assessing. Enter the financial data on the left side of the simulator with your best current assumptions. Input the contracted payment in the “P_reimbursement” field based on your payer contract or the expected allowed amount. Adjust the denial probability using the slider and numeric box, based on your historical denial patterns for that payer, service line, or DRG. Then, enter the fixed cost per case, which should reflect the allocated overhead for that unit or program, followed by the baseline variable cost per day at standard acuity. Finally, specify the expected length of stay in days and select an acuity multiplier that accounts for both clinical severity and SDOH burden, slightly above 1.0 for more complex or resource-intensive patients. After updating these inputs, the simulator will automatically calculate expected revenue, total cost, and net margin per case. It displays a resilience band indicating whether the scenario is strong, thin, or at risk.

After establishing a credible base case, use the right side of the simulator to think like a strategist. Review the net margin, margin percentage, and the resilience band, then analyze the breakdown tiles to see how much of the financial picture is driven by expected revenue versus fixed and variable costs. Next, access the one-click stress tests at the bottom. These show how the net margin changes when the length of stay increases by one day, the denial probability rises by 10 percentage points, or acuity increases by 0.2. Compare the new margin and the change against your base case to identify which lever is most sensitive. If a slight rise in denial risk significantly reduces the margin, the issue mainly involves revenue integrity. If modest changes in LOS or acuity cause rapid erosion, you face operational and patient risk challenges. Leaders can repeat this process for different payers, programs, or case types and use the resulting patterns to guide contract negotiations, care redesign, staffing strategies, and value-based care decisions. Always remember that HF3 treats margin as an expectation under uncertainty, not a guaranteed number.