NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

Name

Capella university

 NURS-FPX 6216 Advanced Finance and Operations Management

Prof. Name

Date

Preparing and Managing an Operating Budget

The operating budget for St. Anthony Medical Center outlines projected revenue and expenses for the upcoming year. The hospital expects $37 million in total revenue from inpatient and outpatient services. However, after adjusting for insurance, charity care, and unpaid bills, the net revenue is $31.3 million. Expenses are expected to total $34 million, leading to a budget deficit of $2.7 million.

Major costs include staff salaries, medical supplies, and equipment rentals. The budget aims to prioritize essential needs while maintaining quality care. The goal of this budget assessment is to evaluate how the hospital plans its finances to manage costs and improve patient care. It aims to identify areas where spending can be controlled while meeting the needs of the hospital’s patients and staff.

Operating Budget

An operating budget has several important parts. It includes revenue, expenses, and adjustments like insurance or charity care. Revenue shows how much money the hospital expects to make. Expenses show costs for salaries, supplies, rent, and other needs. Budget information comes from patient data, past budgets, and input from staff. Many things can affect a budget, like the hospital’s goals, policies, and the need to compete for funding. These factors make it important to plan carefully and use accurate information (Wang & Anderson, 2021). The operating budget for the 35-bed unit includes money coming in (revenue) and money going out (expenses). Revenue is how much we expect to earn, while expenses cover salaries, supplies, and patient care costs. Patient data, past budgets, and staff input help us plan, but many factors, like policies and hospital goals, can affect the budget.

Table 1: Revenues

Category	Amount in Dollars	Details
Inpatient Revenue	$22,000,000	Overall Health Care: $12,000,000; Surgical Procedures Costs: $8,000,000; Diagnosis of Diseases: $2,000,000
Outpatient Revenue	$15,000,000	Consultations: $6,000,000; Diagnostics: $4,000,000; Ambulatory Services: $5,000,000
Total Patient Services Revenue	$37,000,000	Inpatient Revenue + Outpatient Revenue
Contractual Adjustments	-$4,500,000	Modifications to Insurance: -$3,500,000; Other Adjustments: -$1,000,000
Charity and Uncompensated Care	-$1,200,000	Charitable Care Expenses: -$800,000; Unpaid Medical Services: -$400,000
Net Patient Services Revenue	$31,300,000	Total Revenue from Patient Services, Adjustments, and Charities

 

Table 2: Expenses

Category	Amount in Dollars	Details
Salaries and Wages	$18,500,000	Staff in General Care: $8,000,000; Staff in Surgery: $6,000,000; Diagnostics Staff: $2,500,000; Managerial Costs: $2,000,000
Supplies	$7,200,000	Surgical Instruments: $3,500,000; Medical Equipment for Diagnosis: $2,000,000; Supplies for General Care: $1,700,000
Rentals and Leases	$3,500,000	Leases for Equipment: $2,000,000; Structure Rentals: $1,500,000
Purchased Services – Utilities	$1,600,000	Electricity: $900,000; Water: $400,000; Other Utilities: $300,000
Depreciation Expense	$3,200,000	Equipment Depreciation: $1,800,000; Building Depreciation: $1,400,000
Total Budget Expenses	$34,000,000	Salaries, Supplies, Rentals, Utilities, Depreciation
Excess over Revenue	-$2,700,000	Net Revenue – Total Expenses

Briefing of the Budget

The budget shows how St. Anthony Medical Center will manage its money for one year. We expect to make $37,000,000 in revenue from inpatient and outpatient services. After accounting for insurance, charity care, and unpaid bills, the net revenue is $31,300,000. Expenses, like staff salaries, supplies, rent, utilities, and equipment costs, total $34,000,000. This leaves a deficit of $2,700,000. Salaries make up the biggest expense.

Supplies and building costs are also large. The budget highlights areas where spending needs control to improve the financial situation. Careful planning is needed to cover costs while maintaining high-quality patient care (Wang & Anderson, 2021). The 35-bed unit has a tight budget. Staff salaries are the largest cost, and overtime makes it even higher. Supplies and patient care for older adults also add to expenses. Careful spending is needed to manage costs and improve finances.

Uncertainties

Some gaps have been identified in this budget. The data on how many patients will need inpatient or outpatient services should be clear. This is important to estimate revenue. A better breakdown of payments from private insurance, Medicaid, and Medicare is needed to understand how adjustments will affect revenue. More details about charity care and unpaid bills from the past can be helpful in planning for those costs. Information on staff overtime rates and turnover should be clear for salary costs. Precise data on how many supplies are used for each patient type is missing. Lastly, energy costs could change due to market rates or new rules, which makes them hard to predict.

Designing and Creating the Budget

The budget was created to organize and control the unit’s finances for the next year. It was designed based on expected revenue and expenses, focusing on delivering quality care while managing costs effectively. Assumptions were made about patient admissions, supply needs, and staff requirements due to limited data on future trends. The goal was to balance patient care needs with available resources. Staff overtime, a major expense, was carefully analyzed to reflect the current shortages. Equipment costs, ongoing maintenance, and utilities were included to ensure smooth operations. The budget was structured to address immediate priorities while remaining flexible to accommodate unforeseen challenges.

Line Items and Cost Center Codes

Each expense was categorized into line items such as salaries, supplies, utilities, and equipment. Cost center codes were assigned to track spending in different areas like patient care, administrative services, and diagnostics. This approach helps monitor where funds are used and ensures that spending aligns with unit priorities. Line items for overtime and temporary staffing were added because of current shortages. Supplies were broken down by type, such as medical or diagnostic, to ensure accurate allocation. Utilities like electricity and water were also listed as separate items. This structured format provides a clear and organized view of the budget, making it easier to identify cost-saving opportunities.

Staffing Requirements and Workload

Staffing needs were calculated based on the unit’s patient load and the high overtime usage caused by staff shortages. The budget included salaries for 20 full-time staff and temporary workers filling vacant positions. Overtime was a major expense, so it was carefully estimated using past trends. The workload of staff was assessed to determine if additional hiring is required. The aging population served by the unit adds to staffing demands due to the complexity of care. Balancing patient safety with manageable workloads was a key focus. The budget also accounted for training costs to improve staff retention and reduce future turnover.

Major Units of Budget

The budget is divided into two main sections: revenue and expenses. Revenue includes income from inpatient services, outpatient care, diagnostics, and surgeries. These are projected based on past trends and patient volume estimates. Expenses cover salaries, supplies, utilities, equipment, and administrative costs. Staff salaries are the largest expense, followed by medical supplies and equipment rentals. Adjustments for charity care and unpaid bills are included to reflect real income (Wang & Anderson, 2021). By focusing on these major units, the budget ensures that resources are allocated to meet the unit’s operational needs while maintaining financial balance. Prioritizing essential areas helps improve cost efficiency.

Source 

Budget data was collected from various sources, including patient records, past budgets, and input from staff members. Historical data helped estimate revenue from services and common expenses like staff salaries and medical supplies. Information on charity care and unpaid bills from previous years provided insights into adjustments. Discussions with department heads helped refine projections for utilities and equipment costs. Hospital policies guided decisions about funding priorities.

Nice-To-Have Items 

The current financial situation of the unit requires prioritizing essential areas such as staffing, medical supplies, and equipment maintenance. By focusing on these necessities, the budget aims to provide high-quality care within available resources. Non-essential items may be reconsidered in future budgets if finances improve. 

Factors Affecting and Equipment Necessities

Several factors influenced this budget, including staff shortages, high overtime costs, and the needs of an older patient population. Equipment rentals and maintenance costs were included as necessary ongoing expenses. Rising utility rates and supply costs also impacted planning. Changes in healthcare policies or insurance reimbursements could further affect revenue and expenses. Additionally, staff turnover and training needs were considered to manage current challenges and prepare for the future (Waitzberg et al., 2021). These factors make the budget dynamic and flexible, ensuring it can adapt to changes. Equipment necessities were prioritized to maintain operational efficiency and meet patient care standards. 

Data Reliability

The reliability of data used in the budget varies. Historical data on staff salaries, supply costs, and utilities is dependable and forms the foundation of the budget. Patient volume estimates, however, are less predictable and depend on changing healthcare trends. Data on charity care and unpaid bills from previous years helps but may not fully reflect future needs. Projections for overtime and temporary staffing are based on current shortages but could change if positions are filled. Utility rates and supply prices could also fluctuate due to market conditions (Bergmann et al., 2020). Regular updates and reviews are essential to ensure the budget stays accurate and relevant. 

Items Not Included in The Budget

Some items were excluded from the budget to prioritize essential spending. Non-critical items like extra staff amenities, non-urgent equipment upgrades, or luxury medical supplies were left out. These items, while beneficial, do not directly impact patient care or operational efficiency. The focus was on immediate needs like staffing, supplies, and equipment maintenance. Excluding these items allows the budget to address current financial challenges (Patrick et al., 2020). If additional funds become available later, some of these items could be reconsidered. The decision to exclude them ensures that resources are used effectively to maintain high-quality care.

Conflicting Data 

Some conflicting information made creating the budget more challenging. For example, patient volume projections are uncertain, making revenue estimates less reliable. Data on staff overtime costs varies due to fluctuating schedules and turnover. Utility costs could change unexpectedly due to market conditions or policy changes. Historical data on charity care and unpaid bills helps but may not fully predict future needs. Regular monitoring and adjustments will help address these uncertainties and keep the budget on track. Balancing conflicting data requires flexibility and careful planning. 

Strategic Plan

The strategic plan for the unit focuses on improving patient care, managing costs, and aligning with the mission of providing high-quality healthcare. The main goal is to address the current challenges, such as staff shortages and high overtime costs while ensuring safe and efficient care for the older population we serve. The budget was carefully designed to support this plan. It prioritizes necessary expenses like staff salaries, medical supplies, and equipment maintenance (Patrick et al., 2020). Non-essential or “nice-to-have” items were excluded to keep spending in line with immediate needs.

The organization’s mission emphasizes quality care and efficient use of resources. This budget aligns with that mission by focusing on staffing needs, supply management, and reliable equipment to support patient care. Leaders are likely to appreciate the practical focus of the budget, especially the emphasis on solving staffing issues and controlling overtime costs. However, they may have concerns about revenue projections or the exclusion of non-critical items that could enhance patient or staff satisfaction. This strategic plan aims to balance financial constraints with the needs of the unit. It provides a clear pathway for meeting patient care goals while staying within budget limits. It also includes flexibility to adjust for unexpected changes, like fluctuations in patient volume or utility costs.

Future Evaluation

Evaluating the success of this plan will involve measuring its outcomes against the organization’s mission. Key criteria for evaluation include patient care quality, staff satisfaction, and financial performance. Metrics like overtime reduction, staff turnover rates, and patient satisfaction scores will show whether the plan is effective. Revenue and expense trends will also be reviewed to ensure financial goals are met. If the budget aligns with projected outcomes, it supports the mission of delivering high-quality care. Regular reviews will help identify areas for improvement and keep the plan adaptable (Devasahay et al., 2021). This process ensures the unit stays focused on its goals while managing resources effectively.

Ongoing Budget Management Plan

Managing the budget requires continuous monitoring and adjustments. The first step is to control staff overtime by filling all open positions promptly to reduce the need for overtime. Creating balanced schedules will help distribute work evenly among staff. Overtime hours will be tracked weekly to prevent overuse. Non-productive time, such as paid time off and education costs, will also be carefully managed (Nuti et al., 2021). While staff certifications and training are important, these activities will be scheduled in a way that does not disrupt daily operations. Online training options will be explored to reduce costs while supporting staff development.  

For supplies and equipment, regular reviews of usage and orders will help prevent waste. Tracking which items are used most frequently will allow for adjustments in the supply budget. Vendor negotiations will aim for better pricing, and bulk purchasing will be considered when applicable. Equipment maintenance will be planned ahead of time to avoid unexpected costs. Monthly reports will be generated to compare actual spending against the budget. This will help identify issues early and allow for timely adjustments. Regular meetings with staff will provide valuable input to improve the plan (Nuti et al., 2021). By focusing on teamwork, resources can be used wisely, ensuring the budget remains on track.  

Assumptions

This plan assumes that all open staff positions will be filled within a reasonable timeframe. It also assumes that training opportunities and certifications will continue to be available at current costs. Supply prices are expected to remain stable, and vendors are anticipated to offer flexible deals. Another assumption is that patient volumes and needs will remain consistent with current levels. Any sudden changes, such as an increase in patient numbers, may require budget adjustments. Lastly, accurate data is assumed to be available to track spending and guide decisions. Missing or unreliable data could affect the plan’s success.

Conclusion

The budget helps St. Anthony Medical Center plan its finances for the year. It shows the expected income and costs, including important areas like staff salaries and medical supplies. There is a gap between revenue and expenses, but the budget focuses on essential needs to ensure quality care. The plan will be regularly reviewed to make sure it stays on track and adapts to changes. With careful management, the hospital can continue to provide good care while managing costs.

References

Bergmann, M., Brück, C., Knauer, T., & Schwering, A. (2020). Digitization of the budgeting process: Determinants of the use of business analytics and its effect on satisfaction with the budgeting process. Journal of Management Control, 31(1-2), 25–54. Springer. https://doi.org/10.1007/s00187-019-00291-y 

Devasahay, S. R., DeBrun, D. A., Galligan, D. M., & McAuliffe, P. E. (2021). Key performance indicators that are used to establish concurrent validity while measuring team performance in hospital settings – A systematic review. Computer Methods and Programs in Biomedicine Update, 1, 100040. https://doi.org/10.1016/j.cmpbup.2021.100040 

NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

Nuti, S., Noto, G., Ruggieri, T. G., & Vainieri, M. (2021). The challenges of hospitals’ planning & control systems: The path toward public value management. International Journal of Environmental Research and Public Health, 18(5), 2732. https://doi.org/10.3390/ijerph18052732 

Patrick, A., Hess, O., Cooper, K., Rock, C., Doll, M., & Bearman, G. (2020). Daily disinfection of the hospital room and non-critical items: Barriers and practical approaches. Current Infectious Disease Reports, 22(12). https://doi.org/10.1007/s11908-020-00743-w 

NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

Waitzberg, R., Quentin, W., Webb, E., & Glied, S. (2021). The structure and financing of healthcare systems affected how providers coped with COVID‐19. The Milbank Quarterly, 99(2), 542–564. https://doi.org/10.1111/1468-0009.12530 

Wang, Y., & Anderson, G. (2021). Hospital resource allocation decisions when market prices exceed Medicare prices. Health Services Research. https://doi.org/10.1111/1475-6773.13914