- Prepare an 8-10 page operating budget for a hospital unit.
- RUBRIC
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Competencies Measured
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:Competency 1: Design an operating budget that incorporates variances or discretionary spending.
Prepare an operating budget.
Explain how a budget is designed and created.Competency 2: Develop a plan for managing the labor force, within the parameters of the budget and productivity.
Develop an approach to ongoing budget management.
Competency 5: Apply financial principles to a strategic plan for achieving organizational goals and fiscal success.
Develop a strategic plan.
Competency 6: Communicate effectively with diverse audiences, in an appropriate form and style, consistent with applicable organizational, professional, and scholarly standards.
Present budget data and information clearly and accurately.
Integrate relevant and credible sources of evidence to support budget data and information, correctly formatting citations and references using APA style.
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Operating Budget for 35-bed Hospital Unit
Student’s Name
Institutional Affiliation
Course
Professor
Date
Operating Budget for 35-bed Hospital Unit
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Introduction
An operating budget is an instrumental guide to spending in organizations such as hospitals for
efficient and effective running. It comprises the expenditure and the revenue accrued for the
daily operation of the organizations. It focuses on the operational expenditure that includes the
cost-of-service provision. A hospital operating budget contains a list that provides a summary of
all the expenses and potential income, such as the charges of health service provision and the
variance between the expenditure and the income revenue, including both positive and negative
variance. Healthcare operating budgeting involves determining the funding to be planned for
facility operating and staffing costs, personnel costs, and training. Staffing usually takes the
largest cost of the hospital or healthcare operating cost. It does not only account for fixed
operations costs such as salaries; it also includes potential overstaffing, overtime hours, and other
variable costs.
A hospital operation cost is very important in healthcare as it allows the healthcare
systems such as a hospital to monitor and balance revenues and expenses to control and manage
the operation of such healthcare organizations. Preparing an operating budget requires that all the
revenue statistics include clearly and elaborately to enable the hospital manager and the strategic
planners to use the budget correctly in managing and planning for the hospital. All the major
sections of the budget should be indicated clearly for easy following of the budget when
planning or running a hospital. When creating a hospital operating budget, it is essential to
consider important aspects such as employee salaries, hospital revenues, licenses and taxes,
benefits, insurance, hospital equipment, supplies, and professional fees. The operating budget
should be prepared to allow close monitoring of all expenses and revenue generated during the
operating period or a financial year.
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Design and Creation of the budget
Designing and creating an operating budget requires adequate time and professionalism.
The design and Creation of an operating budget for a hospital should be focused on reducing
expenses and increasing the revenue generated from offering health services. It is quite
challenging and time-consuming to create an operating budget plan for a hospital unit with 35
bed capacity with 20FTE staff due to some factors that may negatively impact the budget and
lead to challenges during the operation time. The budget design should incorporate all the
essential expenditures that the hospital may incur in one financial year, with well-approximated
costs assigned to each. It is essential to design the operating budget to include essential
expenditures that include the variable cost, salaries, and wages for the FTE staff, overtime
expenditures, insurance, equipment maintenance costs, staffing costs, and others.
The operating budget was created using a line-item budgeting format, a design format
where the individuals’ financial statement items are grouped by category. The line-item
budgeting design is recommended for hospital and other organization budgeting because it can
be used to compare the financial information of the last financial year to the one in the current
financial year. The line-item budgeting is advantageous over other budgeting designs because it
is simple to do and fast to build, saving time. It also helps an organization analyze and
comprehend whether the revenue can cover the expenditure. Therefore, it is easy to tell whether a
business or an organization makes financial progress by easily comparing the items of the
expenditure and the revenues outlined in the line-item budget with their costs. It also allows easy
following of the expenditure incurred, and items incurring the highest cost can be easily spotted
and manipulated to meet the financial goals of the organizations. It is easy to keep track of the
expenses and change them in the future during the operation dynamics of the organization.
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The design and Creation of the Operating budget for the hospital are based on the data of
revenue and expenditure gathered in the past three months to estimate the total expenditure that
the hospital will use in the next financial year. Recent data on expenses and the revenue
generated is usually prioritized over the data for the past years because it helps depict the
expenditure and revenues for the next financial year. The information predicts the dynamics of
the next financial year because it considers the recent change of operations, expansions, and new
items, including liabilities brought into the hospital. When creating an operating budget for a
hospital or any other health organization, it is essential to use reports and data produced by
electronic patient information Communication as it helps to provide the required reports such as
the number of staff members, usage records of equipment, and average daily Census (ADC) that
is useful in the Creation of the budget. It is also essential to conduct a compressive financial
analysis of the revenue and expenses for the past three or more months in the hospital to come up
with a realistic budget and factions that can accommodate changes in the expenditure in the near
future.
The Creation of the operating budget for the hospital considers the hospital capacity,
which is a 35-bed capacity with 20 full-time equivalents (FTE) staff. The staffing model for the
hospital is 1:12 for the support staff and 1: 7 for the nurses. It also has an ADC of 20, also
requires an additional three ancillary staff each day to ensure a smooth operation. The nurses
receive a daily salary of $30.5 per hour; they work 10 hours a day for 4 days a week; their salary
per week is approximately $1220 for one week and about $4880 monthly for each nurse. A nurse
earns about $9760 in two months and about $58 560 in annual salary. The ancillary staff, such as
the Patent care associate (PCA), are entitled to a salary of $14.5 per hour. They work for about
10 hours a day and five days a week; the expenditure for their salary in a week is about $725
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weekly and approximately $ 2 900. For two months, the Ancillary staff pockets $5 800. Overtime
cost for nurses and other activities is approximately $400.62, and 102 for support staff per day.
Every month, there are 5 days of overtime; in two months, the overtime for nurses and other
activities is about $4006.2 and $1,020 for the support staff. The average cost incurred for other
miscellaneous spending covering life support activities, seminars, meetings, and workshops is
approximately around $100, 87.43 for the ended fiscal year.
The hospital unit incurs the medical supplies costs for life-saving equipment, laboratory
equipment, replacements, crutches, gloves, surgical instruments, beddings, and technology at
about 55% of the total unit expenditure, representing about 8% of the total hospital expenditure.
Other equipment costs include laundry services, medication dispensation, and quality control
equipment. All the medical supplies expenses are approximated at $1350.56 per month. The
budget expenditure on insurance was based on specific patients’ demographics; The hospital
units take of older patients, and older patients have insurance such as medication. The older
patients add extra cost to the hospital unit as they require extra services in caring for their health
services; they require referrals that use hospital transport and other costs. They also develop
complications increasing their cost of care, which reflects on the hospital’s operating budget. To
project the revenue for the hospital unit, it is essential to use the data comparable to project
revenue that can be included in the operating budget plan.
Strategic Plan
The strategic plan for the hospital has a well-developed mission and vision statement,
which helps the hospital management and other stakeholders to run the hospital with the help of
the suggested operating budget to reach its goals. The hospital’s vision is to provide accessible,
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compassionate, high-quality, cost-effective healthcare services to patients to promote health. The
hospital’s mission is to provide quality healthcare services in a physically responsible way to
improve patients’ and society’s physical, social, psychological, and spiritual well-being. The
strategic plan is aligned with the vision and mission of the hospital to achieve the objective of the
hospital unit and the entire hospital at large. The strategic plan is based on the goals of the
hospital projected for about 2 or more years. The long-term goals of the hospital unit include
collaboration between the patients, the medical-surgical team, the family, and the hospital to
improve healthcare and reduce the number of deaths that occurs due to lack of adequate care at
the hospital. The medical-surgical team, the nurses, the managers, and the support staff will be
held responsible for the activities in the hospital units intended to help the hospital achieve its
goals and vision.
The objectives of the hospital unit include increasing the range of services to meet the
increasing opportunities presented by increasing patients’ needs, which include specialized
treatment. The hospital unit also aims to provide the best healthcare services to help save lives
and make it easier and simpler for patients to access quality care at all times. Patients with
various health needs and special treatment procedures have sought the unit’s health services
before, and the unit was not in a position to offer some of the specialized treatment requested by
the client. In the future, the hospital looks towards being in a position to offer various treatment
procedures, including treating special health conditions. Another objective of the hospital unit is
to provide a safe therapeutic environment for patients at all times. The hospital unit also aims to
increase the overall satisfaction rates of the clients, patients, visiting officers, and employees.
The hospital unit is determined to use the projected operation plan to actualize its
objective and goals; the projected budget will be followed strictly to ensure the hospital achieves
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the health goals in the strategic plan hospital units’ visions and mission are well reflected in the
budget as adequate funds have been allocated to most important services that will help the
hospital achieve their mission and visions, the expenses have been allocated adequate fundings
that will help improve service delivery at the hospital to ensure the nurses and other employees
are facilitated and motivated to work hard to produce the best and improve the service delivery
of the hospital in the efforts of realizing its goals and objectives. Approximately $1 879 600 is
dedicated to the expenditure of the hospital to improve service delivery and finally impacts the
overall performance of the hospital unit.
The strategic plan has also ensured useful management of the revenue and expenses
incurred in the hospital to account for all the funds of the hospital units. In the strategic plan,
metrics will be used to ensure modification of any changes are met in time; the metrics will help
track the monthly expenses and revenues to effect changes where required to ensure the
hospital’s operations are aligned with the objectives and the long-term goals of the hospital. Also,
in the strategic plan, measures have been put in place to ensure that staff utilization is closely
monitored to ensure their created operating budget is not negatively impacted by underutilization
which can increase expenses and reduce revenues due to poor, inadequate service delivery.
The strategic plan has included means to ensure adequate staffing for the hospital unit to
ensure no cases of nursing burnout which would lower the quality of care provided to patients.
Staffing will be prioritized when sorting the issue of employees and allocating funds to train
nurses to improve their skills for better service delivery. Strategic planning has also put in place
measures to check on the hospital supplies and equipment required for its daily operation and
ensure they function appropriately. The faulty ones are replaced to maintain the quality of
services provided at the facilities.
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The strategic planning has taken into consideration the required occasional review of the
operating budget, which will be conducted monthly to enhance monitoring of the hospital’s
operation and ensure all the required changes are addressed early enough to avoid compromising
service delivery at the hospital unit. Also, a SWOT analysis has been used in the strategic plan to
measure the strength the, weakness, opportunities, and potential threats to the hospital operations
that may affect the dynamics of the hospital and ways proposed to ensure the operation of the
hospital unit is uninterrupted, and the quality of service remains high throughput. SWOT
analysis is one of the best tools used to analyze the positions for the business or an organization
to formulate changes required to maintain or improve the performance.
Table 1: Operating Budget
SWOT analysis in strategic planning helps an organization predict areas where
improvement isis required to ensure the organization’s goals, objectives, vision, and missiond.
The strength and weaknesses of the hospital units are determined by analyzing the internal
structure of the hospital unit, including the staffing, motivation of workers, availability of
adequate equipment, and any other factors that may negatively or positively impact the
performance and the outcomes of the hospital unit. The strength and weaknesses of the hospital
unit are based on the internal and operating factors of the hospital unit. In contrast, the
opportunities and threats are based on external factors such as government regulation and any
other interference from other organization or their patients that may interfere with the operation
of the hospital unit. A strength identified by the SWOT analysis of the operating budget and the
hospital unit at large is the budget is designed and created to align with and support the hospital’s
objectives, mission, and visions; it has allocated adequate expenses required to improve service
delivery that contribute to the realization of the goals and objectives. Another strength identified
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by the SWOT analysis is that the operating budget will be subject to close monitoring and
positive changes and adjustment made where possible to ensure the hospital delivers quality
healthcare n line with the vision.
The weakness identified by the SWOT about the operating budget is that some of the
expenditures on the medical supplies and expenses are estimations that may not reflect the real
cost and revenues during the operation of the hospital unit; this may negatively influence the
results of projected results the hospital, the provided cost be too or too high may affect the
financial stability of hospital operation hence affecting quality service delivery. Some of the
opportunities associated with the proposed operating budget are that some of the hospital’s
required funding may be achieved by selling some of the goods and services produced by the
hospital.
The hospital may make some direct profit by trading with other hospitals or other
relevant organizations hence making profits, and the hospital may also make some profits in the
training of some of the nurses and other healthcare workers at a fee, increasing extra revenue that
may help to fund some of the expenses. The threats identified by the SWOT analysis include a
lack of corporation from some of the staff members, leading to the underperformance of the
hospital and negatively impacting the financial resources allocated to various hospital units.
There may also be some threats, such as non-corporation from the senior staff, which may affect
the running of the hospital unit, negatively impacting its healthcare delivery and affecting the
ability to achieve its goals, objectives, visions, and missions in the projected timeframe of the
strategic plan.
Approach to Ongoing Budget Management
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After designing and creating the budget in the strategic planning process, it is essential to
develop a budgeting management process that involves activities such as choosing the budget
committee reviews and scheduling the budget review calendar. This will enable the hospital
management to monitor the budget, compile and review the budget models, assess if the budget
is meeting the set objectives and targets, and modulate the budget where needed. Budget
management is a continuous process that helps the management to ensure the budget serves its
intended purpose anchored in the strategic plan. A budget review is done during the
organization’s running to create opportunities that may help improve the organization’s
performance and to ensure the budget adheres to the objective stated in the strategic plan.
The budgetary management process involves using cash or accrual accounting methods
to compute the organization’s financial statements, evaluate the revenues and expenditures and
determine the position of the budget concerning what is stated in the strategic plan. It is always
essential to select the most appropriate accounting style that can be used to manage the budget.
The selection of the style of accounting to be used depends on factors such as budgetary
management experiences, the size of the company, and the items on the budget. For a hospital
unit with 35 capacities that have utilized the line-item budgeting designs, it is essential to use the
accrual accounting methods to manage the budget.
Managing a flexible budget is easier and allows an organization to make effective
changes where necessary. It is, therefore, essential to create a flexible budget with room for
modifications that may allow for incorporating future opportunities that may present during the
period of operating in the hospital unit. One of the best ways to create a flexible budget that will
allow for management includes limiting expenses for nonproductive hours such as vacations and
leaving areas for modifications in the future in the events that arise threats or opportunities to the
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operation of the hospital. It is essential to affect the budget management process by using
technology such as generating monthly financial statements of the expenditure and revenue and
using the technology to accurately track the spending to facilitate the effective evaluation of the
budget during the budget review process. It is also essential to assess other budgets, such as the
capital budget, to evaluate their net impact on the operating budgets during the budget review
process.
Conclusion
In conclusion, an operating budget is an essential item used in the financial management of the
organization, the design, and Creation of the operating budget may be challenging; however, all
the required factors must be considered when choosing the design and creating the operating
budget. It is essential to evaluate the organization, the size, and the items involved in the
operation before designing and creating the budget. The strategic plan should contain a well-
prepared operating budget for running the business in the stated period. The budget must be
flexible to allow management of the budget and the Creation of modifications where necessary.
The operating budget is created in adequate time. It requires sufficient planning to avoid future
financial mistakes that may negatively impact the operating budget’s goals in achieving the
hospital unit’s or organization’s vision and mission. All the stakeholders, including nursing
leaders and hospital managers, should form operation budgets to achieve the goals of such
organizations. An operating budget is, therefore, useful in the entire operation of a health
organization as it helps to bring success to the business.
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