Developing an Operating Budget for a Health Care Unit

Prepare and Manage Operating Budget Essay
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Sound financial management is fundamental in ensuring healthcare institutions' financial success and well-being. Thus, nurse leaders play a significant role in the management of operating budgets and resources. Nurse leaders should possess the crucial skills of preparing and managing operating budgets since they form basic decision-making frameworks, provide safe and optimal quality care, and allocate resources. Operating budgets offer a clear guideline for maximizing resources and ensuring financial goals align with the institution's objectives. Nurse leaders should play a central role in making data-centered decisions within limited financial and time resources. Financial analysis entails organizing and documenting data in a feasible approach that allows for evaluation, comparison, as well as synthesis. One of the primary roles facing nurse administrators when it comes to designing and managing an operating budget entails delineating the types and volume of healthcare services to deliver. Therefore, nurse leaders should also use strategies to augment their organization's profitability and sustainability. This essay will develop an operating budget for the hospital unit, extensively discuss the budget's design and creation, develop a strategic plan, and present a plan for ongoing budget management.
Prepare the Operating Budget
Operating Budget for Hospital Unit

 

Budget Period: 1st June, 2023 - 31th May 2024

 

Budget Categories

Amount ($)

Revenue

 

Inpatient services

1200000

Oupatient services

43000

Emergency department services

38000

Other services

40000

Grants

100000

Donations

150000

Investments

200000

Insurance reimbursements

50000

Total Revenue

1821000

Expenses

 

Personal Expenses


Salaries and wages

211200

Employee benefits(Retirement plans and health insurance

110500

Overtime and temporary staffing

90000

Non-personal expenses


Supplies and materials

250000

Utilities

3000

Equipment maintenance and repairs

2000

Rent and lease

10000

IT services and software

25000

marketing and advertising

45500

Staff training

550

Depreciation expenses


Equipment

780

Facilities

9000

Other operating expenses


Professional services

37000

Travel and conferences

2000

Research and development

1200

Capital expenditures


Equipment purchases

430000

facility upgrades

150000

Contingency funds

700

Total expenses

1378430

Net income

442570

The budget has comprehensively covered major sections, including revenue projections, operating expenses, capital expenditures, and contingency. Consequently, the budget encompasses one year of revenues and expenses from June 1, 2023 – May 31, 2024. It is important to note that the budget observes standard formatting conventions as required in healthcare settings. Its concise presentation clearly shows revenue projections, operating expenses, capital expenditures, and contingency funds in distinct parts. Also, the budget presents readable and easy-to-analyze figures. The preparation of this budget highlighted knowledge gaps, areas of uncertainty, and unknowns which are fundamental for further improvement and information. For instance, enhanced details on historical patient volume data and trends would help ensure accuracy in revenue projections. Collecting data on possible changes in market dynamics, insurance reimbursements, and healthcare policies would also improve revenue projections' accuracy. Moreover, acquiring detailed data concerning equipment maintenance, lifespan, and maintenance costs would ensure the accuracy of equipment-related and future capital expenses (Reiter et al., 2021). Therefore, addressing such knowledge gaps and getting more information would ensure accuracy and refine the operating budget and thus foster effective budget management in the hospital unit.
Designing and Creating the Operating Budget
A budget is an organization's forecasted revenues and expenses within a specified timescale, usually a year. It is a tool for creating targets and adjusting the organization's operations as the market conditions dictate. Designing and creating an operating budget in healthcare entails careful planning, consideration, and analysis of different factors. Nurse leaders' role has evolved from clinical skills and managing clinical nurses to house financial resource management skills. Current health systems require nurses to know that hospitals need financial knowledge to maintain competitively and function well (Paarima et al., 2021). Underlying assumptions are critical in designing and creating an operating budget since they offer grounds for making estimation and projections. Reiter et al. (2021) posit that developing an operating budget needs several assumptions. The underlying assumptions in this budget included anticipated revenue streams, patient understanding and volumes, costs involved, and changes in regulations impacting healthcare reimbursements. For instance, when considering the older population using the hospital unit's services, the underlying assumptions included increased patient volume seeking senior care and related expenses. Historical data, professional opinions, and industry trends inform such assumptions (Finkler et al., 2020).
Determining line items and cost center costs entails dividing expenses into smaller subsets, making it easy to conduct analysis and tracking. Line items show revenue sources and personal expenses, while cost center codes subdivide them depending on their detrimental affiliation and nature (Reiter et al., 2021. However, this process needs the coordination of several stakeholders like departmental managers, finance experts, and administration to enhance the accurate and concise representation of revenue sources and expenses. For instance, line items in the budget include salaries and wages, professional services, and equipment. At the same time, a cost center code would imply assigning to particular departments like administration, nursing, or pharmacy. The operating budget comprises labor and equipment costs as key components. The allocation of labor funding in the budget touches on salaries and wages, overtime pay, and benefits for staff members, such as retirement and health insurance. The process significantly entails such elements as the market absorption rate for healthcare practitioners, staffing ratios, and skills mix needed. Nurse managers in a decentralized organization should allocate such resources wisely to effectively run their department (Weiss et al., 2019). Consequently, allocating equipment funding involves accounting for the acquisition, ongoing, and maintenance expenses regarding IT systems, medical devices, and machinery.
The determination of staffing requirements and workload calculation are critical in ensuring accuracy in budget creation and planning. Nurse leaders should evaluate patients' historical data, patient volumes and acuity, and case mix to evaluate the required staffing levels (Baker et al., 2018). Such workload calculation techniques as nurse-patient ratio and workload intensity approaches are significant since they help ensure the budget caters to adequate staff to address patient needs. Such calculations in the operating budget consider issues like care hours for direct patients, vacation or leave coverage, and non-productive times like during meetings and training. Pointing out equipment needs and related ongoing expenses is critical in designing and creating an operating budget. The pinpointing process encompasses evaluating the present equipment state while accounting for technological advancements and calculating replacement and maintenance costs. The budget uses a direct cost allocation approach, ignoring services other support departments offer (Reiter et al., 2021). The equipment needs in the operating budget prove to be unique in terms of specialization of unit care, technological advancements, and patient population. On the other hand, the ongoing expenses in the budget include repairs, staff training to use equipment, and maintenance costs safely.
The primary sources of budget information differ significantly regarding the hospital organization. The primary sources in the operating budget above include departmental budgets, financial statements, purchasing data, revenue reports, and expense records. Coordina...