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 anticipates generating $37 million in total revenue from inpatient and outpatient services. However, after accounting for insurance adjustments, charity care, and unpaid bills, the net revenue is estimated to be $31.3 million. The hospital expects total expenses of $34 million, resulting in a budget deficit of $2.7 million. The primary costs contributing to the deficit include staff salaries, medical supplies, and equipment rentals. The hospital’s budget prioritizes essential needs while ensuring high-quality care for patients. The goal is to assess how the hospital plans its finances, control costs, and improve patient care. By evaluating key areas of spending, the hospital aims to balance its resources and deliver optimal care while staying within budget constraints.

Operating Budget Components

The operating budget consists of several key components: revenue, expenses, and adjustments such as insurance and charity care. Revenue refers to the hospital’s expected earnings from inpatient services, outpatient care, and other health-related services. Expenses encompass salaries, medical supplies, equipment rentals, utilities, and other operational costs. Data used to develop the budget comes from historical patient records, previous budgets, and input from hospital staff. Factors such as hospital goals, policies, and competition for funding influence the budget’s formation. The operating budget for a 35-bed unit includes projections for both incoming revenue and outgoing expenses. It is structured to allocate resources efficiently to meet patient care needs while managing costs effectively (Wang & Anderson, 2021).

Table 1: Revenues

Category	Amount in Dollars	Details
Inpatient Revenue	$22,000,000	Health Care: $12,000,000; Surgical Procedures: $8,000,000; Diagnosis: $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	Sum of Inpatient Revenue + Outpatient Revenue
Contractual Adjustments	-$4,500,000	Insurance Modifications: -$3,500,000; Other Adjustments: -$1,000,000
Charity and Uncompensated Care	-$1,200,000	Charitable Care: -$800,000; Unpaid Services: -$400,000
Net Patient Services Revenue	$31,300,000	Total Revenue after Adjustments and Charity Care

Table 2: Expenses

Category	Amount in Dollars	Details
Salaries and Wages	$18,500,000	General Care Staff: $8,000,000; Surgery Staff: $6,000,000; Diagnostics Staff: $2,500,000; Managerial Costs: $2,000,000
Supplies	$7,200,000	Surgical Instruments: $3,500,000; Diagnostic Equipment: $2,000,000; General Care Supplies: $1,700,000
Rentals and Leases	$3,500,000	Equipment Leases: $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	Sum of all expenses listed above
Excess over Revenue	-$2,700,000	Net Revenue minus Total Expenses

Budget Briefing

The St. Anthony Medical Center operating budget is designed to manage its finances effectively for the upcoming year. With a projected revenue of $37,000,000 from inpatient and outpatient services, and after accounting for adjustments, the net revenue is expected to be $31,300,000. The budget also outlines total expenses of $34,000,000, resulting in a $2,700,000 deficit. The primary expenses are staff salaries, medical supplies, and equipment rentals. The budget emphasizes cost control, especially in areas with high expenses, such as overtime and staffing, to maintain high-quality patient care. The 35-bed unit must carefully manage its limited resources to meet patient needs, considering the large costs associated with staffing and medical supplies (Wang & Anderson, 2021).

Uncertainties and Data Gaps

Some uncertainties in the budget may affect its accuracy. Patient volume projections are not entirely clear, which complicates revenue estimations. Additionally, more detailed information about payment sources such as private insurance, Medicaid, and Medicare is required to improve revenue forecasting. Data on charity care and unpaid bills could help further refine revenue adjustments. The hospital also faces challenges related to staff overtime and turnover rates, which affect salary expenses. Precise data on supplies used per patient type and potential changes in energy costs due to market rates or regulatory changes could also introduce variability into the budget’s planning.

Designing and Creating the Budget

The budget for the unit was carefully designed to meet operational goals while managing costs. Revenue and expense projections were based on expected patient volume, supply needs, and staff requirements. Due to limited data on future trends, assumptions about patient admissions, supply needs, and staffing were made. The budget balances patient care demands with available resources, ensuring that necessary expenses are covered without compromising quality. Staffing shortages and overtime were carefully analyzed to reflect the current workforce situation. Equipment, maintenance, and utilities costs were also included to ensure smooth operations throughout the year.

Staffing and Workload Considerations

Staffing needs were calculated based on the unit’s patient load and current staff shortages, which contribute significantly to overtime costs. The budget includes salaries for 20 full-time staff and temporary workers to fill vacant positions. Overtime, a major expense, is carefully estimated using past trends. Workloads were assessed to determine if additional hiring is necessary. The aging population in the unit adds complexity to care, increasing the demand for staff. Balancing patient safety with manageable workloads is a priority, and the budget includes training costs to help retain staff and reduce turnover.

Factors Affecting the Budget

Several external factors influence the budget, including staff shortages, overtime costs, and the healthcare needs of an aging population. Equipment rentals and maintenance costs were included to ensure operational efficiency. Rising utility rates and supply costs also play a role in shaping budget allocations. Changes in healthcare policies or insurance reimbursements could further impact revenue and expenses. The need for staff training and turnover management is another significant consideration in the budget (Waitzberg et al., 2021). These variables make the budget dynamic, requiring regular updates and flexibility to adapt to new challenges.

Data Reliability and Missing Items

While data on salaries, supplies, and utilities is reliable, estimates for patient volume and overtime costs remain uncertain. Charity care and unpaid bills data from previous years is helpful but may not reflect future needs accurately. Projections for overtime and temporary staffing are based on current shortages, but these may change once positions are filled. Utility rates and supply prices could also fluctuate, affecting overall spending (Bergmann et al., 2020). The budget excludes non-essential items, such as luxury medical supplies or staff amenities, to focus on immediate operational needs. If additional funds become available, some of these items may be reconsidered.

Strategic Plan and Future Evaluation

The strategic plan focuses on balancing financial constraints with the mission of providing high-quality care. The budget aligns with the organization’s mission by prioritizing staffing needs, medical supplies, and equipment maintenance. Evaluation will involve measuring patient care quality, staff satisfaction, and financial performance. Metrics such as overtime reduction, staff turnover, and patient satisfaction will help assess the effectiveness of the plan. Regular reviews will ensure that the budget remains adaptable and aligned with the hospital’s goals (Devasahay et al., 2021).

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

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

NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

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