Creation and Management of an Operating Budget

The success of an organization depends heavily on effective budget planning, preparation, and management. A budget is a calculation of the resources required to deliver services. It describes the organization’s financial objectives and how to accomplish them while controlling expenses. A budget is based on an organization’s mission and strategic plan, and if it is carefully designed, the actual results will match the projected results (Butler et al., 2019). Operating revenue and costs are included in the budget. The hospital’s incoming income is known as operating revenue. Operating costs include, but are not restricted to, salaries, wages, employee benefits, supplies, utilities, professional fees, licenses, taxes, insurance, supplies, equipment, and overtime.

NURS FPX 6216 Assessment 3 Budget Negotiations and Communication

An emphasis of the current budget is a 45-bed medical-surgical facility. The unit is staffed with 25 full-time equivalents (FTE) workers. Several staff has been working extra as a result of recent turnover. The older population that the unit census tends for incurs costs. To prevent a detrimental effect, the nurse manager has to bring the budget under control (Dort et al., 2018). Direct and indirect patient care expenditures are the two areas of expenses for the department. Salaries, medical supplies, and equipment are examples of direct costs. Seminars, conferences, continuing education, office supplies, and shared expenses are indirect costs, including lighting, heating, administrative, and staff costs. 

Variable and fixed costs are included in the departmental budget. Expenses like employee salaries, rent, and telephone are fixed expenditures independent of the degree of activity (Gabardine et al., 2022). Variable costs, on the other hand, are more changeable. Personnel, medical supplies, linen, staffing, and food are variable costs that fluctuate according to patient acuity and census. The budget for staffing must account for wages, costs associated with hiring new personnel, per diem workers, shift differentials, and overtime. The unit will have the necessary resources and be effective if budgeting and management are done correctly.

45-bed Medical-Surgical Unit Operating Budget FY 2022-2023

Design and Creation of a Budget

Planning and data evaluation are the first steps in creating the nursing unit’s operating budget. The information received will be used to predict the upcoming budget’s anticipated revenue and expenses. One of the essential steps in budget planning is gathering reliable data. In the end, the finance division gathers the information and works with the nurse manager to develop the budget (Mujtahid et al., 2021). The information gathered covers existing services, potential future services, case mix, payer mix, patient acuity, and patient hours per day. These forecasts are based on historical data from the prior year, including patient days, the average length of stay, nursing hours per patient, and overtime.

NURS FPX 6216 Assessment 3 Budget Negotiations and Communication

The unit’s income is calculated based on anticipated revenue reimbursement. Medicare, managed care, Medicaid, and private insurance is the primary payer sources due to the elderly patient demographic. The budget also needs to account for patients without insurance (Mujtahid et al., 2021). The nursing unit’s expenses include salaries, wages, overtime pay, hiring new employees; continuing education costs, insurance, medical equipment, and supplies (Wu et al., 2022). Examples of supply costs for the nursing unit include linen, patient care items, wound care supplies, dispensing medication, needles, , and materials required for operations (Wu et al., 2022). Equipment expenses include blood pressure monitors, IV machines and SCD devices

To adequately satisfy the demands of the patients, nurse staffing models are used to determine and allocate the quantity and kind of nurses. A template comprises the annual total of patient days, and the average daily census is utilized to determine the required number of nurses. The hospital runs on a daytime and nighttime schedule. It is crucial to use the right nursing workload and skill combination (Zhou et al., 2022). The most crucial phase is ongoing monitoring and assessing to guarantee unit compliance once the budget has been developed, reviewed, and approved. It is crucial to keep an eye on inventories and supply costs to prevent the abuse of goods. To avoid overstaffing or understaffing the unit, census trends should be observed. 

Strategic Plan

Strategic planning is imagining the future and preparing to achieve corporate goals (Leger & Dunham-Taylor, 2017). The organization aims to provide community members with safe, high-quality healthcare services while showing compassion. Strategically, the budget was developed with the organization’s objective in mind. The spending plan is set up to deliver safe, efficient treatment and superior patient results (Leger & Dunham-Taylor, 2017). The budgeted staffing ratios are designed with the elderly population in mind. By lowering the population’s safety threats, we can provide safe treatment. The unit will succeed if everyone works together and takes responsibility.

Compared to the prior year, the budgeted expenses have remained relatively high. The projected budget is unlikely to cause the executive leaders any problems. Labor costs are expected to rise due to staffing concerns regarding anticipated expenses. Extra pay, hiring, orientation, training, and contract nurses receive increased funding. This will not surprise the leadership when they assess the budget because they are aware of the staffing concerns. The unit will take great care to retain current and incoming workers. Manager involvement and communication will help to achieve this.

Ongoing Budget Management

To achieve budget objectives, ongoing budget management must be given supreme importance. Due to the costs associated with staffing, this work may be difficult. For effective budget management, overtime must be decreased. The hospital’s float pool and PRN staff may be used to do this. To cut labor costs, contract nursing should only be used seldom (Welch and Smith, 2020). Candidates of high caliber who are dedicated to the company must be hired to fill open positions. Retaining employee morale and satisfaction can lower turnover. Non-productive hours are those that are compensated but not put to use. Examples include paid holidays, sick days, vacation time, professional leaves for training and education, and vacation time. Healthcare businesses have chosen to adopt just-in-time (JIT) training to reduce the number of training hours for new equipment (Yun and Yu, 2021). JIT training involves doing an action before practicing the skill to enhance learning, confidence, and safety. Education regarding new supplies or equipment can also be done while working the shift. The budget includes money for the mandatory annual training hours.

Supply waste reduction and supply utilization monitoring are continual tasks. Monitoring inventory trends reveals if there is unjustified excess supply utilization. The organization may benefit from effective staff communication. Once a supply is brought into a patient’s room, it cannot be utilized for another patient, and any supplies still in the room after the patient leaves will be thrown out regardless of cost (Yun and Yu, 2021). This is a significant potential to achieve financial objectives. Costs can be kept down by using and maintaining equipment properly. According to manufacturer requirements, the equipment will be serviced. Equipment upkeep lowers the cost of replacement. The expected budget is depicted in the table below:

Conclusion

For nurse managers, creating and developing a budget is a complex but necessary and significant responsibility. An accurate budget is essential for the unit to give high-quality patient care. Staff adherence is one of the keys to good budget management. Nurse Managers are responsible for ensuring that all departments’ and units’ costs stay within the allocated budget. They must also communicate with unit staff members about their financial expectations and discuss their financial goals. Staff members must be aware of the consequences of wasting supplies for the unit. In order to identify and address any concerns with variance, the nurse manager must regularly analyze patterns in supply consumption, staffing, and census data. 

References 

Butler, M., Schultz, T. J., Halligan, P., Sheridan, A., Kinsman, L., Rotter, T., Beaumier, J., Kelly, R. G., & Drennan, J. (2019). Hospital nurse-staffing models and patient- and staff-related outcomes. Cochrane Database of Systematic Reviews. https://doi.org/10.1002/14651858.cd007019.pub3 

Dort, T., Sheron, N., & Standaert, B. (2018). Improving the hospital quality of care during winter by optimizing budget allocation between rotavirus vaccination and bed expansion. Applied Health Economics and Health Policy, 16(1), 123-132. 

Gabardine, C. S., Dohmen, P. J., Eigenpair, F., Schut, F. T., van Rajai, E. M., & Hijinks, R. (2022). Financial risk allocation and provider incentives in hospital–insurer contracts in The Netherlands. The European Journal of Health Economics, 1-14. 

NURS FPX 6216 Assessment 3 Budget Negotiations and Communication

Mujtahid, M., Sunanda, R. Y., Lestari, F., & Wijaya, O. (2021). Developing hospital emergency and disaster management index using tops is a method: Sustainability, 13(9), 5213. 

Ren, W., Zhao, Y., Zhong, H., Fu, X., & Wu, J. (2021). Exploring the Optimal Allocation Decision-Making of Expenditure Budget in Hospitals Under Multi-Objective Constraints: Evidence from Urban Public Hospitals, China. SAGE Open, 11(4), 21582440211058191. 

Wu, Y., Fung, H., Shum, H. M., Zhao, S., Wong, E. L. Y., Chong, K. C., … & Yeoh, E. K. (2022). Evaluation of Length of Stay, Care Volume, In-Hospital Mortality, and Emergency Readmission Rate Associated with Use of Diagnosis-Related Groups for Internal Resource Allocation in Public Hospitals in Hong Kong. JAMA network open, 5(2), e2145685-e2145685. 

Zhou, L., Geng, N., Jiang, Z., & Wang, X. (2019). Public hospital inpatient room allocation and patient scheduling considering equity. IEEE Transactions on Automation Science and Engineering, 17(3), 1124-1139.

Thomas, A. A., Uspal, N. G., Oron, A. P., & Klein, E. J. (2016). Perceptions on the impact of a just-in-time room on trainees and supervising physicians in a pediatric emergency department. Journal of Graduate Medical Education, 8(5), 754–758. https://doi.org/10.4300/jgme-d-15-00730.1  

Welch, T. D., & Smith, T. (2020). Understanding FTEs and Nursing Hours Per Patient Day. Nurse Leader, 18(2), 157–162. https://doi.org/10.1016/j.mnl.2019.10.003

Leger, J. M., & Dunham-Taylor, J. (2017). Financial Management for Nurse Managers: Merging the Heart with the Dollar. Jones & Bartlett Learning, LLC.

 Yun, M. R., & Yu, B. (2021). Strategies for reducing hospital nurse turnover in South Korea: Nurses’ perceptions and suggestions. Journal of Nursing Management, 29(5), 1256–1262. https://doi.org/10.1111/jonm.13264

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