budget.ppt

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BUDGETING FOR NURSING SERVICE

Healthcare organizations are increasingly focused on cost-containment and efficacious use of financial resources. Todays nursing leaders require budgeting knowledge in order to efficiently manage operations in the patient care environment and meet financial targets.

Budgets A budget is a detailed financial plan, used to carry out organizational goals. The budget includes proposed earnings and expenditures as well as details about how resources( money, time, and people) will be acquired and used. The purpose of the budget is to project future plans and costs.

Operating budget-deals primarily with salaries, supplies, and contractual services It is the financial plan for the day to day activities of the organization containing a statement of expected revenues and expenses for the fiscal year.

Revenue Budget- includes expected income based on volume and mix of patients, rates, and discounts.

Expense Budget- includes salary and non-salary items that reflect patient care objectives and planned activities for the nursing unit.

Cost and Profit

Cost Center-the smallest area for which costs are accumulated. They may produce revenue, such as laboratory and radiology or not produce revenue, such as nursing.

Profit Center- a unit where performance is measured in terms of profit the difference between revenues and expenses

Classification of Costs

Fixed Costs-expenses that remain the same such as rent or insurance premiums.

Variable costs-expenses that change with changes in volume and acuity.

Mixed Costs-may vary with volume but not directly.

Direct Costs-affect patient care.

Salary (Personnel) Budget

The personnel budget projects the salary costs that will be paid and charged to the cost center. It accounts for replacement of staff for benefit time, overtime, shift differentials, orientation, on-call hours, bonuses and premiums, and salary increases.

Variance Analysis

The difference between the amount that was budgeted for a specific revenue or cost and the actual revenue or cost that resulted during the course of activities is known as the variance.

There is an established level at which a variance needs to be investigated.

A variance may be favorable or unfavorable and may be related to patient volume, efficiency in relation to nursing care hours provided, rates in hourly rates paid, or in non-salary expenditures

Position Control- a tool to monitor actual numbers of employees to the number of FTEs budgeted.

Why you need budgeting skills

Absolutely essential management skillFinancial viabilityQuality patient careUnit operational efficiencyStaff satisfactionLeadership expectationMost nurse managers do not come into the job with these skills

Department Patient Nurse ratioICU/CCU/NNN, Burnt11 Paediatric and Emergency31General Wards61Isolation ward21O.P.D (each)1Dressing Room (each)1OT31

Capital Budgeting Process

Identify immediate needs

New services

New technology

Broken equipment

Identify Long-term needs

New servicesNew patient populationsNew technologyImproved technologyEquipment replacement planElimination of rentals

Give what they want

Get input

MDs (Intensivists, surgeons, cardiologist,specialists) RN Staff Respiratory Therapy Ancillary staff

Vendors Develop (compliant) vendor relationships throughout the year Be aware of contracted vendors Become knowledgeable about products Ask for demos Ask for references (and check them) Evaluate the literature provided to you Drive a hard bargain Dont forget trade-in value Consider contract for training costs

Hidden Sources

Investigate sources of fundingTechnology committeesSpecialty funds Workplace safety fundsPatient safety fundsEquipment used in Clinical TrialsVendor trialsContingency Funds

Make a convincing caseHow does this equipment improve quality of patient care?Is it a regulatory compliance issue?Will it improve patient safety?Will it improve staff safety?Will it save you money in the long run?

Final Advice

Be mindful of deadlinesAllow enough time for each step of the processVendor response timePaperworkLocal/regional/corporate approvalsFiscal year

Budget Variance in the Operating Budget

WHY ARE YOU OVER BUDGET?

Budget Variance

Payroll budget

Non-payroll budget

Non-payroll Operating Budget

Supply Costs

Equipment Costs

Operational Costs

Non-payroll costs

Unit upkeep / constructionOperational CostsEducationConference feesReferences materialsEmployee recognition

Non-payroll (cont.)

Transportation

Traveler housing

One-time expenses

Lost patient belongings

Supply Costs

Ask yourself, Is there a change in the supply

OR

a change in the patients?

Change in supply cost

New productChange in cost of productChange in vendorChange in contract priceSubstitute productStocking Issues

Change in Patient

Change in volume

Change in patient population

Individual patient need

Equipment Cost

PurchasesRentalsMaintenanceVendor changeContract ChangeConsider capitated costs for rentals

Payroll Budget

Simply putWhat you pay the people who take care of the patients

Payroll Budgeting Tips Budget to full-time equivalents (FTEs) and dollars Account for inflation and salary increases Factor in contractual obligations Estimate non-productive time Account for anticipated changes in patient volume and acuity

Payroll budgetVolumeAcuityOvertime Pay Penalty PayRegistry and Traveler PayPayroll Variance Volume HPPD CPPD

VolumeJanuary Patient DaysBudgeted = 310 Actual = 434 Variance = 124To calculate volume variance:Variance days/budgeted days124/310 = .4Conclusion:You are 40% over your budgeted volume!

Summary of Variance

Examine Payroll and Non-payroll costsLook at both in relation to volumeNon-payrollSupply costEquipment costsOther operating costs PayrollPayrollOT and Registry UsageTraining CostsConcisely explain why

Developing a Staffing MatrixRequired information

Predicted/budgeted average dailycensus (ADC) Historical trends Population changes/changes in casemix Changes in service/specialty offerings

Hours Per Patient DayHPPD = number of hours worked in the 24hour period divided by themidnight censusExampleNOC shift staffed with 4 RNsDAY shift staffed with 5 RNs and a NAPM shift staffed with 5 RNs and a NAMidnight census = 8HPPD = (16 employees x 8 hours) / census of 8 = 128/8=16

Cost Per Patient Day

CPPD =[(Total RNs * 8 hours) * hourly salary +

(Total LVNs * 8 hours) * hourly salary +

(Total NAs * 8 hours) * hourly salary)]/divided by midnight census

Developing a Position ControlDocumentRequired information Budgeted Average Daily Census (ADC) Required full-time equivalents (FTEs) in eachjob category (from staffing matrix) Current hired FTEs in each job category pershift Current Posted FTEs in each job category pershift Historical use of non-productive time

ANALYSIS

1. What can we determine from this positioncontrol document?

2. Have we budgeted for enough staff?

3. Do we currently have enough staff?

4. What additional positions would we need topost?

Step one: Review past performance:

1. As a starting point, the nurse executive will require to review the following

a. The financial records from prior financial periods as a basis for planning.

b. The present activities of the nursing division.

c. The activities that the division plans to institute during the projected financial period.

d. Those activities the division plans to delete during the projected period.

Step two: Review the organization's goals and projections: The nurse executive has to study the organization's goals and financial projections thoroughly. - Items in the major budgetary report that affect the nursing department should be determined

Step three: Review of the variances with higher levels of management :

Once the goal statement is finished, it, (together with the actual versus budget analysis done earlier), should be reviewed with higher level management

The departmental goals proposed should be carefully considered; as well as the variances, their causes, and proposed corrective actions should be reviewed.

Once the final statement for the department is in place, the new budgeting process can begin in earnest.

Step four: Actual preparation of the budget:

The actual preparation of a new budget can be done based on a previous budgetary plan, or newly proposed plan (if a newly developed or modified service).

To complete the budget, a budget worksheet is essential. Worksheet is "a tool used by managers to prepare their budget". It includes a number of columns including information about:

a) Historic information with old budget.

b) Actual numbers with comments explaining the variances.

c) Revenue and costs.

What have you learned?

Capital Budget Identify short and long-term needsWork effectively with vendorsPlan ahead and allow lots of timeAnalysis of Operating Budget variancePayrollNon-payrollStaffing MatricesPosition Control

The quickest way to get what you want is to help others get what they want.

SHIFT TO POPULATION BASED CARE AND INCREASING COMPLEXICITY OF PATIENT CARE

THE GREAT THING IN THIS WORLDIS NOT SO MUCH WHERE WE STANDBUT IN WHAT DIRECTION WE AREGOING