NURS FPX 6216 Assessment 1 Instructions: Mentor Interview

Name

Capella university

NURS-FPX 6216 Advanced Finance and Operations Management

Prof. Name

Date

Introduction to Mentor Interview

Proper financial management is critical for an organization’s success and sustainability in the health sector. Operating and capital budgets ensure that resources are utilized efficiently and economic goals are aligned with the mission and objectives of the organization. This interview seeks to uncover the experience of a nurse leader, Sarah Thompson, who serves as Chief Financial Officer (CFO) at St. Mary’s Medical Center, about how she deals with operating and capital budgets.

Resource allocation strategy, budgeting issues, and methods that secure fiscal success are of key focus (Seixas et al., 2021). With this insight from an experienced mentor, we will compare the processes that involve managing the two different kinds of budgets, analyzing the effectiveness of various management strategies. This interview, in combination with supplemental research, will give us a more comprehensive understanding of how financial principles are applied in healthcare and how nurse leaders can contribute to the economic health of their organizations. 

Comparison Between Management Process of Operating and Capital Budget 

During the interview, Sarah Thompson disclosed how she remains constantly aware of all the recurrent cost items through which she successfully controls the financial expenses to fulfill the operating objectives at St. Mary’s Medical Center without a surplus. One of the major problems at this stage is controlling supply and materials costs in the operating budget, as explained in the succeeding pages. She added that last year, due to disrupted supply chains, the hospital encountered a 15% increase in pharmaceutical expenses during 2023 (Fatin Alshibli et al., 2024). Managing this type of variance is crucial in maintaining financial equilibrium. Operating budgets also include ongoing monitoring for staffing needs, as salaries and benefits make up a significant portion of the total budget.

On the other hand, managing a capital budget requires more careful planning since large, one-time expenditures are allocated for long-term projects or asset acquisitions, requiring a strategic outlook on how those investments will benefit the organization over time. For instance, St. Mary’s Medical Center has set aside $3.5 million of its capital budget to replace old MRI equipment, expecting this investment to enhance patient throughput and diagnostic accuracy, thus improving overall patient care (Ladapo et al., 2020).

NURS FPX 6216 Assessment 1 Instructions: Mentor Interview

Though infrequent, these capital investments significantly impact the hospital’s ability to provide high-quality healthcare services. However, the processes also share common elements. Both demand deep analysis of financial forecasts, resource optimization, and thorough monitoring of every expense. In an interview, Sarah Thompson explained, “Both require data analytics and forecasting models.” For instance, in the year 2023, through predictive analytics, the organization has been able to enhance the model of staffing where overtime costs can be reduced to 5 percent, thus keeping up with the expected operating budget for the given higher-than-estimated patient admissions that year (Pradhan et al., 2024). Both budgets also use variance and cost-benefit analyses to determine whether the allocated funds have been utilized effectively and efficiently.

Although there are similarities, the differences lie in managing these budgets. Operating budgets require constant adjustments to meet short-term goals. In contrast, capital budgets are often set for a longer period and may involve more stringent approval procedures before spending is approved. According to Sarah Thompson, capital budget expenditures should be aligned with long-term strategic goals, such as improving operational efficiency and patient care.

NURS FPX 6216 Assessment 1 Instructions: Mentor Interview

Capital budgets tend to be much more scrutinized and must meet the organization’s long-term strategic objectives, which is not true with operating budgets (Seixas et al., 2021). For instance, capital expenditures are evaluated not only for their financial implications but also for their relevance in achieving the hospital’s mission of increasing access to healthcare (Pradhan et al., 2024). In this regard, capital budgeting is more strategic than managing an operating budget.

Despite the differences, both types of budgets also share certain challenges. For instance, forecasting for both operating and capital budgets is inherently challenging. Sarah Thompson cited the ongoing uncertainty around healthcare policy changes and regulatory requirements as a major factor contributing to difficulty in predicting both operational and capital costs.

She indicated that the hospital had to revise its operating budget mid-year in 2023 to factor in unexpected Medicaid reimbursement cuts. This meant a need to reduce certain non-essential operational expenses. Some knowledge gaps were identified in the interview process. For instance, predicting capital expenditures based on emerging technologies or unanticipated shifts in healthcare needs is still unclear (Kulkov et al., 2023). Healthcare organizations anticipate new technology needs, rapid advancements, or shifts in patient demographics complicate long-term capital planning (Kulkov et al., 2023).

Allocating Resources for Labor, Equipment, and Services

The detailed planning and data analysis drive the resource allocation process at St. Mary’s Medical Center for labor, equipment, and services. Sarah states, “Labor is allocated based on predictive models, where 70% of staffing decisions rely on patient volume and acuity metrics”. For example, the emergency department adjusts staffing during peak demand periods, which have historically increased by 20% over winter months (Alsomali et al., 2024). These models will help predict the need for labor, but unforeseen events, such as a pandemic, make it difficult to predict and force rapid adjustments.

Equipment allocation also includes planning a $1.5 million replacement of MRI machines in 2024. The hospital operates on a 5-year cycle to replace equipment. Currently, 30% of the hospital’s imaging equipment is over 10 years old, and new MRI machines are expected to improve diagnostic accuracy and patient throughput by 15% (Van Beek et al., 2020). The hospital assumes a gradual technological progression, but Sarah Thompson pointed out that sudden equipment failures, such as the breakdown of a CT scanner, can necessitate expedited purchases outside the planned budget.

NURS FPX 6216 Assessment 1 Instructions: Mentor Interview

Service allocation is influenced by the growing demand for virtual care services, especially following the rise of telehealth during the COVID-19 pandemic. Sarah Thompson shared that telehealth visits increased by 50% in the last two years, and the hospital has earmarked $500,000 for upgrading telemedicine platforms in 2024 to ensure accessibility and quality care. Historical trends have shown that 30% of outpatient visits could be shifted to telehealth in the coming year, further influencing service allocation decisions (Neeman et al., 2022).

The assumptions behind these allocations are based on a combination of historical data, economic conditions, and patient demand forecasts. According to Sarah Thompson, assumptions regarding future labor needs and equipment replacement may be affected by changes in healthcare policy or unexpected economic challenges, such as inflation in healthcare costs (Alsomali et al., 2024). Continuous reassessment is important because the hospital needs to stay responsive to ensure financial stability while meeting patient care demands.

Effective Approach to Plan for Profitability and Fiscal Success

According to Sarah Thompson, planning for profitability and fiscal success involves “a multifaceted approach, combining both short-term efficiency and long-term sustainability.” “Our approach primarily revolves around zero-based budgeting,” Sarah explained. “This budgeting approach requires each department to justify its budget allocation from the ground up every year, regardless of previous years’ budgets.

We ensure that every dollar spent directly supports our strategic objectives and leaves no room for inefficiencies to carry over. This enhances accountability and ensures that resources are allocated in alignment with our goals and priorities (Pradhan et al., 2024). One of the key components of Sarah’s fiscal strategy is the identification and investments targeted to yield long-term value. For example, we invested $3 million a few years ago in an integrated health information system. While it’s a huge up-front cost, the return on investment is immense. We’ll save roughly $1 million a year as soon as it’s fully integrated. We’ll avoid administrative costs by having fewer errors in patient care and improving efficiency across our operations, ensuring better compliance with regulatory requirements. This investment will significantly enhance our financial performance and improve patient care (Seixas et al., 2021).

NURS FPX 6216 Assessment 1 Instructions: Mentor Interview

She also spoke about the merits of a more conservative approach to financing. “Some healthcare organizations would opt to invest more spread over a longer period,” she said. This approach mitigates risk by avoiding large up-front costs and a potential for budget overstretching. However, this can also mean missing the chance to implement critical technologies or improvements to generate more important long-term savings or immediate gains in patient care. A conservative approach is apt when finances are uncertain or economies are distressed, but this can only delay further efficiencies and improvements in delivering care (Aman et al., 2024).

Sarah quickly noted that her preferred approach to making calculated investments is not to do so without risks. Flexibility is key. While our zero-based budgeting model is effective, we need to be prepared to adjust based on changing circumstances (Huaihai, 2023). This means we are always paying attention to how we are performing financially, observing whether or not our choices are having an effect, and adjusting as necessary to stay the course toward achieving our long-term objectives. By this means, we balance the potential risks and rewards, ensuring we can plan to be profitable yet mitigate possible negative consequences.

Evaluation of the Nurse Leader’s Approach to Budget Management

Sarah Thompson has been a driver of operational efficiency and financial stability at St. Mary’s Medical Center in budget management. Observing her approach, several strengths were seen in her strategy, particularly on zero-based budgeting and her focus on long-term investments. According to Sarah, zero-based budgeting ensures that each department has to justify its budget allocation yearly, thereby keeping the system accountable and minimizing waste.

The best practice guidance for healthcare finance, as by Alshehri et al. (2023), aligns with the practice where budget allocations are reviewed regularly to avoid wastage and ensure that all resources are utilized to their full potential. Avoiding the carryover of unnecessary expenses ensures that more funds are allocated toward the areas that directly serve the organization’s strategic objectives. Besides that, Sarah aims to invest appropriately for long-term value, just like the ideas presented in the literature on healthcare financial management, where short-term fiscal responsibility should not compromise long-term growth.

NURS FPX 6216 Assessment 1 Instructions: Mentor Interview

A study by Aman et al. (2024) also shows that investment priorities are about investments that pay back financially and operationally with considerable returns. For example, Sarah’s investment in an integrated health information system reflects a structured approach to capital budgeting that addresses current operational needs and contributes to future savings and better patient care. This investment’s projected $1 million annual return is a good example of how strategic capital expenditures can drive future profitability and enhance overall organizational efficiency.

Sarah’s approach is not without areas for improvement, however. Even though zero-based budgeting successfully decreases inefficiencies, the process is cumbersome. Every department must defend its whole budget every year as if starting anew. This can delay immediate reactions to important concerns in hospitals because sometimes prompt financial decisions must be made. Periodic reviews instead of starting anew will make it flexible, according to Zhuang et al. (2020). A hybrid method incorporating zero-based budgeting with rolling forecasts may prove more adaptive and thus allow Sarah to adjust allocations when needs unexpectedly arise quickly. 

Conclusion

In conclusion, Sarah Thompson is concerned with budgeting at St. Mary’s Medical Center through strategic planning. The use of zero-based budgeting allows for the elimination of inefficiencies and alignment of spending with the long-term goals of the hospital. Even though effective, it needs flexibility like that found in rolling forecasts. She also focuses on long-term investments, such as the health information system, that will save money and enhance care. Overall, her approach balances financial responsibility with the ability to adapt to changing needs in healthcare.

References

Alshehri, A., Balkhi, B., Gleeson, G., & Atassi, E. (2023). Efficiency and resource allocation in government hospitals in Saudi Arabia: A case-mix index approach. Healthcare, 11(18), 2513. https://doi.org/10.3390/healthcare11182513 

Alsomali, M. S., Altawili, M. A., Modaf Mohammed Albishi, Alharbi, Otaibi, A., Alzahrani, T. F., Alqahtani, M., Abdullah, A., Shehri, A., Alghamdi, A. A., & Abdulaziz. (2024). Improving the quality of care for vacation-related emergency department visits: A narrative review of patient satisfaction and contributing factors. Cureus. https://doi.org/10.7759/cureus.74608 

Aman, A., Anwar, S., Muhammad Atif Khan, Haddad, H., Nidal Mahmoud Al-Ramahi, & Mohammed Arshad Khan. (2024). Economic policy uncertainty and financial system efficiency. Heliyon, 10(10), e31384–e31384. https://doi.org/10.1016/j.heliyon.2024.e31384 

NURS FPX 6216 Assessment 1 Instructions: Mentor Interview

Fatin Alshibli, Khaled Alqarni, & Hasan Balfaqih. (2024). Analyzing the causes and impact of essential medicines and supplies shortages in the supply chain of the Ministry of Health in Saudi Arabia: A quantitative survey study. Informatics in Medicine Unlocked, 101457–101457. https://doi.org/10.1016/j.imu.2024.101457 

Huaihai, Z. (2023). Application of Zero-Based budgeting. Accounting and Corporate Management, 5(10). https://doi.org/10.23977/acccm.2023.051001 

Kulkov, I., Ivanova-Gongne, M., Bertello, A., Makkonen, H., Kulkova, J., Rohrbeck, R., & Ferraris, A. (2023). Technology entrepreneurship in healthcare: Challenges and opportunities for value creation. Journal of Innovation & Knowledge, 8(2), 100365. https://doi.org/10.1016/j.jik.2023.100365 

Ladapo, J. A., Spritzer, C. E., Nguyen, X. V., Pool, J., & Lang, E. (2020). Economics of MRI operations after implementation of interpersonal skills training. Journal of the American College of Radiology, 15(12), 1775–1783. https://doi.org/10.1016/j.jacr.2018.01.017 

Neeman, E., Lyon, L., Sun, H., Conell, C., Reed, M., Kumar, D., Kolevska, T., Kotak, D., Sundaresan, T., & Liu, R. (2022). Future of teleoncology: trends and disparities in telehealth and secure message utilization in the Covid-19 era. JCO Clinical Cancer Informatics, 6. https://doi.org/10.1200/cci.21.00160 

NURS FPX 6216 Assessment 1 Instructions: Mentor Interview

Pradhan, R., Beauvais, B., Ramamonjiarivelo, Z., Dolezel, D., Wood, D., & Shanmugam, R. (2024). Agency staffing and hospital financial performance: Insights and implications. Journal of Healthcare Leadership, Volume 16, 365–374. https://doi.org/10.2147/jhl.s470175 

Seixas, B. V., Regier, D. A., Bryan, S., & Mitton, C. (2021). Describing priority setting practices and resource allocation in publicly funded health care systems of high-income countries. BMC Health Services Research, 21(1). https://doi.org/10.1186/s12913-021-06078-z 

Van Beek, E. J. R., Kuhl, C., Anzai, Y., Desmond, P., Ehman, R. L., Gong, Q., Gold, G., Gulani, V., Hall‐Craggs, M., Leiner, T., Lim, C. C. T., Pipe, J. G., Reeder, S., Reinhold, C., Smits, M., Sodickson, D. K., Tempany, C., Vargas, H. A., & Wang, M. (2020). Value of MRI in medicine: More than just another test? Journal of Magnetic Resonance Imaging, 49(7), e14–e25. https://doi.org/10.1002/jmri.26211 

Zhuang, T., Eppler, S. L., Shapiro, L. M., Roe, A. K., Yao, J., & Kamal, R. N. (2020). Financial distress is associated with delay in seeking care for hand conditions. HAND, 16(4), 511–518. https://doi.org/10.1177/1558944719866889