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

Creating and overseeing an operating budget involves predicting an organization’s income and expenditures for a specific period, typically a fiscal year. This process requires a comprehensive review of past financial data, corporate objectives, market trends, and regulatory requirements. The budget typically encompasses various revenue sources such as sales, services, grants, investments, and expenses, including personnel, supplies, utilities, rent, maintenance, and other operational costs. Effective budget management entails continual monitoring, analyzing differences between planned and actual performance, and making adjustments to ensure that actual results align with projected targets and optimize the use of resources (Anderson et al., 2020).

Mercy Medical Center (MMC), situated in a bustling metropolitan area, serves a diverse community with top-notch healthcare services. The institution focuses on delivering exceptional medical care while adapting to the dynamic needs of its patient base. Equipped with a wide array of medical specialties, advanced technology, and a skilled workforce, the center is dedicated to offering accessible, patient-centric care while upholding the highest standards of clinical excellence and innovation. Among its units is a 35-bed facility with a team of 20 Full-Time Equivalent (FTE) employees. This unit specializes in serving an elderly population, facing staffing challenges like turnover, which necessitates increased overtime and extra shifts to maintain smooth operations (Capella University, n.d.). As a nurse, I will be responsible for crafting the operational budget for the hospital unit.

Operating Budget

An operational budget is a blueprint projecting an organization’s income and expenses over a defined fiscal period, usually a year. It plays a crucial role in helping organizations efficiently manage their resources to fulfill their objectives, with a focus on day-to-day operations. Operational budgets encompass various revenue streams like sales, services, grants, and investments, along with staffing, supplies, utilities, rent, and upkeep expenses.

By comparing actual financial performance against planned targets, organizations can gauge their financial well-being, pinpoint any disparities, and make informed decisions to optimize resource allocation and attain financial stability (Visconti & Morea, 2020). MMC’s operational budget outlines a comprehensive financial plan for the year, with scheduled quarterly assessments. It follows conventional formatting standards, encompassing essential revenue and expenditure categories. By leveraging historical fiscal data and integrating new progressive expenditures, MMC aims to align its financial strategies with evolving healthcare needs and organizational goals.

Table 1: Revenue of one year

Revenues	Amount
Inpatient Revenue	$860,000
Outpatient Revenue	$630,000
Overall Patient Service Revenue	$1,490,000
Contractual Deductions	($120,000)
Charitable and Unpaid Care	($30,000)
Net Revenue from Patient Services	$1,340,000
Total Budget Revenue	$2,400,000

Table 2: Expenses of one year

Expenses	Amount
Employee Compensation	$104,000
Supplies	$59,000
Leasing Costs	$12,000
Outsourced Services – Utility Expenses	$11,000
Asset Depreciation	$17,000
Overall Budget Expenditure	$203,000

NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

The net budget is calculated by subtracting the total budgeted expenses, which amount to $203,000, from the total budgeted revenue, which is $2,400,000. This results in a net budget of $2,197,000.

The operational budget for MMC lays out a thorough financial plan for the upcoming fiscal year, meticulously designed to uphold the institution’s dedication to delivering top-notch healthcare services to its diverse community. In terms of revenue, the budget anticipates various income sources, including $860,000 from hospital admissions and $630,000 from outpatient services, totaling $1,490,000 in patient service revenue. Following adjustments for contractual obligations and allowances for charity and uncompensated care, the net revenue from patient services amounts to $1,340,000, contributing to a total budget revenue of $2,400,000.

Regarding expenses, careful attention has been paid to essential costs such as employee wages, supplies, facility rentals, utility payments, and depreciation. These expenditures, totaling $203,000, have been meticulously budgeted to ensure efficient resource allocation while upholding operational effectiveness and the highest standards of patient care. Through this detailed budgeting approach, MMC aims to proficiently manage its financial resources, fulfill its mission of patient-focused care, and maintain its position as a pillar of healthcare excellence in the metropolitan region. 

Areas of Uncertainty

While MMC’s operational budget offers insights into expected revenues and expenses, further clarity is needed in several areas. Specifically, more detail is required regarding revenue sources, like patient services and cafeteria operations, to identify growth opportunities. Additionally, explanations for certain expenses, such as deflationary measures and information technology investments, must be improved, leaving stakeholders uncertain. Furthermore, the budget highlights a significant deficit, prompting questions about strategies for financial sustainability. Enhancing information on revenue sources, detailing expenses, and outlining deficit mitigation strategies could improve the budget’s effectiveness in guiding financial decisions for the center (Harrington et al., 2023).

How was the Budget Designed and Created?

Creating a budget involves several steps and factors. Stakeholders play a crucial role by identifying the organization’s goals, objectives, and financial constraints, which help define the budget’s objectives and scope. Historical data, industry standards, expert opinions, and external factors like market trends and regulatory requirements are consulted to predict revenues and estimate expenses. Key expenses such as labor, materials, equipment, and facility maintenance are carefully examined to establish specific line items and cost codes. Funding for labor and equipment is determined based on staffing levels, workload, and service requirements (Špacírová et al., 2020). 

This budget has been carefully designed to showcase a surplus of $60,000 beyond the total revenue, indicating prudent financial planning and operational effectiveness. The budget ensures a favorable financial outcome by meticulously balancing various revenue sources, such as inpatient and outpatient services, alongside careful expense management (Harrington et al., 2023).

Strategic measures to control costs, including efficient resource allocation and disciplined expense handling, contribute to this surplus, underscoring the organization’s dedication to financial stability and optimal resource utilization. Fortuna (2021) emphasized the significance of financial management practices, including budgeting, in enhancing the profitability of small and medium-sized enterprises. It highlights the role of effective budgeting in cost control, revenue maximization, and ultimately achieving profitability, which aligns with the principles reflected in the provided budget scenario.

Determining Line Items and Cost Center Codes

Departmental leaders, finance teams, and stakeholders worked together to identify and rank essential expenses, aiming for transparency and effectiveness in budgeting. Past spending patterns, operational needs, and future expansion strategies informed the selection of line items. Precise cost codes were set to oversee expenditures and distribute resources among departments.

Staffing Needs and Workload

Surveys and data analysis were conducted to assess patient numbers, the severity of cases, and the required mix of skills to optimize staffing effectiveness. Past trends, industry norms, and future forecasts were utilized to estimate workloads, ensuring adequate coverage while reducing overtime and idle time. Staffing levels were adapted to meet patient care needs and enhance employee morale, taking into account staff engagement and feedback (Okoroafor et al., 2022).

Major Sections Included in Budget

The primary sections comprised net revenue from patient care, revenue from outpatient and inpatient services, and operational costs like salaries, supplies, rental expenses, lease payments, and depreciation. Additionally, contractual adjustments, charity, and unremunerated care were accounted for to provide a comprehensive overview of the organization’s finances (Okoroafor et al., 2022). Each segment was systematically categorized into analysis, decision-making, and resource distribution.

Source of Budgeting Information.

Budget details were predominantly sourced from staff evaluations, technical evaluations, financial statements, and departmental budgets, ensuring precise decision-making. Analysis of data from the previous fiscal year unveiled trends in spending, sources of income, and potential areas for cost savings. Operational metrics and performance indicators shed light on the efficient utilization of resources (Okoroafor et al., 2022).

Assumptions to Consider

It was assumed that there was a correlation between the utilization of supplies, patient volumes, and investments in new diabetic devices with rapid returns and a defined lifespan. Projections anticipated consistent patient volumes, market conditions, and financial constraints to guide resource distribution and financial strategizing (Nikolaos, 2022). Changing circumstances and input from stakeholders prompted ongoing reviews and adaptations of assumptions.

Nice-To-Have Items Included in Budget

Charitable and uncompensated care services were incorporated to address the needs of both staff and patients, enhancing satisfaction and care quality. These initiatives aligned with the organization’s mission and values of community welfare and patient-focused treatment. Budgeting for these services was essential as they could impact patient well-being, staff motivation, and community engagement (Nikolaos, 2022).

Factors Affecting Managing of Budget

Budget management was influenced by policy regulations, funding competition, and the organization’s objectives, leading to fluctuations in performance. Shifts in legislation, market dynamics, and the healthcare landscape compounded challenges in budget planning and execution. Ongoing monitoring and adaptation were essential to mitigate risks and optimize financial effectiveness (Nikolaos, 2022).

Equipment Requirements and Other Expenditures

The acquisition of Electronic Health Record (EHR) technology, radiology equipment, and physiotherapy tools, as well as their maintenance, updates, and depreciation costs, were deemed necessary. Budgets were structured to balance capital investments and operational expenses to meet current equipment needs while ensuring long-term viability. Assessments of equipment performance and usage influenced budget allocation and resource management decisions.

Data Reliability

The budgeting information was up-to-date and reliable, sourced from financial records and operational assessments, accurately reflecting the organization’s financial status and needs. Data integrity and reliability were enhanced through thorough validation and quality checks. Furthermore, stakeholder feedback and performance metrics provided additional validation, supporting strategic planning and decision-making processes (Špacírová et al., 2020).

Information Not Included in The Budget

Although electronic health records (EHR) and telehealth offered the possibility of alleviating nursing workload, they were not implemented due to their high costs, which required evaluation. Despite their importance, various technologies were postponed until future budget cycles for assessment and ranking. Stakeholder consultations and feasibility analyses were suggested to assess the implications, feasibility, and cost-efficiency of integrating these technologies into the operational budget (Badowski et al., 2020).

Conflicting Data

When crafting the budget, it is essential to acknowledge conflicting information or gaps in data. Revenue forecasts based on historical trends and industry predictions may not always align. External factors like market conditions, regulatory changes, or unforeseen events can lead to variations in spending projections. Additionally, feedback from stakeholders can highlight budget priorities or resource requirements that need to be addressed (Badowski et al., 2020). Recognizing these potential conflicts or discrepancies fosters transparency and encourages open communication, enhancing the accuracy and collaborative nature of budgeting and financial decision-making.

Strategic Plan

A comprehensive assessment of its purpose and strategic goals is essential to develop a strategic plan that aligns with MMC’s mission and objectives. The hospital’s primary focus is on delivering top-notch healthcare services, expanding its workforce, and embracing innovative medical technologies like EHR and telehealth. As a result, the strategic plan prioritizes budget allocations towards initiatives such as staff development, enhancements in patient care delivery, and the adoption of cutting-edge medical advancements. This approach ensures that the budget reflects the hospital’s overarching goals and supports its commitment to providing specific high-quality healthcare services, such as patient care, diagnostic imaging, surgical procedures, and specialized treatments (Kenno et al., 2020).

Crafting a budget that aligns with Mercy Medical Center’s strategic goals is likely to meet the approval of executive leaders. These leaders are expected to endorse budget allocations that support the hospital’s strategic plan, particularly those aimed at improving patient outcomes, enhancing operational efficiency, and fostering innovation. However, they seek further clarification on budget items contradicting the hospital’s objectives or strategy.

Including discretionary elements in the budget enables MMC to foster development and innovation. Initiatives such as enhancing the patient experience, promoting staff well-being, and adopting advanced medical technologies like EHR and telehealth contribute to the hospital’s efficiency and competitive edge (Kenno et al., 2020). By incorporating such items into the budget, the hospital demonstrates its commitment to meeting the evolving needs of patients, staff, and stakeholders while delivering exceptional care.

Criteria for Future Evaluation

Future evaluation criteria for the proposed strategic plan are essential to assess its effectiveness and alignment with MMC’s mission and objectives. Firstly, evaluating alignment with the mission involves examining how well the outcomes of the strategic plan correspond to the hospital’s values and long-term objectives. This assessment entails reviewing financial allocations towards mission-driven initiatives and strategic goals to underscore the hospital’s dedication to delivering specific high-quality healthcare services, such as emergency care, pediatric services, and cancer treatment.

Secondly, patient care is critical to the strategic plan’s success. The hospital can evaluate the impact of its investments in enhancing patient experience and health outcomes by analyzing the effects of budget allocations on various aspects of patient care, such as satisfaction levels, clinical outcomes, and quality of care indicators (Pessina et al., 2020). By enhancing patient care through budget allocations, the hospital can demonstrate the success of its strategic plan.

Assessing staff engagement and development is crucial for understanding the impact of the strategic plan on MMC’s workforce. Budget allocations for staff engagement, satisfaction, and professional growth contribute to a positive work environment and retention. To measure the plan’s effectiveness, the hospital evaluates initiatives such as staff training in critical care, nursing specialties, and surgical procedures, wellness programs tailored to mental health support, and career advancement opportunities in leadership development and specialized training (Palozzi & Ranalli, 2023).

Additionally, assessing funding allocations’ impact on technical improvements is vital for the hospital’s readiness to implement advanced medical technology. Investments in healthcare IT infrastructure, diagnostic equipment upgrades, and telemedicine capabilities enhance operational efficiency and patient outcomes. Analyzing these investments’ effects on clinical processes helps determine how effectively the plan utilizes technology to innovate and improve healthcare (Palozzi & Ranalli, 2023).

Plan for Ongoing Budget Management

As an integral component of its community’s healthcare network, MMC must develop a comprehensive budget management strategy encompassing all financial facets. The hospital acknowledges the significance of harmonizing budgetary choices with its organizational objectives and guidelines (Pessina et al., 2020). By aligning budgeting decisions with strategic aims, MMC guarantees that resources are allocated toward fulfilling its mission and realizing its long-term strategic objectives.

Decrease in Staff Overtime 

MMC strives to decrease staff overtime and unproductive hours to improve operational effectiveness and cut unnecessary costs. By introducing efficient personnel scheduling methods and establishing staffing norms based on patient care requirements, the hospital can enhance staffing levels and decrease dependence on expensive overtime shifts (Ricciardi & Tarricone, 2021).

Application of Workforce Management Software

MMC plans to introduce workforce management software to streamline personnel scheduling and predict instances of overtime. By utilizing sophisticated scheduling solutions, the hospital can effectively oversee staffing levels, address personnel shortages, and uphold operational efficiency while reducing overtime expenses (Ricciardi & Tarricone, 2021).

Balancing Staff Development with Operational Needs

Hospitals understand the significance of harmonizing staff development initiatives with operational requirements (Ricciardi & Tarricone, 2021). MMC aims to boost staff competencies and effectiveness by prioritizing educational and certification initiatives that enhance patient care results. Moreover, the hospital will align training endeavors with organizational objectives and strategic aspirations.

Assumptions

MMC’s financial management relies on several key assumptions. First, aligning budget decisions with organizational objectives optimizes resource allocation and supports the hospital’s mission. Second, reducing worker overtime and controlling non-productive time and expenses is expected to lower costs without compromising patient care. Third, adopting digital solutions is anticipated to enhance operational efficiency and address personnel issues (Kenno et al., 2020).

Conclusion

MMC employs a comprehensive approach to managing its operating budget and optimizing resource utilization while aligning financial decisions with its mission and strategic goals. The strategic plan prioritizes patient-centered care, staff development, and technological innovation to address financial challenges and ensure future success. Through proactive measures like controlling expenses and leveraging digital solutions, the hospital aims to mitigate financial risks and enhance overall performance. At the same time, continuous evaluation ensures that budget decisions remain aligned with the organization’s values and adapt to evolving healthcare dynamics.

References

Anderson, D. M., Cronk, R., Best, L., Radin, M., Schram, H., Tracy, J. W., & Bartram, J. (2020). Budgeting for environmental health services in healthcare facilities: A ten-step model for planning and costing. International Journal of Environmental Research and Public Health, 17(6). https://doi.org/10.3390/ijerph17062075 

Badowski, M. E., Wright, E. A., Bainbridge, J., Michienzi, S. M., Nichols, S. D., Turner, K. M., Wicke, C., Awad, J., Thompkins, A., & Martin, R. D. (2020). Implementation and evaluation of comprehensive medication management in telehealth practices. Journal of the American College of Clinical Pharmacy, 3(2), 520–531. https://doi.org/10.1002/jac5.1210 

Capella University. (n.d.). Capella University – University Catalogs – NURS-FPX6216. Capella.smartcatalogiq.com.https://capella.smartcatalogiq.com/en/2023-2024/university-catalog/course-descriptions/nurs-fpx-nursing-flexpath/6000/nurs-fpx6216/ 

NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

Fortuna, C. P. A. (2021). Budgeting practices: Its impact on the profitability of small and medium enterprises in Isabela. Universal Journal of Accounting and Finance, 9(3), 336–346. https://doi.org/10.13189/ujaf.2021.090307

Harrington, C., Mollot, R., & Williams, D. (2023). United States’ nursing home finances: Spending, profitability, and capital structure. International Journal of Social Determinants of Health and Health Services, 54(2). https://doi.org/10.1177/27551938231221509 

Kenno, S., Lau, M., Sainty, B., & Boles, B. (2020). Budgeting, strategic planning and institutional diversity in higher education. Studies in Higher Education, 46(9), 1–15. https://doi.org/10.1080/03075079.2019.1711045 

Nikolaos, T. (2022). Budget management for the non-profit organization. International Journal of Global Economic Light, 8(6), 9–13. https://www.eprajournals.net/index.php/JGEL/article/view/1256 

Okoroafor, S. C., Ahmat, A., Osubor, M., Nyoni, J., Bassey, J., & Alemu, W. (2022). Assessing the staffing needs for primary health care centers in Cross River State, Nigeria: A workload indicators of staffing needs study. Human Resources for Health, 19(S1). https://doi.org/10.1186/s12960-021-00648-2 

NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

Palozzi, G., & Ranalli, F. (2023). Telemedicine implementation between innovation and sustainability: An operating model for designing patient-centered healthcare. In Human-Centered Service Design for Healthcare Transformation (pp. 375–399). https://doi.org/10.1007/978-3-031-20168-4_21 

Pessina, E., Barbera, C., Langella, C., Rossi, F., Sancino, A., Sicilia, M., & Steccolini, I. (2020). Reconsidering public budgeting after the COVID-19 outbreak: Key lessons and future challenges. Journal of Public Budgeting, Accounting & Financial Management, 32(5), 957–965. https://doi.org/10.1108/jpbafm-07-2020-0115 

Ricciardi, W., & Tarricone, R. (2021). The evolution of the Italian national health service. The Lancet, 398(10317). https://doi.org/10.1016/S0140-6736(21)01733-5 

Špacírová, Z., Epstein, D., García-Mochón, L., Rovira, J., Olry de Labry Lima, A., & Espín, J. (2020). A general framework for classifying costing methods for economic evaluation of health care. The European Journal of Health Economics, 21, 529–542. https://doi.org/10.1007/s10198-019-01157-9 

NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

Visconti, R., & Morea, D. (2020). Healthcare digitalization and pay-for-performance incentives in smart hospital project financing. International Journal of Environmental Research and Public Health, 17(7). https://doi.org/10.3390/ijerph17072318