Prepare an 8-10 page operating budget for a hospital unit.

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  • Prepare an 8-10 page operating budget for a hospital unit.
  • RUBRIC
  • Competencies Measured
    By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

    • Competency 1: Design an operating budget that incorporates variances or discretionary spending. 
      • Prepare an operating budget.
      • Explain how a budget is designed and created.
    • Competency 2: Develop a plan for managing the labor force, within the parameters of the budget and productivity. 
      • Develop an approach to ongoing budget management.
    • Competency 5: Apply financial principles to a strategic plan for achieving organizational goals and fiscal success. 
      • Develop a strategic plan.
    • Competency 6: Communicate effectively with diverse audiences, in an appropriate form and style, consistent with applicable organizational, professional, and scholarly standards. 
      • Present budget data and information clearly and accurately.
      • Integrate relevant and credible sources of evidence to support budget data and information, correctly formatting citations and references using APA style.

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Operating Budget for 35-bed Hospital Unit

Student’s Name

Institutional Affiliation

Course

Professor

Date

Operating Budget for 35-bed Hospital Unit

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Introduction

An operating budget is an instrumental guide to spending in organizations such as hospitals for

efficient and effective running. It comprises the expenditure and the revenue accrued for the

daily operation of the organizations. It focuses on the operational expenditure that includes the

cost-of-service provision. A hospital operating budget contains a list that provides a summary of

all the expenses and potential income, such as the charges of health service provision and the

variance between the expenditure and the income revenue, including both positive and negative

variance. Healthcare operating budgeting involves determining the funding to be planned for

facility operating and staffing costs, personnel costs, and training. Staffing usually takes the

largest cost of the hospital or healthcare operating cost. It does not only account for fixed

operations costs such as salaries; it also includes potential overstaffing, overtime hours, and other

variable costs.

A hospital operation cost is very important in healthcare as it allows the healthcare

systems such as a hospital to monitor and balance revenues and expenses to control and manage

the operation of such healthcare organizations. Preparing an operating budget requires that all the

revenue statistics include clearly and elaborately to enable the hospital manager and the strategic

planners to use the budget correctly in managing and planning for the hospital. All the major

sections of the budget should be indicated clearly for easy following of the budget when

planning or running a hospital. When creating a hospital operating budget, it is essential to

consider important aspects such as employee salaries, hospital revenues, licenses and taxes,

benefits, insurance, hospital equipment, supplies, and professional fees. The operating budget

should be prepared to allow close monitoring of all expenses and revenue generated during the

operating period or a financial year.

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Design and Creation of the budget

Designing and creating an operating budget requires adequate time and professionalism.

The design and Creation of an operating budget for a hospital should be focused on reducing

expenses and increasing the revenue generated from offering health services. It is quite

challenging and time-consuming to create an operating budget plan for a hospital unit with 35

bed capacity with 20FTE staff due to some factors that may negatively impact the budget and

lead to challenges during the operation time. The budget design should incorporate all the

essential expenditures that the hospital may incur in one financial year, with well-approximated

costs assigned to each. It is essential to design the operating budget to include essential

expenditures that include the variable cost, salaries, and wages for the FTE staff, overtime

expenditures, insurance, equipment maintenance costs, staffing costs, and others.

The operating budget was created using a line-item budgeting format, a design format

where the individuals’ financial statement items are grouped by category. The line-item

budgeting design is recommended for hospital and other organization budgeting because it can

be used to compare the financial information of the last financial year to the one in the current

financial year. The line-item budgeting is advantageous over other budgeting designs because it

is simple to do and fast to build, saving time. It also helps an organization analyze and

comprehend whether the revenue can cover the expenditure. Therefore, it is easy to tell whether a

business or an organization makes financial progress by easily comparing the items of the

expenditure and the revenues outlined in the line-item budget with their costs. It also allows easy

following of the expenditure incurred, and items incurring the highest cost can be easily spotted

and manipulated to meet the financial goals of the organizations. It is easy to keep track of the

expenses and change them in the future during the operation dynamics of the organization.

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The design and Creation of the Operating budget for the hospital are based on the data of

revenue and expenditure gathered in the past three months to estimate the total expenditure that

the hospital will use in the next financial year. Recent data on expenses and the revenue

generated is usually prioritized over the data for the past years because it helps depict the

expenditure and revenues for the next financial year. The information predicts the dynamics of

the next financial year because it considers the recent change of operations, expansions, and new

items, including liabilities brought into the hospital. When creating an operating budget for a

hospital or any other health organization, it is essential to use reports and data produced by

electronic patient information Communication as it helps to provide the required reports such as

the number of staff members, usage records of equipment, and average daily Census (ADC) that

is useful in the Creation of the budget. It is also essential to conduct a compressive financial

analysis of the revenue and expenses for the past three or more months in the hospital to come up

with a realistic budget and factions that can accommodate changes in the expenditure in the near

future.

The Creation of the operating budget for the hospital considers the hospital capacity,

which is a 35-bed capacity with 20 full-time equivalents (FTE) staff. The staffing model for the

hospital is 1:12 for the support staff and 1: 7 for the nurses. It also has an ADC of 20, also

requires an additional three ancillary staff each day to ensure a smooth operation. The nurses

receive a daily salary of $30.5 per hour; they work 10 hours a day for 4 days a week; their salary

per week is approximately $1220 for one week and about $4880 monthly for each nurse. A nurse

earns about $9760 in two months and about $58 560 in annual salary. The ancillary staff, such as

the Patent care associate (PCA), are entitled to a salary of $14.5 per hour. They work for about

10 hours a day and five days a week; the expenditure for their salary in a week is about $725

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weekly and approximately $ 2 900. For two months, the Ancillary staff pockets $5 800. Overtime

cost for nurses and other activities is approximately $400.62, and 102 for support staff per day.

Every month, there are 5 days of overtime; in two months, the overtime for nurses and other

activities is about $4006.2 and $1,020 for the support staff. The average cost incurred for other

miscellaneous spending covering life support activities, seminars, meetings, and workshops is

approximately around $100, 87.43 for the ended fiscal year.

The hospital unit incurs the medical supplies costs for life-saving equipment, laboratory

equipment, replacements, crutches, gloves, surgical instruments, beddings, and technology at

about 55% of the total unit expenditure, representing about 8% of the total hospital expenditure.

Other equipment costs include laundry services, medication dispensation, and quality control

equipment. All the medical supplies expenses are approximated at $1350.56 per month. The

budget expenditure on insurance was based on specific patients’ demographics; The hospital

units take of older patients, and older patients have insurance such as medication. The older

patients add extra cost to the hospital unit as they require extra services in caring for their health

services; they require referrals that use hospital transport and other costs. They also develop

complications increasing their cost of care, which reflects on the hospital’s operating budget. To

project the revenue for the hospital unit, it is essential to use the data comparable to project

revenue that can be included in the operating budget plan.

Strategic Plan

The strategic plan for the hospital has a well-developed mission and vision statement,

which helps the hospital management and other stakeholders to run the hospital with the help of

the suggested operating budget to reach its goals. The hospital’s vision is to provide accessible,

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compassionate, high-quality, cost-effective healthcare services to patients to promote health. The

hospital’s mission is to provide quality healthcare services in a physically responsible way to

improve patients’ and society’s physical, social, psychological, and spiritual well-being. The

strategic plan is aligned with the vision and mission of the hospital to achieve the objective of the

hospital unit and the entire hospital at large. The strategic plan is based on the goals of the

hospital projected for about 2 or more years. The long-term goals of the hospital unit include

collaboration between the patients, the medical-surgical team, the family, and the hospital to

improve healthcare and reduce the number of deaths that occurs due to lack of adequate care at

the hospital. The medical-surgical team, the nurses, the managers, and the support staff will be

held responsible for the activities in the hospital units intended to help the hospital achieve its

goals and vision.

The objectives of the hospital unit include increasing the range of services to meet the

increasing opportunities presented by increasing patients’ needs, which include specialized

treatment. The hospital unit also aims to provide the best healthcare services to help save lives

and make it easier and simpler for patients to access quality care at all times. Patients with

various health needs and special treatment procedures have sought the unit’s health services

before, and the unit was not in a position to offer some of the specialized treatment requested by

the client. In the future, the hospital looks towards being in a position to offer various treatment

procedures, including treating special health conditions. Another objective of the hospital unit is

to provide a safe therapeutic environment for patients at all times. The hospital unit also aims to

increase the overall satisfaction rates of the clients, patients, visiting officers, and employees.

The hospital unit is determined to use the projected operation plan to actualize its

objective and goals; the projected budget will be followed strictly to ensure the hospital achieves

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the health goals in the strategic plan hospital units’ visions and mission are well reflected in the

budget as adequate funds have been allocated to most important services that will help the

hospital achieve their mission and visions, the expenses have been allocated adequate fundings

that will help improve service delivery at the hospital to ensure the nurses and other employees

are facilitated and motivated to work hard to produce the best and improve the service delivery

of the hospital in the efforts of realizing its goals and objectives. Approximately $1 879 600 is

dedicated to the expenditure of the hospital to improve service delivery and finally impacts the

overall performance of the hospital unit.

The strategic plan has also ensured useful management of the revenue and expenses

incurred in the hospital to account for all the funds of the hospital units. In the strategic plan,

metrics will be used to ensure modification of any changes are met in time; the metrics will help

track the monthly expenses and revenues to effect changes where required to ensure the

hospital’s operations are aligned with the objectives and the long-term goals of the hospital. Also,

in the strategic plan, measures have been put in place to ensure that staff utilization is closely

monitored to ensure their created operating budget is not negatively impacted by underutilization

which can increase expenses and reduce revenues due to poor, inadequate service delivery.

The strategic plan has included means to ensure adequate staffing for the hospital unit to

ensure no cases of nursing burnout which would lower the quality of care provided to patients.

Staffing will be prioritized when sorting the issue of employees and allocating funds to train

nurses to improve their skills for better service delivery. Strategic planning has also put in place

measures to check on the hospital supplies and equipment required for its daily operation and

ensure they function appropriately. The faulty ones are replaced to maintain the quality of

services provided at the facilities.

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The strategic planning has taken into consideration the required occasional review of the

operating budget, which will be conducted monthly to enhance monitoring of the hospital’s

operation and ensure all the required changes are addressed early enough to avoid compromising

service delivery at the hospital unit. Also, a SWOT analysis has been used in the strategic plan to

measure the strength the, weakness, opportunities, and potential threats to the hospital operations

that may affect the dynamics of the hospital and ways proposed to ensure the operation of the

hospital unit is uninterrupted, and the quality of service remains high throughput. SWOT

analysis is one of the best tools used to analyze the positions for the business or an organization

to formulate changes required to maintain or improve the performance.

Table 1: Operating Budget

SWOT analysis in strategic planning helps an organization predict areas where

improvement isis required to ensure the organization’s goals, objectives, vision, and missiond.

The strength and weaknesses of the hospital units are determined by analyzing the internal

structure of the hospital unit, including the staffing, motivation of workers, availability of

adequate equipment, and any other factors that may negatively or positively impact the

performance and the outcomes of the hospital unit. The strength and weaknesses of the hospital

unit are based on the internal and operating factors of the hospital unit. In contrast, the

opportunities and threats are based on external factors such as government regulation and any

other interference from other organization or their patients that may interfere with the operation

of the hospital unit. A strength identified by the SWOT analysis of the operating budget and the

hospital unit at large is the budget is designed and created to align with and support the hospital’s

objectives, mission, and visions; it has allocated adequate expenses required to improve service

delivery that contribute to the realization of the goals and objectives. Another strength identified

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by the SWOT analysis is that the operating budget will be subject to close monitoring and

positive changes and adjustment made where possible to ensure the hospital delivers quality

healthcare n line with the vision.

The weakness identified by the SWOT about the operating budget is that some of the

expenditures on the medical supplies and expenses are estimations that may not reflect the real

cost and revenues during the operation of the hospital unit; this may negatively influence the

results of projected results the hospital, the provided cost be too or too high may affect the

financial stability of hospital operation hence affecting quality service delivery. Some of the

opportunities associated with the proposed operating budget are that some of the hospital’s

required funding may be achieved by selling some of the goods and services produced by the

hospital.

The hospital may make some direct profit by trading with other hospitals or other

relevant organizations hence making profits, and the hospital may also make some profits in the

training of some of the nurses and other healthcare workers at a fee, increasing extra revenue that

may help to fund some of the expenses. The threats identified by the SWOT analysis include a

lack of corporation from some of the staff members, leading to the underperformance of the

hospital and negatively impacting the financial resources allocated to various hospital units.

There may also be some threats, such as non-corporation from the senior staff, which may affect

the running of the hospital unit, negatively impacting its healthcare delivery and affecting the

ability to achieve its goals, objectives, visions, and missions in the projected timeframe of the

strategic plan.

Approach to Ongoing Budget Management

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After designing and creating the budget in the strategic planning process, it is essential to

develop a budgeting management process that involves activities such as choosing the budget

committee reviews and scheduling the budget review calendar. This will enable the hospital

management to monitor the budget, compile and review the budget models, assess if the budget

is meeting the set objectives and targets, and modulate the budget where needed. Budget

management is a continuous process that helps the management to ensure the budget serves its

intended purpose anchored in the strategic plan. A budget review is done during the

organization’s running to create opportunities that may help improve the organization’s

performance and to ensure the budget adheres to the objective stated in the strategic plan.

The budgetary management process involves using cash or accrual accounting methods

to compute the organization’s financial statements, evaluate the revenues and expenditures and

determine the position of the budget concerning what is stated in the strategic plan. It is always

essential to select the most appropriate accounting style that can be used to manage the budget.

The selection of the style of accounting to be used depends on factors such as budgetary

management experiences, the size of the company, and the items on the budget. For a hospital

unit with 35 capacities that have utilized the line-item budgeting designs, it is essential to use the

accrual accounting methods to manage the budget.

Managing a flexible budget is easier and allows an organization to make effective

changes where necessary. It is, therefore, essential to create a flexible budget with room for

modifications that may allow for incorporating future opportunities that may present during the

period of operating in the hospital unit. One of the best ways to create a flexible budget that will

allow for management includes limiting expenses for nonproductive hours such as vacations and

leaving areas for modifications in the future in the events that arise threats or opportunities to the

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operation of the hospital. It is essential to affect the budget management process by using

technology such as generating monthly financial statements of the expenditure and revenue and

using the technology to accurately track the spending to facilitate the effective evaluation of the

budget during the budget review process. It is also essential to assess other budgets, such as the

capital budget, to evaluate their net impact on the operating budgets during the budget review

process.

Conclusion

In conclusion, an operating budget is an essential item used in the financial management of the

organization, the design, and Creation of the operating budget may be challenging; however, all

the required factors must be considered when choosing the design and creating the operating

budget. It is essential to evaluate the organization, the size, and the items involved in the

operation before designing and creating the budget. The strategic plan should contain a well-

prepared operating budget for running the business in the stated period. The budget must be

flexible to allow management of the budget and the Creation of modifications where necessary.

The operating budget is created in adequate time. It requires sufficient planning to avoid future

financial mistakes that may negatively impact the operating budget’s goals in achieving the

hospital unit’s or organization’s vision and mission. All the stakeholders, including nursing

leaders and hospital managers, should form operation budgets to achieve the goals of such

organizations. An operating budget is, therefore, useful in the entire operation of a health

organization as it helps to bring success to the business.

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Emergency Medicines 38(7), 1446-1447. 10.1016/j.ajem.2020.03.057

Kenton, W. (2021). Strength, Weakness, Opportunity, and Threat (SWOT) Analysis. Retrieved

at: https://www.investopedia.com/terms/s/swot.asp

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Ross, K, T. (2018). A comprehensive guide to budgeting for healthcare managers. Jones &

Bartlett Learning.

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Learning

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