Healthcare Organization Financial Fundamentals Essay
After considering the issues that the management team would like to be reflected in the upcoming year’s operational budget, the following budget will be forecasted.
| KRONA HOSPITAL OPERATING BUDGET FOR 20XX | |||||||
| Revenues | |||||||
| Inpatient | $27,500,000 | ||||||
| Outpatient | 17,250,000 | ||||||
| Emergency Room | 10,000,000 | ||||||
| Laboratory | 5,000,000 | ||||||
| Pharmacy | 1,575,000 | ||||||
| Home Health and Hospice | 1,725,000 | ||||||
| Ambulance Services | 950,000 | ||||||
| Substance Abuse | 250,000 | ||||||
| Other | 850,000 | ||||||
| Subtotal | $65,100,000 | ||||||
| Less Charity Care | 18,000,000 | ||||||
| Net Revenues | $47,100,000 | ||||||
| Expenses | |||||||
| Payroll (including nursing salaries) | $13,750,000 | ||||||
| Benefits | 3,300,000 | ||||||
| Contract Labor | 100,000 | ||||||
| Insurance | 300,000 | ||||||
| General Services (laundry, security, etc.) | 3,000,000 | ||||||
| Depreciation | 1,500,000 | ||||||
| Interest Expense | 300,000 | ||||||
| Professional Services | 10,000,000 | ||||||
| Total Operating Expenses | $32,250,000 | ||||||
| Net Income | $14,850,000 | ||||||
The forecasted budget represents a 10% increase in inpatient revenue, a 15% increase in outpatient revenue, a 5% increase in pharmacy revenue, a 10% increase in payroll and benefits, and a 15% increase in home health and hospital revenue.
Achieving the predicted increase in the various revenues and expenses as identified above is based on multiple factors. Regarding the increase in every area of revenue identified above, several aspects have to improve. One aspect to consider is patient satisfaction. Revenue is likely to increase in the inpatient and outpatient services when customers are satisfied. According to Prayag et al. (2019), satisfied customers are likely to visit the same outlet on repeated occasions and refer the outlet to their peers and friends. Therefore, if Krona Community Hospital enhances its inpatient and outpatient services, patients will visit repeatedly and recommend the facility to others, improving their revenues. Essentially, enhancing customer satisfaction requires hiring a care coordinator responsible for ensuring the service quality is up to the expected standards. Further, the coordinator will establish a customer service department to ensure all patient concerns are accounted for and responded to accordingly. Regarding increased revenue for the pharmacy department, the hospital management should consider diversifying the number of drugs and medicines in their pharmacy to ensure no patient seeks them outside the hospital’s premises.
The forecast given in the budget entails increased payroll and benefits to employees. The increase in payroll and benefits has a reducing impact on the company’s overall net income. However, the increase is necessary because employees are at the center of delivering services to customers and require adequate remuneration. Additionally, when employee remuneration and benefits are increased, they get motivated to perform their duties and can serve a more considerable number of patients. According to Singh (2019), an increase in employee payroll and benefits helps raise employee satisfaction and retention. Therefore, increasing payroll and benefits for employees will help in reducing costs related to turnover and costs associated with training new employees.
Every member of the organization’s leadership has a role to play in budgeting. Executive leaders play the role of initiating and evaluating the budgeting process. They analyze the previous financial period’s budget to identify areas of improvement and measures to be adopted to undertake the improvements (Ho, 2018). For instance, they make revenue increase recommendations such as those made for Krona Community Hospital. The executive leadership performs the role of communicating and delegating responsibilities to junior managers who undertake the actual process of implementing the policies required to achieve budgetary provisions. Therefore, junior managers are responsible for implementing the forecasted budget as requested by the executive management. Also, members at the bottom of the pyramid, such as financial analysts at the staff level, participate in the budgetary process by offering suggestions to their seniors and ensuring costs are kept within the forecasted range.
References
Ho, A. T. K. (2018). From performance budgeting to performance budget management: theory and practice. Public Administration Review, 78(5), 748-758.
Prayag, G., Hassibi, S., & Nunkoo, R. (2019). A systematic review of consumer satisfaction studies in hospitality journals: Conceptual development, research approaches, and prospects. Journal of Hospitality Marketing & Management, 28(1), 51-80.
Singh, D. (2019). A literature review on employee retention with a focus on recent trends. International Journal of Scientific Research in Science and Technology, 6(1), 425-431.
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As a member of the finance team, you have been asked to forecast the upcoming year’s operational budget for Krona Community Hospital. Click here for last year’s budget. After reviewing specific data, internal input, and external input from various sources, you find that the executive management team would like the budget to reflect the following:
Healthcare Organization Financial Fundamentals Essay
10% increase in inpatient revenue
15% increase in outpatient revenue
5% increase in pharmacy revenue
15% increase in home health and hospital revenue
10% increase in payroll and benefits
Additionally, provide discussion on the following:
How do you think that revenue would increase in each of the areas? Think outside of the box and perform research to determine current trends in those areas.
Why would there be a forecasted need to increase payroll and benefits?
Explain the role of key leadership in the budgeting process, from the chief executive officer down through to the staff level of a financial analyst.
The use of APA style is expected. Students are required to reference at least 2 scholarly sources for this task.
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