Budget Development in the New York-Presbyterian Hospital
Developing a detailed operating budget outlining forecasted revenue and expenses over a specified future period is an integral part of running a nonprofit organization. Adequate funding should contain all the direct costs and Facilities and Administrative (F&A) expenses needed to conduct the set objectives. In healthcare institution settings, a growing issue of the price and value of healthcare services necessitates ensuring the maximum effectiveness and benefits are realized. This is the case with the New York-Presbyterian Hospital, which seeks to account for its expenses and optimize its revenues per its strategic objectives. The developed budget is the institution’s plan for one year and will go a long way in helping the management set and achieve specific goals.
Meanwhile, the New York-Presbyterian Hospital is a not-for-profit, academic medical centre that strives to deliver quality and unique patient care, teaching, research, and community service. The institution is committed to offering various healthcare services (New York-Presbyterian, 2004). The hospital’s mission concerns the constantly changing healthcare environment and provides a medium to set its priorities for new investments and strategic initiatives. At the core of its objectives is budget development, aiming to weigh the benefits, risks, and costs of the hospital’s strategic goals.
The operating budget comprises the revenue, cost, and expense budget. Typically, it lists the anticipated income, fees, and expenses for the upcoming fiscal year (Walsh, 2016). The budget’s general breakdown revenues comprise the net patient revenue, provision for bad debts, and other revenues stemming from consultancy and a comprehensive continuum of service around specific patient populations and disease areas. The budget estimate for the following fiscal year is $7,826,500 million for net patient service, $367,200 million for fringe benefits, and $ 404,600 million for miscellaneous income. Based on the institution’s internal revenues service classification (IRS), the New York-Presbyterian Hospital directly receives its significant charitable payment, including grants, donations, and bequeaths (The New York and Presbyterian Hospital, 2017). With the anticipated total revenue of $ 8,751,113 million in the coming year, the institution remains committed to scaling up these sources of benefits to fund its strategic, capital, and physician recruitment plans and community services.
In terms of operating costs, the operating budget consists of patient subsidies, salaries and wages, provision for bad debts, employees’ benefits, rental expense property, buildings, and equipment leases, software licensing and hosting contract, suppliers and other benefits interest, depreciation and amortization, and lease agreements. Patient subsidies are expected to increase in the upcoming fiscal year to $153,000 million. This aligns with the institution’s planned service lines of improving the behavioural health, cardiac, children’s, and women’s health in the targeted communities (New York-Presbyterian, n.d.). The strategy is the foundation to plan for the facility’s future objectives to improve its services’ quality, growth, and cost-effectiveness. In the same vein, the hospital anticipates increasing its salaries to $ 600 million to bridge the gap in the doctor-patient ratio. Essentially, the institution plans to recruit more healthcare workers and physicians to meet the doctor-patient ratio deficit. The same case is expected in employees’ benefits, which will likely rise to 1,028,000 million to reflect the hospital’s defined benefit pension plans. The provision of bad debts is also expected to increase to $ 153,000 million.
Similarly, the anticipated rise in licensing and hosting contract costs is due to a planned contract with the Systems Corporation for their revenue cycle solution and integrated electronic medical records (The New York and Presbyterian Hospital, 2017). Total licensing software costs are expected to hit $ 480 million. The expenses of depreciation and amortization and facility services/ lease agreements are also expected to close at $ 362,500 million and $ 1,900 million, respectively. These figures will be about the arrangement to lease assets to the Dormitory Authority of the State of New York (DASNY).
The hospital understands that the following fiscal year will heighten its healthcare service horizon; hence, operating expenses are also expected to increase. These expenses are expected to be as follows: Long-term debt – current portion ($70,491 million), accounts payable and accrued expenses ($695,047 million), accrued salaries and related liabilities ($375,100 million), pension and postretirement benefit liabilities – current portion ($24,915 million), professional and other insurance liabilities – current portion ($132,700 million), other current liabilities due to related organizations ($247,000 million), professional and other insurance liabilities ($23,985 million), pension and similar benefit plans ($221,000 million), deferred revenue, postretirement benefit liability ($1,000 million), other noncurrent liabilities ($544,800million).
The New York-Presbyterian Hospital acknowledges that resolving the budget gap cannot be the sole burden of the taxpayers and the state. Instead, the responsibility must be shared responsibly. For this reason, the institution has identified some initiatives that will generate additional revenues to cut some overhead costs. These programs, along with the expected inpatient volume related to Liver transplants, children’s and mental health, are projected to increase considerably. Therefore, this budget will act as the road map towards implementing the hospital’s strategic plan in the following year.
|Revenues||Projected Operating Budget for 2021 ($million)||Proposed Operating Budget for 2021 ($million)|
|Net patient Service revenue||7,826,454||7,826,500|
|Net patient services revenue||7,979,447||7,979,500|
|Salaries and wages||362,581.00||362,600.0|
|Provision for bad debts||152,993||153,000.0|
|Property, Buildings and Equipment leases||210.6||211.0|
|Software licensing and hosting contract||476.6||480.0|
|Suppliers and other benefits||2,521,533||2,215,400.0|
|Interest and amortization of deferred financing fees||98,296||98,300.0|
|Depreciation and amortization||362,479||362,500.0|
|Facility services/ Lease agreements||1,899||1,900.0|
|Total operating cost||4,528,541.40||4,222,591.0|
|Long-term debt – current portion||70,491.0||70,491.0|
|Accounts payable and accrued expenses||695,047.0||695,047.0|
|Accrued salaries and related liabilities||375,066.0||375,100.0|
|Pension and postretirement benefit liabilities – current portion||23,915.0||24,915.0|
|Professional and other insurance liabilities – current portion||132,704.0||132,700.0|
|Other current liabilities due to related organizations||246,948.0||247,000.0|
|Professional and other insurance liabilities||23,985.0||23,985.0|
|Pension and Similar Benefit Plans||220,921.0||221,000.0|
|Postretirement benefit liability||64,754.0||64,760.0|
|Other noncurrent liabilities||544,784.0||544,800.0|
|Total Operating Expenses||2,399,616.0||2,400,798.0|
New York-Presbyterian. Community Service Plans | NewYork-Presbyterian. Nyp.org. Retrieved May 28 2021, from https://www.nyp.org/about/community-affairs/community-service-plans.
New York-Presbyterian. (2004). New YorkPpresbyterian Hospital 2004 community service plan comprehensive report (pp. 1-25). New York: New York-Presbyterian Hospital. Retrieved from https://www.nyp.org/pdf/communityserviceplan2004.pdf
The New York and Presbyterian Hospital. (2017). consolidated financial statements and supplementary information and accompanying reports and schedules related to the uniform guidance: The New York and Presbyterian Hospital Year Ended December 31, 2017, With Reports of Independent Auditors. Ernst & Young LLP. Retrieved from https://projects.propublica.org/nonprofits/download-audit?download=true&filename=19996620171
Walsh, K. (2016). Managing a budget in healthcare professional education. Annals of Medical And Health Sciences Research, 6(2), 71. https://doi.org/10.4103/2141-9248.181841
Strategic plan link: https://www.nyp.org/about/community-affairs/community-service-plans
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If your organization makes frequent business transactions, one of the tasks you face as a manager is budget preparation. A budget is a tool used for planning and controlling financial resources. It guides your plan of action in financial terms within a set period. A budget does not have to be complex; however, it should support the organization’s strategic plan. We will need resources to achieve our goals and objectives.
For this assignment, you will focus on the operating budget. An operating budget shows the company’s projected revenue and associated expenses for an upcoming period—usually the following year. An operating budget starts with income and then displays each expense type. This includes variable costs—or the costs that vary with sales—such as raw materials and production labour. The operating budget includes fixed costs, such as the monthly rent on office space or the monthly payment for a photocopier lease. The budget also includes operational expenses, such as interest on business loans and the noncash depreciation expense. These items enable the company to compute its projected net income and net profit percentage.
Imagine you are the health care administrator for a nonprofit nonprofit health agency or outpatient surgery centre. Your first task is to locate the strategic plan for that organization or determine its strategic direction through the vision statement, mission or purpose statement, and strategic priorities or goals. You will also need the audited financial statements for the organization.
Using the information from your research, develop a one-year operating budget for the chosen entity, including operating revenues and expenses. Include a 1–2 page document to justify the approach you use in constructing the operating budget with the strategic plan or strategic direction.
Upload the strategic plan or direction and audited financial statements as an attachment or include the Web link.
Complete your operating budget using Excel.
Support your work with at least three quality references, one being your course textbook. These should be cited per the Strayer Writing Standards.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your system. Check with your professor for any additional instructions.
The specific course learning outcome associated with this assignment is:
Develop a budget for a department within a healthcare organization.
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