NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

 Preparing and Managing an Operating Budget

Healthcare business operation and financial management in their units are critical tasks of nurse managers. In this assessment, a nurse manager of a 35-bed hospital unit with 20 full-time equivalent employees was responsible for preparing and managing the unit’s budget. Recently, overtime and extra shift coverage have increased labor costs, and staff turnover has created the need for new hires. Caring for an elderly patient population also adds to the financial challenge as many elderly patients have comorbidities and chronic conditions that require higher levels of care and resource utilization.

Nurse managers must have good financial acumen and strategic planning skills to manage budgets. Nurse leaders with a solid understanding of healthcare economics can efficiently allocate economic resources, stay abreast of national and global healthcare trends, and develop a budget that spends the money wisely while maintaining quality patient care (American Nurses Association, 2023). Nurses should know clinical practice and business principles to expand their healthcare organizations’ growth, strengthen their leadership skills, and meet patient needs. Similarly, financial literacy allows nurse managers to lead healthcare improvement and aid in policy change. 

Preparing an Operating Budget

The operating budget for a 35-bed Hospital Unit  

NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

A hospital unit’s operating budget is a financial plan that estimates expenses and revenue for a specified period, usually one year (Zhang & Bohlen, 2023). This budget allows nurse managers to allocate financial resources to use the unit for high-quality patient care effectively. Fixed costs are constant over time, and variable costs depend on patient needs or operation demands. Revenue sources are also identified to make the unit financially viable. 

• Fixed Costs: Salaries and wages for the 20 full-time equivalent (FTE) employees are one of the main fixed costs in the operating budget. A large part of the budget is staff compensation, including benefits and insurance, because it is needed to provide good care. Other fixed costs include electricity, water, internet, and facility equipment to ensure the functionality of medical devices and facility infrastructure. The costs associated with these are relatively stable throughout the year and are essential to the smooth running of the unit. 
• Variable Costs: The unit also incurs variable costs, which depend on patient volume and staff workload. The recent staff turnover has caused many employees to work overtime or extra shifts, which raises labor costs. In addition, the spending on medical supplies, prescription medications, food services, and other services for an elderly patient population is also higher. Healthcare costs are increased because many elderly patients have chronic conditions that require specialized treatment. Funds are allocated for training and development programs to maintain staff competency and comply with healthcare regulations.
• Nice-to-Have Expenses: The budget includes optional or nice-to-have expenses other than essential costs to make the workplace more satisfying and to increase operational efficiency. There is a budget for appraisals and bonuses for staff to recognize performance and reduce turnover. Increasing experience with non-labor materials like computers, phones, and wearable devices helps improve workflow efficiency and patient monitoring. Furthermore, funds for research and development generate evidence-based practice improvements and help in innovation in elderly care. 

NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

• Revenue Sources: To ensure the unit’s financial stability, it depends on more than one source of revenue. Due to patient services like inpatient care, diagnostic procedures, and specialized treatment, patient services accounted for the largest portion of revenue. The unit also receives much funding through Medicare and Medicaid reimbursements, as the unit’s population is primarily elderly. Grants and donations also flow from other sources supporting research initiatives and the enhancements to the facility. Another important revenue source for furthering elderly care strategies and introducing new healthcare technologies is research funding.  

The financial plan is broken down into quarterly reviews for budget management that can be adjusted to meet hospital needs and economic conditions. Strengths, low labor costs, stable revenue sources, opportunities for securing additional funding, threats, staff burnout, and economic fluctuations are identified in a SWOT analysis (Taherdoost & Madanchian, 2021). This operating budget is a structured financial framework to support the efficient operation of the hospital unit while meeting the high quality of patient care. The unit can make the operation stable and economically sustainable through carefully controlling fixed and variable costs, optimizing revenue stream, and regularly reviewing financial performance.

Knowledge Gaps and Uncertainty

The budget could be less accurate due to several knowledge gaps and uncertainties. Typical project patient volume and acuity levels may vary. Therefore, staffing needs and medical supply costs may vary. Staff turnover and retention efforts may result in varying overtime expenses. Revenue predictions are less stable due to the uncertainty of grants and research funding availability. What is more, either unexpected emergencies or unexpected regulatory changes will push expenses higher. Better budget precision would be achieved with more data about historical budget performance, patient census trends, and reimbursement rates. The last is to explore potential cost-saving strategies like workflow efficiency improvement or alternative supply sourcing to improve financial sustainability.

Budget Designing and Creation

A budget is created and designed considering internal and external factors. To begin with, a thorough assessment of past financial data, patient demographics, and hospital requirements is carried out to set a base for the budget. That includes studying historic trends in revenue and expenses (Homauni et al., 2023), pinpointing cost drivers, and estimating the positive and negative effects on patient volume. The allocation of financial resources corresponding to projected needs is an important part of budget planning because it involves balancing fixed and variable costs and providing quality patient care. 

Another consideration of budget formation is cost-benefit analysis, which helps the hospital unit compare financial inputs with expected outcomes. This method guarantees that the expenditures align with the healthcare services’ overall efficiency and sustainability (Zhang & Bohlen, 2023). Moreover, linear programming helps minimize costs and maximize benefits to use resources efficiently. These financial evaluation techniques aid in making an informed decision on staff salaries, medical supplies, equipment, and other critical expenditures. While designing the budget, several challenges and uncertainties have to be acknowledged.

A major issue is the uncertainty of healthcare needs, especially among elderly people whose comorbidities and chronic diseases greatly increase the cost of hospitalization (Pobrotyn et al., 2020). Medical supply and drug costs are estimated while an effort is made to avoid higher than expected expenses from sudden patient deterioration. Despite the continuous challenge of staff turnover, financial provisions make recruitment, training, and retention strategies necessary.  

Conflicting Data and Perspectives 

Unforeseen economic fluctuations, changes in reimbursement rate, and the possibility of the effect of new health care policies are some of the conflicting data or information that are not included in the budget. Since grants and donations are a revenue source, they are not guaranteed yearly, and it’s not certain whether a grant or donation will be offered. In addition, additional unforeseen costs from technological and treatment advances in health care may also occur. By recognizing these uncertainties, such a budget can be altered as the need arises to maintain financial stability while maintaining outstanding standards of patient care.

Strategic Plan and Evaluation Criteria 

Strategic planning is necessary in developing a successful budget that will lead to financial stability and prepare for what is coming in the healthcare field. This method helps in resource allocation for healthcare organizations, addressing uncertainties, and developing a sustainable roadmap for the long run. A strategic plan is well designed, which leads to a comprehensive proposal that is congruent with the hospital’s mission and objectives. This 35-bed hospital unit’s main aim is to provide high-quality care to patients. This can only be achieved by a strong workforce, new medical technologies, and efficient resource utilization. One of the reasons for a strategic plan to be effective will be to ensure that staff retention, technological advancements, and resource management are enhanced to improve hospital performance overall.  

1. Employee Retention Program: An employee retention program is a well-structured program that helps maintain staff satisfaction, reduce turnover, and improve patient care. High staff turnover drives more hiring and training and the possibility of patient care disruptions. Implementing professional development, workplace improvement, and performance-based incentives helps achieve employee retention (Shiri et al., 2023). Through this approach, employees would remain on their jobs as they feel valued and supported. Staff training, bonuses, and appraisals are incorporated into the operating budget so that workforce retention remains a priority, improving patient outcomes and organizational stability.  
2. Integration of Technological Advancements: The strategic plan also includes embracing healthcare technology. Medical advances further crisp information and change treatment processes; they augment patient care by facilitating evidence-based decision-making. The hospital’s investment in data-driven healthcare solutions and contemporary equipment allows it to remain competitive, attract more patients, and secure funding from the government. The innovations make the hospital safer and more efficient for patients (Junaid, 2022) and help the hospital build a reputation and generate revenue. Funding of healthcare technologies guarantees that the unit can offer high-quality service while utilizing resources.
3. Resource Allocation for Elderly Care: Since the hospital is aimed at the elderly, adapting resources to their needs is necessary. Medical equipment that requires special attention, chronic disease management programs, and additional support services are all needed for older adults. In the budget, essential supplies like wheelchairs, pressure relief mattresses, mobility aids, and incontinence care products should be included. Targeted healthcare programs, including rehabilitation services, stress management, home healthcare, etc., can improve patient outcomes and reduce readmission rates at the hospital. Making sure that allocating financial and material resources do contribute to better patient care and overall operational efficiency.

Strategic Plan Evaluation  

Measuring the effectiveness of the strategic plan requires evaluating it and ensuring that the hospital’s financial goals match its mission. Since the budget is done on an annual cycle with quarterly reviews, regular assessments will ensure that financial allocations are delivering the desired outcome. Budget accuracy, cost control, patient satisfaction, and workforce retention will be key performance indicators that will help in necessary adjustments. The objective is to spend as effectively as possible while keeping some cash in reserve to deal with unforeseen problems. Gradually, the hospital can improve the budget and strategic plan to ensure sustainable growth, high-quality patient care, and efficient operation.

Approach to Ongoing Budget Management

Healthcare budgeting is not just a short-term process but is to be monitored and managed to maintain financial sustainability and quality patient care (Homauni et al., 2023). To manage the budget effectively, one must track key performance indicators (KPIs) and generate financial reports regularly. They offer insight that is valuable in the course of making the necessary budget adjustments throughout the fiscal year. Certain indicators will be tracked in the hospital’s operational budget to manage the hospital’s operational budget, such as reducing staff turnover, enhancing patient health outcomes, and successfully implementing technological and research-based advancements. With these indicators, the hospital can evaluate how the financial resources are spent to support quality healthcare services.

One of the most important operational budget management principles concerns balancing cost-effectiveness and high-quality care. Due to a limited budget for medical supplies and equipment, it is critical to Budget the expenditure to match the requirements for patient care. Budget management can be done by prioritizing spending based on necessity, patient safety, and long-term benefits (Homauni et al., 2023). Furthermore, healthcare organizations must take cost control measures such as bulk purchasing, supplier negotiation, and resource sharing to minimize unnecessary costs.  

Assumptions 

Retention rates are one of the foundational assumptions of this budget management approach, as it is assumed that employee satisfaction directly impacts the retention rate. Competitive salaries, professional development opportunities, and workplace benefits are key factors that help in employee retention as they adversely affect recruitment and training costs (Beatty et al., 2024). The hospital introduces staff incentives, training programs, and professional growth opportunities in the budget to create a more engaged and satisfied workforce that provides better patient care quality.

The other assumption is that staff training improves clinical competency, efficiency, and patient outcomes. It is suggested that well-trained healthcare professionals are more confident in their jobs, less prone to make medical errors, and play a role in improving healthcare quality. Overall, the continuous evaluation and adjustment of the budget will ensure the relation between hospital operations and financial constraints, and it will be ensured simultaneously, maintaining the commitment to provide quality care for patients. Strategic financial planning and data-driven decision-making can help the hospital to be sustainable in the long term and operationally excellent.

Conclusion

In conclusion, the development and management of hospital operating budgets are successful when they are planned strategically, continuously monitored, and data-driven in planning and decision making. The hospital aligns financial resources with organizational goals so that the priority of quality patient care is maintained while being financially sustainable. Key budget optimization strategies include staff retention programs, technological investment, and eliminating excessive cost allocations. A budget is always affected by challenges that emerge later; therefore, tracking key performance indicators such as staff turnover rates, patient outcomes, and technological advancements allows one to conduct timely budget adjustments.

It also encourages a workforce that is trained and developed professionally to be well skilled and satisfied because the patients will be handled well by the workforce. Financial efficiency is also accomplished by cost-control measures such as bulk purchasing and supplier negotiations. The hospital can face economic uncertainty and improve healthcare services through structured budget management. A good budgeting system not only helps to achieve operational success but also helps the hospital to gain a good name and long-term sustainability.

References 

American Nurses Association. (2023, September 12). Financial management skills for nurse managers. ANA Nursing Resources Hub. https://www.nursingworld.org/content-hub/resources/nursing-leadership/nursing-financial-management/

Beatty, K., Trull, H., Minnick, C., Ksir, A., Surles, K., & Meit, M. (2024). Expanding options to recruit, grow, and retain the public health workforce. Health Affairs Scholar, 2(12). https://doi.org/10.1093/haschl/qxae115 

Homauni, A., Moghaddam, N. M., Mosadeghkhah, A., Noori, M., & Abbasiyan, K. (2023). Budgeting in healthcare systems and organizations: A systematic review. Iranian Journal of Public Health, 52(9). https://doi.org/10.18502/ijph.v52i9.13571

Junaid, S. B. (2022). Recent advancements in emerging technologies for healthcare management systems: A survey. Healthcare, 10(10), 1–45. https://doi.org/10.3390/healthcare10101940 

Pobrotyn, P., Susło, R., Witczak, I. T., Rypicz, Ł., & Drobnik, J. (2020). An analysis of the costs of treating aged patients in a large clinical hospital in Poland under the pressure of recent demographic trends. Archives of Medical Science, 16(3), 666–671. https://doi.org/10.5114/aoms.2018.81132

Shiri, R., El-Metwally, A., Sallinen, M., Pöyry, M., Härmä, M., & Toppinen-Tanner, S. (2023). The role of continuing professional training or development in maintaining current employment: A systematic review. Healthcare, 11(21), 2900. https://doi.org/10.3390/healthcare11212900 

Taherdoost, H., & Madanchian, M. (2021). Determination of business strategies using SWOT analysis; planning and managing the organizational resources to enhance growth and profitability. Macro Management & Public Policies, 3(1), 19–22. https://doi.org/10.30564/mmpp.v3i1.2748 

Zhang, R., & Bohlen, J. (2023). Healthcare business budgeting. PubMed; StatPearls Publishing. https://www.ncbi.nlm.nih.gov/books/NBK589707/ 

NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget