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NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

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    NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

    Student Name

    Capella University

    NURS-FPX 6216 Advanced Finance and Operations Management

    Prof. Name

    Date

    Introduction 

    Healthcare business and management of finances are one of the major responsibilities of nurse managers. Nurse managers should be knowledgeable to prepare and manage budgets for their healthcare facilities. Knowledge and education about business acumen help leaders to effectively plan financial resources in their workplaces, learn about present national and international healthcare trends and develop effective budgets to appropriately use their monetary reserves and generate income from them. Research supports this point by concluding that nurses should not only be skilled in their nursing practices but should also possess business skills so that they can expand the growth of their healthcare facilities, empower themselves, and fulfill the needs of their consumers. Insightful knowledge of business and economics qualifies nurses to become empowered in their leadership and management roles, thus influencing healthcare reforms and innovations (Raftery et al., 2021). 

    As a nurse manager of 35 bedded hospital with 20 full-time equivalent employees, I have been assigned a task to prepare and manage a budget for my unit. My unit has recently encountered staff turnover for which I have to hire new employees. Moreover, most of the existing staff work overtime or take extra shifts which has also increased the required costs. Lastly, we care for elderly patients which is another monetary burden due to increased comorbidities and higher risks of chronic diseases. 

    Preparing an Operating Budget

    An operating budget is defined as an estimated budget that is prepared to keep in mind the expenses based on fixed and variable costs, for a certain period (mostly a year) (Zhang & Bohlen, 2023). The components included in the operating budget are expected expenses and the predictable revenue which will be generated throughout the year. The major expenses of a small hospital include; employees’ salaries, medical supplies and utilities, prescription drugs, food, and training and development (Ren et al., 2021). These components are an important part of hospital budgets whereas other nice-to-have components are appraisals and bonuses, non-labor materials like phones, computers, wearable devices, etc., and research expenses. They keep a certain level of importance in increasing staff satisfaction, reducing turnover rates, growing with the healthcare trends, and ultimately improving the hospital’s reputation.

    On the other hand, hospitals gain revenue from patient services, grants/donations and charitable income, and research revenue. Some of this income is generated from Medicaid and Medicare Services too. This budget is planned for one year and is then divided into three-month divisions. After every quarter, the budget will be reanalyzed to ensure that it is working effectively according to the hospital’s, employees’, and patients’ needs. It will also be evaluated as needed depending upon the uncertain conditions that may arise during the year. These conditions are elaborate further in the assessment. To create an effective operating budget, it is essential to gather as much as data available from internal as well as external sources of information. Internal sources within the facility help to learn more about previous budgeting and its effectiveness, the needs of the hospital, and the financial reserves available. This data is analyzed using the SWOT technique.

    NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

    The SWOT analysis is defined as the identification of an organization’s strengths and weaknesses and thereby utilizing the opportunities to eradicate those weaknesses. It also involves the identification of threats (internal or external) (Benzaghta et al., 2021). In budget management, SWOT analysis assists in the identification of the hospital’s strengths and weaknesses, and a successful budget is prepared using the information. Moreover, data from external sources is also used for example knowledge about governmental monetary funds, grants, and donations. During the process of developing a budget and executing it effectively, we may encounter certain uncertainties like adverse events, emergency/disastrous situations, high influx of patients, increased employees’ brain drain, and incoming revenue less than expected. For unforeseen conditions, the hospital’s monetary reserves must be kept prepared which should also be a part of an operating budget.

    The operating budget created for the 35 bedded hospital is below: 


    COMPONENT

    EXPENSE PER YEAR (USD) 
    Employees’ salaries500,000 (20 FTE staff)
    Medical Supplies & Utilities200,000
    Prescription drugs300,000
    Patients satisfaction programs250,000
    Training & Development250,000
    Research200,000
    Appraisals & bonuses250,000

    TOTAL EXPENSES

    1,950,000

    NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget


    COMPONENT

    REVENUE PER YEAR (USD) 
    Patients’ services 700,000
    Grants/donations (for research)100,000
    Charitable organizations250,000
    Medicaid/Medicare500,000

    TOTAL REVENUE 

    1,550,000

    The budget created above identifies that the expenses are higher than the revenue generated. This indicates the need for identifying financial resources outside the hospital and enhancing the skills to better approach stakeholders for securing more resources. 

    How is a Budget Designed and Created?

    Various factors influence the process of budget development and management. Some of the factors that impact the process of budget planning are economic constraints, health resources allocation, political conditions, and patient expectations (Ren et al., 2021). Other internal factors are hospital requirements, changes in the volume of patients, inflation rate, staff shortages, rising competition in the market, and the introduction of various healthcare trends (technologies and research). Literature suggests some ways to rationalize the use of capital while developing an expense and revenue budget. These ways are; cost-benefit analysis and linear programming (Ren et al., 2021).

    Cost-benefit analysis is a classification of various impacts concerning the costs associated with them. The method proposes results where the benefits-to-cost ratio is analyzed so that monetary decisions can be made to effectively utilize the existing financial resources (Jiang & Marggraf, 2021). While cost-benefit analysis helps in the effective use of resources, linear programming is about minimizing the costs and maximizing the benefits generated from the activities. This is performed through mathematical calculations of resources and costs (Boloș et al., 2020). 

    NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

    Other aspects that need attention are the requirement of patients and the staff turnover rate. In terms of the elderly population, it is essential to keep in mind the continuous changes in their health statuses which impact highly on the costs associated with the disease process and hospitalization. This changing health pattern increases the need for medical utilities and drugs which takes most of the financial reserves available. Moreover, the increasing number of employees leaving the hospital ultimately increases the need to fill in those positions and retain existing employees by providing benefits and appraisals. All of these factors impact the development of the budget. It is therefore essential to consider all these factors while establishing a budget plan to ensure that a patient-centered, complete, and effective financial plan is developed for the hospital to grow and progress and provide quality care to the consumers. 

    Strategic Plan and Evaluation Criteria 

    One of the ways to develop successful budgets is strategic planning. Strategic planning is studied as a vital methodology to gain profit through effective financial planning. This does not only cater to the current needs and requirements but also incorporates the plans for unknowns and uncertain conditions. Thus, preparing the leaders and hospital for emergencies. The result of successful strategic planning is a strategic proposal. It is imperative to take into account the mission and requirements of any organization when establishing a proposal plan.

    In the 35 bedded hospital, our major aim is to provide quality care to our patients. Quality care is only possible if qualified employees are there to serve these patients. It is therefore essential to enhance employee satisfaction and decrease the turnover rate. Moreover, to provide quality care, the healthcare facility must work according to the current and future healthcare trends using innovative technologies and research-based best practices. To ensure these aspects are fulfilled, a strategic plan is developed. 

    NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

    1. Employee retention program: A comprehensive employee retention program will assist not only in retaining staff within the organization but also reduces the turnover rates and costs that are correlated with staff leaving the workplace. This program is justified by utilizing Social Exchange Theory whereby staff training and development, improved work environment, and appraisals and bonuses are associated with job satisfaction eventually decreasing staff brain drain from the hospital (Xuecheng et al., 2022). The inclusion of training and development and appraisals/bonuses in the operational budget as essential components indicates the importance of these services for staff retention and the improvement of quality of care. 
    2. Technological advancements: Another important consideration for the strategic plan is the introduction of various technologies to improve patient care. Technological advancements help in improving patient care by providing effective, accurate, and evidence-based care according to future healthcare perspectives. It overall improves healthcare delivery with innovative methods (Ngoc Dinh et al., 2020). Moreover, data-driven and technological healthcare also makes a hospital better compete within the healthcare market. It helps in improving the hospital’s reputation thus bringing in more revenues through patient influx, and governmental funds. 
    NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

    Additionally, it is significant to focus on improving patient care by providing enough access to effective and need-based resources. As mentioned earlier, the population majorly covered by this 35 bedded hospital is the elderly. So, it is essential to not only hire and allocate human resources who are qualified in providing care and treatment to the targeted group but also financial and materialistic resources should be distributed according to their needs. For example medical and non-medical supplies like diapers, bedsore management supplies, wheelchairs, crutches, automatic beds, etc. Medications that are specific to this population should be part of the budget too.

    Thus, it is essential to allocate resources tailored to the patients’ needs. Some of the programs that could be initiated for patients are the management of stressful situations, rehabilitation, and home health care. These programs also have a cost associated with them which should also be included in the operational budgets and likewise in the above-presented budget. The main purpose of this strategic plan is to ensure that both employees and patients are satisfied with the hospital’s management, and financial allocation thus fulfilling the mission of the hospital to provide quality care. 

    Evaluation of the strategic plan is as important as its development. Since the budget is planned for a year and is divided into quarterly sections, it is essential to regularly monitor the progress. The criteria on which the budget evaluation is based should include accuracy, relevance, limited spending, and more saving for emergencies. Moreover, the results must be correlated with hospitals’ mission to provide quality care in limited but by using effective resources. 

    Approach to Ongoing Budget Management

    The process of budgeting doesn’t stop at development however, it is an ongoing process where budget management takes place. The above-presented budget will be similarly managed and monitored continuously. The approach that will be used to manage the budget is tracking the indicators and maintaining monthly reports. These indicators and reports will provide evidence to bring changes in the budget throughout the year. Some of the indicators developed are; a reduction in staff turnover rate, improvement in patient health status, and more technological and research-based advances initiated within the hospital.

    Some of the assumptions on which this approach is based are the importance of appraisals and benefits in terms of increasing staff satisfaction thus, eradicating the issue of staff leaving the organization. Another assumption is that the training and development of employees empower them in their roles which also reduces their dissatisfaction with their roles enabling them to stick by the workplace (Brook et al., 2019). 

    The most important assumption of this ongoing management is the provision of quality care which is part of the mission of almost all healthcare facilities. Effective development and management of the budget will ensure that patient is receiving quality care through skilled professionals by utilization of effective supplies and utilities. The costs that are used on medical supplies and utilities will ensure that effective care is provided and ultimately patient care is improved. To ensure that quality care, as well as cost-effectiveness, is maintained, it is essential to execute the budget plan in a way that resources are secured using limited reserves. Prioritization based on usefulness, inevitability, and cost-effectiveness is essential in this matter. 

    Conclusion

    To conclude, nurse leaders must learn business skills especially related to budget development and management to prepare them for instances where financial planning is required. An operational budget is based on expenses and revenues which are predicted for a year. certain factors must be considered while developing these budgets to ensure that an effective, useful, patient-centered, staff-centered, and holistic budget is developed. Moreover, creating a strategic plan will ensure that the budget is aligned with the hospital’s mission and policies thus showing relevancy. Lastly, there must be an approach developed to manage and monitor the evaluation of the budget based on certain criteria to ensure that it is effective in producing results and particular reforms can be undertaken to improve its effectiveness. 

    References 

    Benzaghta, M. A., Elwalda, A., Mousa, M., Erkan, I., & Rahman, M. (2021). SWOT analysis applications: An integrative literature review. Journal of Global Business Insights6(1), 55–73. https://doi.org/10.5038/2640-6489.6.1.1148 

    Boloș, M.-I., Bradea, I.-A., & Delcea, C. (2020). Linear programming and fuzzy optimization to substantiate investment decisions in tangible assets. Entropy22(1), 121. https://doi.org/10.3390/e22010121 

    Brook, J., Aitken, L., Webb, R., MacLaren, J., & Salmon, D. (2019). Characteristics of successful interventions to reduce turnover and increase retention of early career nurses: A systematic review. International Journal of Nursing Studies91, 47–59. https://doi.org/10.1016/j.ijnurstu.2018.11.003 

    NURS FPX 6216 Assessment 2 Preparing and Managing an Operating Budget

    Jiang, W., & Marggraf, R. (2021). The origin of cost-benefit analysis: A comparative view of France and the United States. Cost Effectiveness and Resource Allocation19(1). https://doi.org/10.1186/s12962-021-00330-3 

    Ngoc Dinh, M., Nygate, J., Hoang Minh Tu, V., & Thwaites, C. L. (2020). New technologies to improve healthcare in low- and middle-income countries: Global Grand Challenges Satellite Event, Oxford University Clinical Research Unit, Ho Chi Minh City, 17th-18th September 2019. Wellcome Open Research5, 142. https://doi.org/10.12688/wellcomeopenres.16008.2 

    Raftery, C., Sassenberg, A.-M., & Bamford-Wade, A. (2021). Business acumen for nursing leaders, optional or essential in today’s health system? A discussion paper. Collegian28(6), 610–615. https://doi.org/10.1016/j.colegn.2021.08.001 

    Ren, W., Zhao, Y., Zhong, H., Fu, X., & Wu, J. (2021). Exploring the optimal allocation decision-making of expenditure budget in hospitals under multi-objective constraints: Evidence from Urban Public Hospitals, China. SAGE Open11(4), 215824402110581. https://doi.org/10.1177/21582440211058191 

    Xuecheng, W., Iqbal, Q., & Saina, B. (2022). Factors affecting employee’s retention: Integration of situational leadership with Social Exchange theory. Frontiers in Psychology13. https://doi.org/10.3389/fpsyg.2022.872105 

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