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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’ salaries 500,000 (20 FTE staff) Medical Supplies & Utilities 200,000 Prescription drugs 300,000 Patients satisfaction programs 250,000 Training & Development 250,000 Research 200,000 Appraisals & bonuses 250,000 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 organizations 250,000 Medicaid/Medicare 500,000 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