24 Nov You are a staff member in the finance department at Nouveau Health, whose sole responsibility is to advance the success of the organization through assisting in planning, forecasting, and f
2-3 pages APA 6, in-text citation, Cite at least three (3) scholarly references
** reference documents and budget are attached**
You are a staff member in the finance department at Nouveau Health, whose sole responsibility is to advance the success of the organization through assisting in planning, forecasting, and finance management.
Complete the following:
- Prepare next year’s financial plan and operational budget.
Note: Use the budget from Unit 1; it did not take into account the growth of the new facility. The CEO has asked that you expand that budget and provide a finalized budget that will take into account the new services offered. The CEO has stated that there is $3 million that you can incorporate in to the budget for additional staffing, services, maintenance, and so forth.
Health Care Financial Planning
For a health care organization to continue in business and perform its function of providing health care, the health care organization must be financially viable. Financial viability is achieved in many organizations by the use of diverse financial functions, such as financial planning, budgeting, and accounting. Each function is necessary to ensure an organization’s financial viability. This session will focus on financial planning and the sources of revenue for health care organizations.
Strategic Financial Planning
Strategic financial planning starts with the executive management of a health care organization developing a strong preliminary strategic plan for the organization that includes the following:
• Identifying optional or potential strategic plan directions and goals • Forecasting outcomes for each of the optional or potential strategic
goals • Developing models and calculating the potential revenue and expenses
associated with a particular business endeavor • Comparing the return and cost of each strategic alternative to assist in
determining what priorities are feasible • Evaluating the different costs of different financing options • Providing comparative financial data to decision makers regarding
The presentation of data and alternatives should be in a format that supports decision-making purposes.
Sources of Health Care Revenue
A health care organization must be able to identify sources of revenue to effectively evaluate its options and make strategic decisions. The following are three primary sources of revenues for health care organizations:
• Government health insurance programs • Employer-sponsored health care insurance • Revenues from individual recipients of health care services
The primary government health insurance programs are Medicare and
Health Care Financial Planning
Medicaid. The programs derived from the Social Security Act of 1965.
The first primary source of funding for most health care organizations is Medicare. Medicare provides health insurance for the disabled, widows of Medicare beneficiaries, and senior citizens. Qualifying recipients are required to pay annual premiums and deductibles to receive the health insurance. Through the years, Medicare has changed to accommodate new medical innovations, such as the increase of managed health care providers in the United States. Because of the increase, new legislations were passed that allowed Medicare beneficiaries to enroll in health plans with reduced copayments and access to prescription medications, while not increasing the costs to taxpayers.
The second primary source of funding for most health care organizations is Medicaid. Medicaid is a partnership funded by the federal government and participating states that provide health insurance for their poor. All states that participate in the Medicaid program must adhere to federal requirements. Like Medicare, many health care organizations serve Medicaid beneficiaries. Because Medicaid has a fast reimbursement period, many health care organizations rely heavily on Medicaid funding as their primary line of business to help pay their overhead costs, such as payroll and utilities.
The third primary source of funding for most health care organizations is the employer-sponsored health insurance programs. Employer sponsored health insurance programs are funded by health insurance companies who charge employers for the costs of providing health insurance for their employees.
Health care organizations may seek other sources of revenue, such as grant funding for infrastructure building. For example, a community health center may seek grant funding to provide specific training to health care workers.
When used properly, the listed sources of revenue for health care will serve as a main catalyst in ensuring an organization’s financial viability.
All organizations, including health care organizations, must have an
operations budget to operate effectively and stay financially viable. This
section will review the purpose of an operations budget, considerations for
development of an operations budget, and content of an operations budget.
Purpose of an Operations Budget
An operations budget is used for several purposes. The two primary purposes
are to provide guidance to managers about the amount of resources they
have available to operate their unit and to guide the performance of the unit.
Operations budgets also provide a measure for financial departments to
determine if costs are in line with what is needed for the organization to earn
a profit. They are then used to monitor and ensure a unit’s operations are
within projected costs.
Operations Budget Versus Facility Budget
An operations budget generally is distinct from an organization’s financial
plan or facility budget. The financial plan is a high-level plan to articulate the
organization's financial goals and objectives. The plan includes anticipated
revenues and expenses on the aggregate. An operations budget details the
projected costs for operating a unit or department. In the case of a small
organization, an operations budget details the projected costs for operating
the organization. A facility budget is a compilation of all department and unit
operations budgets into a complete integrated document.
Developing an Operations Budget
There are many ways to develop and organize an operations budget. An
operations budget generally starts with a manager preparing a preliminary
budget of his/her unit of responsibility. The manager of the unit will use
previous budget information and take into consideration the future needs and
costs of the unit. This includes determining if there are any changes to
standard costs, such as employee wages or costs of materials to operate.
Although the manager of a unit will prepare a preliminary budget for the unit,
often times a financial department will provide some standard costs that are
to be included, especially when costs are used by multiple departments.
Examples of some standard costs that can be provided to a manager by a
finance department include employee salary expenses, employee-related
costs, insurance costs, and overhead costs. Any costs that are unique to a
unit will be projected by the unit manager. After the unit manager prepares a
preliminary operations budget, it is reviewed by others and adjusted
according to the organization's priorities and goals.
Operations budget allocations within the health care industry vary by the type
of organization. For example, organizations that provide health care services
must consider the cost of health care equipment, such as X-ray machines and
MRI machines. Health care insurance and/or reimbursement organizations
budget for the costs of technology used in paying claims and/or bills and
maintaining a provider and/or member services departments. As you can
imagine, the nuances within the operating budgets are numerous.
Contents of an Operations Budget
Operations budgets are detailed in projecting various aspects of operations.
The following are some examples of units that one might expect to see within
a health care organization’s operations budget:
Expected number of personnel
Expected salary of personnel
Expected employee related costs such as taxes and insurance
Expected amounts of health care supplies anticipated to be utilized
Expected costs of employee uniforms, for example, operating room
Expected costs of operating technology such as telephone, computers,
and network capabilities
Expected costs of health care equipment, for example, dialysis
Expected costs of on-going training and professional development
Expected costs of building improvements
|KRONA HOSPITAL OPERATING BUDGET FOR 20XX|
|Home Health and Hospice||1,500,000|
|Less Chartiy Care||18,000,000|
|Net Revenues||$ 42,050,000|
|Payroll (including nursing salaries)||$ 12,500,000|
|General Services (laundary, security, etc)||3,000,000|
|Total Operating Expenses||$ 30,700,000|
|Net Income||$ 11,350,000|
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