Ch 10 Fiscal Responsibility and Budgeting
Learned skill; improves with practice
Fiscal Responsibility and Planning is a _______ skill that _______
17-18 cents
For every dollar that we spend _____ of that goes to health care
Performance Budgeting
For example, a home health agency would set and then measure a specific outcome in a group, such as diabetic patients, as a means of establishing and justifying a budget
- acuity levels - dxs - personal charactertics - patterns of treatment
Hospital case mix is usually defined in terms such as ...
by using supplies wisely (7% of unit budget) and staffing wisely.
How can staff nurses contribute to cost containment?
- baby boomers, older groups fastest growing - some chronic conditions are treatable (HIV and opioid crisis) - Older people are living longer. The highest percentage of cost is at the end of someone's life. - Americans do not accept the end of life well. We provide futile care for a dying older individual.
How does changing population add to rising health care cost?
fix" rather than prevent, use of the most expensive modality or clinician
How does consumer attitudes add to rising health care cost?
Spending more does not always equate to higher quality health outcomes.
How does cost effectiveness related to quality of care?
third party payor system (We no longer shop for the best price for healthcare. We go with what our insurance covers even if its more expensive)
How does health care financing add to rising health care cost?
use-copays encourage expensive drug prices, consumer marketing, polypharmacy
How does pharmaceutical use add to rising health care cost ?
total number of days stayed by all inpatients during a year / the number of admissions or discharges.
How is ALOS (average length of stay) calculated?
decision package to set funding priorities
zero-based budgeting key feature
DRGs
Used by Medicare to determine payment rates for an inpatient hospital stay based on admission diagnosis.
Unit of service-workload units
A unit of work used to calculate productivity (e.g., billable procedures, patient visits, patient day).
too far in advanced
A budget that is predicted _______ will have a higher chance for error
fiscal year budget
A budgeting cycle that is set for 12 months. The start of the 12 months varies from place to place.
Cost-based reimbursement
A common payment method in health insurance. Patients' insurance companies make payments to doctors and hospitals based on the costs of the care provided to the patients.
Pay for performance is critical
A critical aspect of Fiscal Responsibility and Planning
cost center
A department or other unit within an organization to which costs may be charged for accounting purposes.
budget
A financial plan that includes estimated expenses as well as income for a period of time.
36 hours/40 hours = 0.9 FTEs
A nurse works 3- 12 hour shifts/week. How many FTEs does that nurse fill?
Case mix/CM index
A relative value assigned to a diagnosis-related group of patients in a medical care environment. Its the types of patients that the hospital serves
managed care
A system of healthcare in which patients agree to visit only certain doctors and hospitals, and in which the cost of treatment is monitored by a managing company. Wants to maintain the cost while providing quality care.
variance
Anything over the budget. The fact or quality of being different, divergent, or inconsistent.
Average Daily Census (ADC)
Average number of patients per day in a hospital over a given period of time
supply and demand
Because of the detail available in the GDP reports, this series provides comprehensive information on_________ conditions
activities; recourses; planning and control. needs, contirbutions
Budgeting help to predict an organization's ______, maximize the use of ______, and help with ________. it promotes unit's _____ and _______
uNot a simple retail industry uThird party reimbursement uUncompensed care uBenefits vary by company, state, plans selected uMay vary by utilization within a company from year to year
Complexity of HC finance
- anticipated length of service - need for such a service, - availability of other alternatives.
Cost-effectiveness then must take into account factors such as these
Fiscal responsibility
Each of an organization's revenues, expenses, assets and liabilities are the resosnblity of someone
Profit/ Bottom Line
Earnings or net profits (what is left over after you have paid expenses)
cost containment
Effective and efficient delivery of services while generating needed revenues for productivity
Wise use of fiscal resources
Factor that is vital for the solvency HC organization
1. unnecessary care 2. consumer attitude (fix rather than prevent) 3. healthcare financing (3rd party payer system) 4. pharmaceutical use 5. changing population, demo, disease conditions 6. assess to care
Factors that have been found to contribute to the rising health care cost in america
- The in-house census in a month, add the daily census for each day of the calendar month and divide the total by the number of days in a month. - Each census day begins at 12:00am and ends at 11:59 p.m
Facts on Average daily census
cost effective
Producing good results for the amount money spent
Variance analysis
It is the quantitative investigation of the difference between actual and planned budget. This analysis is used to maintain control over a business.
1. Listing of all current and proposed objectives or activities in the department. 2. Alternative plans for carrying out these activities. 3. Costs for each alternative. 4. Advantages and disadvantages of continuing or discontinuing an activity.
Key Components of Decision Packages in Zero-Based Budgeting
operational
Many budgets include the personnel in ________ budgets.
exceed a certain dollar amount. That dollar amount will vary from institution to institution, but $1,000 to $5,000 is common
Often, the designation of capital equipment requires that the value of the equipment...
half
On average, other wealthy countries spend about ____ as much per person on health than the U.S. spends
real GDP
Output of goods & services produced by labor & property located in the US.
- Highest infant mortality rate -Lowest life expectancy - Highest mortality rates - low assess - 11 overal perf rank - higest spending on GDP
Stats on the US compared to other developed countries
- Assess what needs to be included (equitment, labor, ect) - Diagnosis(goal) - Develop the fiscal plan - Implement the plan -Evaluate the plan -Make adjustments and explain variances
Steps in budgetary process
true
T/F A well-designed budget is helpful in both planning and managing resources
more (One average US spends 10,000 per person where as other countries spend 5,000)
The US spends (more/less) per person than other larger countries
ALOS (average length of stay)
The average number of days that patients spend in hospital.
Gross domestic product
The broad measure US economic health.
variance
The difference between the budgeted or baseline amount of expense or revenue, and the actual amount.
meet short and long term needs by maximizing resources
The goal of the budget
staffing
The highest part of a units budget
Personnel budget
The largest budget expenditure for any hospital because healthcare is labor intensive
future replacement and organizational expansion that will exceed 1 year.
The long-term major acquisitions component outlines...
budgeted productivity
The nurse hours per patient day, a benchmark that vaires on the unit
unit managers
The person who has Fiscal responsibility on the unit level
equipment purchases within the annual budget cycle, such as call-light systems, hospital beds, and medication carts
The short-term component of the capital budget includes...
budgeted productivity
This calculates the number of units of products that must be manufactured, and is derived from a combination of the sales forecast and the planned amount of finished goods inventory to have on hand (usually as safety stock to cover for unexpected increases in demand).
DRGs-Diagnostic related groups
This is a patient classification system that standardizes prospective payment to hospitals and encourages cost containment initiatives
flexible budget
Type of budget process that adjust over time to volume, labor costs, capital expenses
New performance budgeting
Type of budget process that emphasizes outcomes and results instead of activities or outputs
Personnel
Type of budget that is to handle fluctuating patient census and acuity, managers need to use historical data about unit census fluctuations in forecasting short- and long-term personnel needs.
capital budget
Type of budget that plan for the purchase of buildings and major equipment, which include equipment over a set amount of money that has a long life (greater than 5-7 years), more expensive, and not used in daily operations
Operating budget
Type of budget that reflects fixed and variable expenses that change with volume of service. Its the day to day expenses of the entity.
Zero based budgeting (so just because you got funding in the past doesn't mean it will get funded again)
Type of budgeting process that justify program needs yearly. labor intensive.
Incremental Budgeting (Flat Percentage Increase Method)
Type of budgeting process that occurs when the budget is increased by a certain percentage no matter what if the budget is spent fully
forecasting
Use of historical data to make an educated budget estimate
•Pricing transparency-get what you pay for •Flexible payment options-discounts like other • industries for prompt payment •More understandable, concise billing •Financial costs equates to the quality of clinical care •Interactions that recognize patients as individuals •Reasonable financing options •Better communication •Solid financial backup plans •Clinicians not distracted by finances •Solid relationship with clinicians
What all can we do about rising healthcare costs?
income as well as expenditure flows
What does the data reflect for real GDP?
# hrs of work for which full time employee is scheduled weekly. 1FTE=5 8-hr days=40hrs of staffing/wk.
What is FTE-full time equivalent?
- Penalties of nonpayment for hospital related events (falls, infections, pressure injuries) - RNs are paid on how well the unit performs based on certain metrics
What is Pay for Performance?
the product you paid for was worth the price
What is cost effectiveness essentially?
Uses data to predict activities of the organization over time
What is used to create a budget?
ongoing monitoring and analysis; to avoid inadequate or excess funds at the end of the fiscal year; Monthly statements outline each department's projected budget and deviations from that budget
What must the manager do while the plan is implemented for the budget? Why? What is a way they do this
Reflects organizational philosophy, mission, goals and objectives
What should Fiscal Responsibility and Planning reflect?
- cost of electricity - repairs and maintenance - supplies
What will fall under the operating budget for a hospital?
Responsibility of every healthcare (HC) provider
Who is responsible for cost containment?
the person with the most direct control or influence on any of these financial elements should be held accountable for them.
Who should be held accountable for Fiscal responsibility?
Because unit managers are involved in daily operations and see firsthand their unit's functioning, they often have expertise in forecasting patient census trends as well as supply and equipment needs for their units.
Why are unit managers usually skilled in forecasting?
provides the greatest and broadest sectoral detail of any other series
Why is Real GDP is an important indicator to track?
determining the allocation of resources to care for and/or treat the patients in the group.
Why is the Case mix/CM index useful?
nursing budgets
account for the greatest share of the total expenses in healthcare institutions
works well in many health-care organizations as a result of changing census and manpower needs that are difficult to predict, despite historical forecasting tools
advantage of flexible budgeting
all org's hierarchy. In terms of labor, equipment, operating expenses compiled
assessment in budgetary process should reflect input from...
flexible budget
automatically calculates what the expenses should be, given the volume that is occurring
flexibility ongoing evaluation revision
budgeting requiresl...
long term planning (major aquisitions) and short term planning.
capital budgets have what components?
goal or what needs to be accomplished, creates cost-effective budget that maximizes use of available resources
diagnosis in budgetary process
fixed (don't vary w volume) variable (vary w volume) controllable (#employee ex) uncontrollable (eqipment depreciation)
expenses are classified in what ways?
Incremental Budgeting
generally inefficient fiscally because there is no motivation to contain costs and no need to prioritize programs and services.
standard. may be addressed in medical units, visists/mo, min/case.
most staffing is based on a predetermined....
-see firsthand unit's funcitoning -expertise in forecasting pt census trends & supply and equipment needs for their units. -monitor & evaluate all aspects of unit's budget control. -Communicates budgetary goals and plans to staff -held accountable for financial results
nursing unit manager roles/respon rt fiscal responsibility
Incremental Budgeting
simplest method for budgeting
%'s of license and unlicensed nursing assistants, and UAPs staff working at a given time.
staffing mix
productive time and nonproductive time
the personnel budget includes _________ and ________ times
accuracy
value of budget directly related to...
vision creativity thorough knowledge or political, social, & economic forces that shape HC
what does fiscal planning require?
duplication of services overutilization of services use of technology that exceeds pt's needs
what does high spending represent?
cost of benefits new employee orientation employee turnover sick/holiday time education time
what does nonproductive time include?
nursing care hours/pt-day NCHPPD nursing care hours worked in 24 hours/pt census
what is used to calculate daily staffing needs?
