Financing and Budgeting in a Healthcare Setting.

Assessment Instructions

Note: Complete the assessments in this course in the order in which they are presented.Financing and Budgeting in a Healthcare Setting.

Preparation

You are the nurse manager of a new urgent care clinic, and one of your first tasks is to prepare next year\’s operating budget. Like many nurses, you have had little or no direct experience with the budgeting process and realize that financial management is not one of your strengths as a leader. Consequently, you have decided that you need to reach out for help from someone in the facility with budgeting experience and financial management expertise who can offer you help and insight.Financing and Budgeting in a Healthcare Setting.

ORDER A PLAGIARISM-FREE PAPER HERE

Requirements

Interview

Conduct an interview with your site supervisor, or other nurse leader whom you consider to be a mentor in the area of health care finance. Discuss their experience with operations and capital budgets in their current or previous role. Explore the following topics in your interview:Financing and Budgeting in a Healthcare Setting.

• Their experience managing an operating budget.
• Their approach to managing productivity within the parameters of the budget.
• Their approach to oversight of the appropriate use and availability of equipment and supplies.
• The experience of managing a capital budget.
• How managing a capital budget differs from managing an operating budget.
• Their application of finance principles to fulfill the organization\’s mission and goals.

Analysis

Note: The requirements outlined below correspond to the grading criteria in the assessment scoring guide. Be sure that your written analysis addresses each point, at a minimum. You may also want to read the Guiding Questions: Mentor Interview [DOCX], linked in the Resources under the Suggested Resources heading, to better understand how each criterion will be assessed.Financing and Budgeting in a Healthcare Setting.

Prepare a written analysis of your findings from the interview, supplemented by your own research and evaluation of budget management techniques.

• Compares the process of managing an operating budget to that of managing a capital budget, and identifies knowledge gaps, unknowns, missing information, unanswered questions, or areas of uncertainty.
• Describes the process of allocating resources for labor, equipment, and services, and identifies assumptions underlying the process.
• Describes an effective approach that contributes to planning for profitability and fiscal success, and impartially considers potential merits of an alternative approach.Financing and Budgeting in a Healthcare Setting.
• Evaluates a nurse leader\’s approach to budget management, citing one or more relevant resources that provide criteria for budget evaluation.
• Writes clearly and concisely. Grammar and mechanics are error-free.
• Integrates relevant, credible, and convincing sources of evidence to support assertions. Sources are current, and citations and references are error-free.Financing and Budgeting in a Healthcare Setting.

Additional Requirements

Format your analysis using APA style.

• Use the APA Style Paper Template [DOCX] linked in the Resources under the Required Resources heading. An APA tutorial is also provided in the Resources, under the Suggested Resources heading, to help you in writing and formatting your analysis. Be sure to include:Financing and Budgeting in a Healthcare Setting.
  • A title page and reference page. An abstract is not required.
  • A running head on all pages.
  • Appropriate section headings.
  • A minimum of five properly formatted citations and references.
• Your analysis should be 3–5 pages in length, not including the title page and reference page.Financing and Budgeting in a Healthcare Setting.

Introduction

Financing and budgeting are two key areas when it comes to healthcare management. These areas must be well managed inorder to ensure that there are enough resources for the current operations and also for the future operations.Financing and Budgeting in a Healthcare Setting. As such, prior planning and proper allocation of the available resources is key through a well thought capital and operational budgeting. To understand this insight, I undertook an expert’s opinion in the budgeting and finance from a person whom I consider a mentor when it comesto healthcare budgeting and finance. Ms.Peg Burnette (CPA) is the chief finance officer (CFO) at Denver Health, with a health financing career spanning over 25 years(Denver Health, 2020). Ms. Burnette’s financial leadership in the healthcare sector has seen her achieve record patient collection and income results for the Denver Health in the years she has held the CFO position with the organization. Furthermore, her achievements have earned her recognition such as CFO of the year by Denver Business Journal in 2010 and among the Women Business Leaders by Forbes Magazine in 2016 (Denver Health, 2020). This essay will provide an insight into budgeting and financial matters as expressed by Ms. Burnette’s through an arranged phone interview.Financing and Budgeting in a Healthcare Setting.

Comparison of The Process of Managing an Operating Budget to That of Managing A Capital Budget

According to Ms. Burnette, organizational budgeting involves two main budgeting elements. These are the capital budgeting, as well as operational budgeting. For the capital budgeting, this involves the organizational spending on fixed assets items that are projected for future cashflows (Shastri& Stout,2008). They include assets such as land, buildings, or major equipment and machinery. Operational budgeting on the other hand involves projecting for finances of daily organization operations and activities which involves billings, merchandise purchases, labor, and general and administrative expenses. The two budgets are crucial in ensuring that the organization progresses and meets its daily operations as well as future spending and acquisitions (Clayton, 2001).Financing and Budgeting in a Healthcare Setting.

In comparison of the two budgets, the processes of their management differ from each other in terms of projection, timeline, evaluation, and allocation. In the view of Ms. Burnette, the finance officer must first steer clear of which budgetary items consist of capital assets and which ones involve the operational items. As such, the available or projected resources will be able to be allocated effectively without overbudgeting or double budgeting which may strain the resources.Financing and Budgeting in a Healthcare Setting.

For the operational budget, the management mostly runs solely with the department financial officers, where each department is allocated a certain amount of expenditure, either quarterly, semi-annually or within the fiscal year. According to Ms. Burnette, the financial officers within the organizational units must track the expenses on a monthly basis and as well, make corrections if need be. Ms. Burnette cites that operational budgets are subject to frequent scrutiny and whenever possible, there should be established cost-cutting strategiesaimed at reducing the costs. With operational budget being funded from out-of-pocket from the organization’s revenue generated cash-flow, it should be avoided where possible or reduced to the minimum. The income on top of what was projected as operational expenses is treated as capital asset and presented as retained earnings in the end year reconciliation.Financing and Budgeting in a Healthcare Setting.

On the other hand, for the capital budgeting, its management is a bit complex and according to Ms. Burnette, it requires proper planning and projectors that takes into account the operational expenses as well as the availability of resources within the fiscal year. Capital budgets are done over a period of years and thus a percentage must be covered for every fiscal year. Leadership in managing the capital budget is thus important as one fiscal year mismanagement can ruin the rest of the budgetary process or prolong the projections which might lead to additional costs including affecting the operational budgets (Shastri& Stout,2008). The officer in charge must be in a position to take into account inflation rates, as well as capital interests as they constitute on the capital expenses when budgeting. Financing and Budgeting in a Healthcare Setting.Costs involving disposal, maintenance, purchasing and operations of capital assets must also be considered when developing capital budgets. The finance leadership must also come up with processes to approve expenses to avoid misuse or overspending. In the views of Ms. Burnette, both the capital and operational budgets must be established with considerations of priority, resources availability, need as well as future growth(Sumedrea& Costin,2014).Financing and Budgeting in a Healthcare Setting.

Description of The Process of Allocating Resources for Labor, Equipment, And Services

Resource allocation involves setting the organization’s scarce resources to the most appropriate needs for the organization. It involves assigning, re-assigning or relocation of resources whenever the need arises. As such, especially in a healthcare setting, allocating resources for labor, equipment, and services is key and thus requires a defined process to ensure accountability and equitable resource allocation in all the three areas(Herzog, 2006).Financing and Budgeting in a Healthcare Setting. According to Ms. Burnette, the allocation of resources for labor must take into account the current and the future labor needs for the organization. In her view, the leader must ask themselves how many employees do I have? how many will leave (either by retirement or intention to leave)? how many do I need to hire? As such, the resource allocation will be easier to come up with in terms of labor costs such as hiring, retirement benefits, allowances, salaries and other employee gratuities(Sumedrea& Costin,2014). Financing and Budgeting in a Healthcare Setting.

.

For the equipment, resource allocation must consider first a process that will identify the current and future needs for the various departments within the facility. The financial officer coming up with the budget should then be in a position to establish the needed equipment that fall short and the available resources. The decision for leasing or purchasing an equipment will also depend with the urgency and resource availability.Financing and Budgeting in a Healthcare Setting. From Ms. Burnette’s experience, the priority should be placed with the most crucial and basicequipment that can hinder the daily operations of the facility, then followed with those that can be purchased in phases or are not in the list of urgency (Clayton, 2001).Financing and Budgeting in a Healthcare Setting.

On the service aspect on matters of resources allocation, Ms. Burnette describes that services can be categorized into short-term and long-term. The short-term services must be given the first priority as they constitute the daily activities within the facility and define the ongoing service delivery within the facility.Financing and Budgeting in a Healthcare Setting. According to Ms. Burnette, services such as daily clinic visits must be prioritized then followed with bi-weekly, monthly, quarterly, semi-annually and annual services. Giving example of my new urgent care clinic, she insisted that my priority services should be about the daily visits by urgent cases within the facility. All in all, the resource availability cuts across all the three areas, and as such, prioritization and equitable allocation of resources becomes vital when budgeting.Financing and Budgeting in a Healthcare Setting.

Effective Approach That Contributes to Planning for Profitability and Fiscal Success

Every organization must strive to achieve the best through strategic planning that ensures continued profitability. According to Ms. Burnette, for the financial management success including budgeting, an effective approach must be adopted to ensure planning for profitability and fiscal success. One such approach is the application of asset management which involves the management of current liabilities turnovers (Accruals and payables) and current assets (Which includes inventories, receivables and cash).Financing and Budgeting in a Healthcare Setting. This is best applicable when there is already a benchmark in place to measure against the organization’s performance either across the industry or using several selected similar organizations within the industry. Although the asset management approach can be tricky, another approach with similar merits can be the application of ‘profitability ratio’ which involves measuring of profit margins with respect to revenues, total assets and net worth. For the effective application of this approach, organizations must set profit ratios to measure against, to more effectively manage and improve their value-chain activities (Sumedrea& Costin,2014). Financing and Budgeting in a Healthcare Setting.

Evaluation of A Nurse Leader\’S Approach to Budget Management, And Relevant Resources That Provide Criteria for Budget Evaluation

According to Ms. Burnette, a nurse leader’s approach to budgeting will be highly determined by the evaluation of the budget items, either through comparison with the previous budgets or using timelines for a given period of time to evaluate the existing budget. Her advice is the utilization of relevant resources that provide criteria for budget evaluation (Herzog, 2006).Financing and Budgeting in a Healthcare Setting. One such resource is the comparison of actual vs planned spending. As such, one will be able to establish the underspending, or overspending of the allocated resources. Another resource for budget evaluation is the assessment of new income or expenses. As such, one will be in a position to adjust accordingly to fit with the current situation.

Conclusion

Budgeting and finance are important aspects in the overall operationalization of the organization. The healthcare sector is most critical due to the crucial services it offers as poor budgeting may result to delays in offering crucial care that may be urgent, resulting to unfavorable results.Financing and Budgeting in a Healthcare Setting. Proper budgeting processes will ensure that the available resources are utilized and allocated to the crucial units to avoid any inconveniences that are occasioned with poor budgeting and planning. Another crucial aspect is the budget evaluation which ensures that the budget gaps are identified in time and the necessary corrections are made. The officer in charge must exhibit good financial leadership by following the stipulated financial guidelines and adopting an effective budget approach to ensure proper financial management.Financing and Budgeting in a Healthcare Setting.