Operating Budget for Patton-Fuller Community Hospital 2010

Operating Budget for Patton-Fuller Community Hospital 2010

Wanda Grant

HCS/577

August 27, 2012

Destiny Chen

Operating Budget for Patton-Fuller Community Hospital 2010

In 2008 Patton-Fuller Community Hospital suffered financial loss that has been turned into profit for 2009 of over $16 million (Annual Report, 2009). Patient revenues increased while expenses were kept to a minimum even through these hard economic times (Annual Report, 2009). Based on the 2009 operating budget and 2010 budget assumptions the 2010 operating budget was developed. In this paper the budget will be discussed as well as identification and discussion of effective and ineffective financial management practices in the healthcare setting and as applied to Patton-Fuller Community Hospital.

Budget Projection 2010

Based on the 2009 operating budget and the 2010 operating budget assumptions the total revenue is for the 2010 budget is expected to increase by three percent because of increase in patient revenue related to new managed care contracts that were negotiated in 2009 and because marketing's goal to achieve a 15 percent increase in donations to the organization (Operating Budget Assumptions 2010, 2009). Total expenses for 2010 are expected to rise approximately 30 percent mainly because of repayment of borrowing in 2009. Salaries and benefits should stay around a one percent overall increase because of deflation across the country (Operating Budget Assumptions 2010, 2009). Price deflation and the company purchasing a surplus of supplies at a large discount in 2009 will also cause supply cost to decrease by three percent (Annual Report, 2009). The poor economy across the country is causing oil prices to rise which is causing increase of rising utility cost which is expected to increase five percent in 2010. However, the new heating and air system the hospital purchased in 2009 is the reason the increase is expected to be no more than the five percent (Operating Budget Assumptions 2010, 2009). The net income in 2010 is expected to increase by 93 percent because of the hospital improved financial operations, steady investment market, price deflation, new equipment efficiency, and new managed care contracts with little increase in patient volume (Operating Budget Assumptions 2010, 2009).

Effective Financial Management Practices in Health Care Setting

Financial management has the primary role in health care organizations of planning for, acquiring, and utilizing funds that maximize the efficiency and value of an organization (Gapenski, 2007). Financial management focuses on several areas and includes: evaluation, planning, long-term investment decisions, financing decisions, working capital management, contract management, and financial risk management (Gapenski, 2007). Patton-Fuller Community Hospital demonstrates effective financial management practices in several ways. One effective financial management practice is to adjust staffing needs based on census and workload. Patton-Fuller as well as many other healthcare organizations experience changes in patient census based on the season with winter being the busiest due to cold and flu season (Annual Report, 2009). At times of low census staff can be pulled to other floors or sent home which prevents waste of money. Another effective financial management practice is to plan for costs that do not usually fluctuate in an organization such as utilities (Annual Report, 2009). Re-evaluation of investments on a continual basis in relation to the stock market is also an effective

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