Budget Management Analysis
HCS/571 Financial Resource Management
June 27, 2011
Dr. Lena Watson
Budget Management Analysis
Budget management analysis is used by mangers as a tool and helps determine that all resources available are being used efficiently. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss specific strategies to manage budgets within forecast, compare five to seven expense results with budget expectations, describe possible reasons for variances, give strategies to keep results aligned with expectations, recommend three benchmarking techniques, and identify those that might improve budget accuracy, ...view middle of the document...
The expense reports show the difference between the budget and the actual amount spent and the result is called the variance. Variances may be within the budget which is favorable, or over the budget which is unfavorable. The variance is used to predict the budget for upcoming years, help with spending during the current year, and help with evaluating the managers and their departments. To determine the cause of variances the managers must investigate and justify to upper management why the variance occurred. There are a variety reasons for variances, which must be identified and controlled if possible.
While analyzing the nursing expense results from various units for a pay period, there were some favorable and unfavorable variances. While reviewing the expense record the paid productive hour’s variance was within the budget and the paid nonproductive hour’s variance was 60 hours over the budgeted hours. The unfavorable variance of paid nonproductive hours may have occurred due to some staff being on modified duty, sick leave, meeting time, or education time, which means they are getting paid with no patient care involved. The overtime percentage of hour’s variance was 7.5% over the budget and the registry percentage of hour’s variance was 8.0% over the budget, both are unfavorable. The overtime may have been caused by bad time management, late arrival of the next shift, or working past shift hours due to not enough staff. The increase in the registry hours may have been due to not enough regular staff due to hiring freeze or staff being off for personal or illness reasons. The hours per patient day (HPPD) licensed productive hours was .13 over budget, the direct product hours was within budget, and the total productive hours was within budget. The hours per patient day over budget may have been caused by the unit being over staffed or also due to the overtime and registry hours. The average daily census (ADC) per unit varied from being within budget to 7.50 over the budget. The daily census is very unpredictable and depends on the time of year, the admissions from ER or the clinic, and transfers from other hospitals or facilities. Strategies to keep the results aligned with expectations may be done by performance budgeting, which will analyze key areas such as staffing, cost control, increased productivity, and indirect and direct patient care. The activities affected by analyzing these performance areas would be daily staffing calculations, reduced cost to the unit, working more efficiently and better time management, patient care planning, and time spent on patient charting. Offering incentives could also be a good way to involve the staff by informing them of the budget goals.
Benchmarking helps to identify performance gaps and identify where improvement is needed. “Benchmarking is used by large health systems and smaller practices alike as a tool to identify targets and set goals enabling staff to...