1

Preparing and Managing an Operating Budget

Student's Name

Institution, Department

Code: Course

Instructor

Due Date
 2

Preparing and Managing an Operating Budget

Our facility incorporates an operating budget that entails the anticipated expenses and

revenues that are needed to foster the daily operations of the facility for a specific fiscal year.

The operating budget covers unit and departmental services, including the provision of care,

facility maintenance and administrative functions (Evianti et al., 2024). The key aspects of the

operating budget include benefits and salaries for healthcare staff, medical equipment and

supplies, revenues and utility expenses from patient's services insurance agencies such as

organizational charities and Medicare (Joseph, 2020). The budget fosters resource allocation,

financial stability and the ability of the healthcare facility to meet the demands of the patients.

Healthcare organizations incorporate operating budgets to examine and predict their

future performance. Organizational performance determines how the staff embraces

organizational duties (Evianti et al., 2024). Medical providers would be proud to carry out their

roles in healthcare institutions that make a profit compared to other organizations with low

profits. Healthcare leaders oversee the staff's activities and manage the organizational resources

and finances. Nurses in healthcare organizations are valuable assets in providing direction on

operating budgets and organizational capital (Joseph, 2020). Moreover, nurses in healthcare

facilities are on the frontline, thus constantly interacting and communicating with patients

(Subramanian & Khanna, 2024). Such approaches enhance cohesive conversations and thus can

identify management flows. This paper addresses organizational strategic interventions,

uncertainties, methodologies, assumptions, and evaluation plans for the management of the

budget within the organization.

Operating Budget

The proposed 22 financial budget covers the organizational budget and income costs. The

budget covers the expenses for 35 hospital bed units for the 20 FTE staff. The presented budget

upholds the guidelines given by the FASB, which provides comprehensive guidance for

healthcare institutions for budget formulation.

Table 1: Operating Budget

Revenue

In any given budget, revenue is a crucial aspect that should be in the column of the

operating budget; revenue s is generated from organizational operations and thus evaluated as

organizational income (Evianti et al., 2024). Profits from the institution, such as cafe business or

other external activities, are a form of institution revenue. They are provided information on

payments done or payments that are expected to be done. Patient contributions towards the

healthcare services provided refer to our gross revenues. Healthcare institutions deduct from

providers such as insurance agencies such as organizational charities and Medicare, where the

accounting teams with the facility deduct the expenses incurred from the operating budget

(Malhan et al., 2024). From the table presented, the organizational net income enhances

purchasing different requirements since the hospital revenue constitutes all expenses.

Expenses

Healthcare facility expenses emerge while purchasing equipment needed to foster

healthcare services (Karia et al., 2024). The expenses are fixed costs or variable costs. Variable

and fixed costs are different aspects since fixed costs are always constant and thus are paid

whether the business is operational or not (Malhan et al., 2024). In contrast, variable costs can be

changed by the activities projected. Some of the variable costs include medical supplies, water

bills, electricity fees, and phone bills. Conversely, some fixed costs include asset depreciation,

salaries, and benefits of the organizational staff. It is evident from the table that operating

expenses are calculated by adding the fixed costs of the organization and the variable costs that

keep changing.

Operating Budget Analysis

The expenses estimated from the projected budget are $1920163. Moreover, the

estimated revenue is valued at$2206400. The medical organization had significant gross revenue

from the patients, estimated at $2470900.The medical institution's returns are calculated by

subtracting deductions from net profit, which entails projected bad debts and remittances. After

deductions are made, the revenue obtained is added to the revenue generated by the patient to

generate operating revenues (Malhan et al., 2024).

The projected budget also entails additional expenses, including water bills, employee

salaries, miscellaneous expenses, medical expenditures, utility bills, phone bills, and employee

benefits. Such outline expenses increased the capital budgeting for last year. Moreover, COVID-

19 also contributed to increased budget and inflation rates (Martin et al., 2023). The pressure that

emerged due to the outbreak has been managed by the government, and the state is gaining its

normalcy. Direct capital budget will facilitate the organization to make huge profits.

Information Gaps/Knowledge

Information gaps within the budget suggested are a result of estimates that are unproven

and missing data. Besides, 35-bed units for the 20FTEs emerge as the only clear information in

the budget. This demonstrates the need for the hospital to incorporate accurate information on

projected estimates such as organizational employee salaries based on overtime payment, job

groups, and specific expenses for the projected aspects. It is essential that the facility fosters

accuracy in projections to enhance its attainment of a sustainable budget (Malhan et al., 2024).

The facility needs accurate projections on the number of expected patients. Getting the accurate

projection of outpatient beds required by the facility is another missing gap. The institution also

lacks clarity on the approaches used to calculate its revenue. It is unclear whether the revenue

generated emerges from patients' days at the medical organization or patients' payments for
 6

healthcare services. Therefore, the source of income within the medical institution should be

clarified.

Data gathered from the facility is needed to provide a comprehensive description.

Increasing healthcare costs emerge as the only available data. Thus, the information fosters an

understanding of how the facility cares for the senior population (Malhan et al., 2024). However,

the information should be clear on the type of specialized treatment offered at the facility. The

services provided at the facility will help to sum up the total revenue obtained from the facility.

From the table, patient revenue emerges as the highest source of generating revenue compared to

other sources. Conversely, the estimated expenses could provide a profound and reliable figure

since it entails the variable costs that the organization can modify if the administration

determines the exact capacity of the patients that visit the medical organization. Such flows

contribute to the provision of wrong estimates.

Nurse Managers are entrusted with including the data provided above. To identify the

flaws in the budget they should have previous the past operating budget. Integrating and

reviewing previous budgets fosters the provision of statistical and forecast accounting (Evianti et

al., 2024). Such strategies must be incorporated by managers to implement new projects and

manage the budget. Lack of previous budgeting data fosters managers to adopt a zero-based

budgeting approach, a crucial methodology that is essential and contributes to accurate costs and

expenses (Malhan et al., 2024). Such is time-consuming since it allows for formulating budget

projections from scratch.

Budget Design and Creation

Implementing zero-based budgets in an organization is crucial since it allows the

development of a budget from scratch (Malhan et al., 2024). Such illustrates that no necessary
 7

information is incorporated. The methodology needs the implementation of cost-effective

initiatives and crucial procedures. The approach is essential in integrating the ZBB, which fosters

establishing an adequate operating budget (Malhan et al., 2024). The medical institution

presented the accurate number of FTEs and beds required. Such precision is crucial in facilitating

the procedures and process of budgeting. Moreover, research provides an understanding of the

importance of fostering efficacy in the operating budget.

While operating budget development, literature asserts that revenues and expenses

columns should be incorporated into the budget (Malhan et al., 2024). Additionally, as evident in

various online budgets, the revenue generated should include sales that the institution makes,

payment provided by the patients, and the stakeholders' provisions, including articulate office

purchases, incurred medical expenses, utility bills, and miscellaneous expenses. Based on the

literature, healthcare facilities must draft their initial operating budget. Thus, this study's

operating budget for 2022 aligns with online sources. The operating budget is also crucial in

enhancing deductions and external contributions, such as depreciation costs (Malhan et al.,

2024). The net revenue is obtained by subtracting deductions from the gross revenue obtained at

that time. Thus, the organization can attract more clients to control its overall revenue and

increase its income.

Projected costs provided by OB are defined by various factors, including the cost

incurred per diem staffing, benefit payments, and overtime payments (Malhan et al., 2024). The

projected salaries cover 29FTEs that are required to provide their services 40 hours a week (U. S.

Bureau of Labor Statistics, 2023). Moreover, OB is designed to integrate annual benefits. It also

embraces various incurred costs like depreciation costs, interests, and salaries that emerge as

fixed costs that the medical institution will incur despite not being operational. The medical
 8

facility operates on its land; thus, renting expenses are not incorporated. The OB also

incorporated different variable costs that are prone to change based on the operations conducted

by the facility on the patients administered in the facility (Malhan et al., 2024). Variable

expenses entail supplies for medication, office and telephone and water bills, office supplies,

medical supplies, and telephone bills. The QI initiatives are integrated into the operating budget

and adapted to enhance patient treatment, specifically among senior adults. Total operating

expenses are obtained by summing the operating budget and variable costs (Karia et al., 2024).

The net profit is calculated by calculating the revenues obtained and subtracting the total costs.

Assumptions

It was anticipated that the projected remuneration was enough for 20FTEs staff salary

that entailed the nurse’s leaders and registered nurses (RN). Another assumption is that OB also

anticipated that all organizational employees would be RNs since they provided standard care

specifically for the adult population. The OB also assumed that the salary provided to the nurse

leaders and RNs is equal since they entail similar rates of payments across the state. It is

estimated that nurse leaders will be paid $9000 (Minnesota Nurses Association [MNA], 2024).

The estimated payment of overtime was $12500.

Conversely, the RN is paid $48 for one hour (US Bureau of Labor Statistics, 2022).

Moreover, it is anticipated that medical beds would enable the organization to profit per unit.

Furthermore, it was also anticipated that reduced COVID-19 would increase the facility's

income. The outlined assumptions emerged due to conflicting data crucial to establishing OB for

the organization.
 9

Strategic Plan

It is essential for the facility to plan for different activities since it enhances the

establishment of sustainable performance. Incorporating strategic planning is crucial since it

assists in lowering challenges associated with healthcare changes such as modern technology

(Karia et al., 2024). The healthcare organization needs to consider various resources during the

provision of care among senior patients, which can be achieved through embracing strategic

planning (Karia et al., 2024). The approach also provides potential solutions and crucial

opportunities for medical institutions to implement for quality outcomes. The strategic plan helps

medical institutions determine setbacks and uncertainties and implement interventions that will

help overcome such concerns.

Objectives and Strategic Goals

Medical institutions should establish clear, attainable, and transparent measurable goals

when formulating their strategic goals (Evianti et al., 2024). The developed objectives should

also provide potential solutions to the aspects that undermine the organization's success. For the

case presented, the concerns within the hospital include increased healthcare expenses for

treating senior patients, poor ratio distribution among the staff, work burden, and job

dissatisfaction. Research indicates that adult patients are vulnerable to chronic conditions due to

weak immune systems. Such patients can have extended hospital stays. Therefore, such practice

increases expenditures on equipment and thus emerges as one of the areas of concern within the

organization (Evianti et al., 2024). Nurses within the facility also raise concerns about the work

burden due to increased patient numbers with such conditions. Therefore, the nurse-to-patient

ratio is another issue that should be solved by the administration. The strategic goals include;
 10

1. Hiring more nurses will reduce the organizational work burden raised by the staff

and increase retention among the nurses (Joseph, 2020).

 The recruitment practice should align with the needs of the units to

enhance the patient-to-nurse ratio.

2. Facilitate the provision of standard care, which will reduce prolonged hospital

stays and encourage increased healthcare expenses.

 Such is attained through the incorporation of care coordination.

 Implement health promotion programs, including patient education, to

enhance medication adherence.

Environmental Analysis: SWOT Analysis

Through SWOT analysis, the facility can identify weaknesses, opportunities, strengths,

and threats hindering its goals. The following are aspects of SWOT analysis.

Strengths and Weaknesses

The facility has a significant number of strengths. For examination, the facility has a

leader who can foster efficacy in organizational operations and accountability. The nurse leaders

within the facility incorporate transformation leadership that encourages the establishment and

enhancement of staff and enhances interactions during organizational activities to improve the

provision of standard care (Evianti et al., 2024). Such strengths are crucial in driving the facility

and allowing the staff to attain its objectives. The facility incorporates open communication, thus

enabling organizational staff to air their concerns that the administration resolves (Subramanian

& Khanna, 2024). Such causes the staff to feel appreciated and valued, thus improving their

satisfaction level with their roles. Adopting open communication enhances collaboration among

the organizational employees, which is crucial in meeting the organizational strategic goals
 11

(Subramanian & Khanna, 2024). The approach also fosters nurse leaders to effectively

communicate the healthcare concerns associated with the need for commitment and shifts and

the working culture among the healthcare providers. Certified healthcare providers, including

RNs, facilitate standard care (Wu et al., 2022). Conversely, the hospital has weaknesses such as

high turnover rates, unsatisfactory patient treatment, and limited budgeting. Such aspects

significantly undermine the facility from attaining the expected outcome. The facility must major

in its strengths to overcome its weaknesses. Such will facilitate the achievement of the presented

objectives.

Opportunities and Threats

The availability of opportunities increases the probability of achieving the objective.

Threats, on the other hand, undermine the ability to attain the desired results (Wu et al., 2022).

The facility can hire additional nurses to provide a pivotal balance of nurse-to-patient ratio to

facilitate establishing a flexible working schedule for the hospital staff (Wu et al., 2022). The

organization can incorporate multidisciplinary collaboration to improve the provision of standard

care, which is crucial in lowering readmissions. High rates of COVID-19 cases emerge as

organizational threats that may undermine the level of income, thus affecting the development of

the facility. The threats undermine the organizational capability to achieve the objectives

implemented.

Strategic Evaluation

It is essential to embrace the evaluation process since it facilitates determining the

specific goals that should be achieved by the healthcare providers and particular areas that need

to be adjusted to foster efficacy (Karia et al., 2024). The healthcare institution focuses on

reducing turnover rates, improving financial success, lowering readmission rates, and hiring
 12

additional staff. Such is achievable if the healthcare providers effectively coordinate with

management to prioritize areas that can be improved. After evaluation, the organization can

improve specific areas within the facility.

Budget Management

Consistency budget management is crucial; therefore, organizational leadership,

including nurse leaders, should acquire the healthcare equipment through a budgetary process to

facilitate the provision of standard care (Evianti et al., 2024). To overcome miscellaneous costs

and maintenance fees, nurse leaders must provide crucial training to the organizational staff on

using the equipment purchased effectively (Karia et al., 2024). Supervisors should incorporate

the budget to monitor how the healthcare providers use the purchased equipment. Such will

facilitate the mitigation of the mismanagement of facility resources. The supervisors can

formulate departmental records and control expenditures to foster the utilization of

organizational resources. The units should have a stock inventory dispatch to keep records of the

resources used effectively. The organization should also focus on developing a safe working

setting which encourages the implementation of flexibility to minimize overtime costs (Joseph,

2020). The facility must embrace car coordination to enhance standard care delivery, thus

reducing patient readmission rates.

Conclusion

Creating an operating budget fosters understanding of the organization and unity in the

reduction of nurse turnover and patient safety. The budget should include the allotted amount of

equipment, supplies, and other direct needs of the patients. Nurse leaders within the facility

should be spokespersons for the departmental needs of the unit administrator. Moreover, the

departmental needs should always align with the vision and mission statement of the
 13

organization. Finally, patient outcomes should always be the priority while developing the

operating budget.
 14

Reference

Evianti, D., Rachman, R., Imaningati, S., & Yusuf, M. (2024). The important role of

management accounting in optimizing cost control and improving profitability in the

service sector. Nomico, 1(4), 105-116.https://doi.org/10.62872/grwv6k50

Joseph, D. D. (2020). Hospital Budgets and Maximizing Staff Efficiency (Doctoral dissertation,

Capella University).

Karia, A. N., Jadhav, J. L., Thombare, P. S., Dalvi, A. G., & Praveen, P. (2024). Financial

management practices in public health: Enhancing sustainability and

accountability. South Eastern European Journal of Public Health,

135-145.https://doi.org/10.70135/seejph.vi.493

Malhan, A. S., Sadeghi-R, K., Pavur, R., & Pelton, L. (2024). Healthcare information

management and operational cost performance: Empirical evidence. The European

Journal of Health Economics, 25(6), 963-977. https://doi.org/10.1007/s10198-023-

01641-3

Martin, B., Kaminski-Ozturk, N., O’Hara, C., & Smiley, R. (2023). Examining the impact of the

COVID-19 pandemic on burnout and stress among US nurses. Journal of Nursing

Regulation, 14(1), 4–12.https://doi.org/10.1016/S2155-8256(23)00063-7

Minnesota Nurses Association, (2024). RN salaries and benefits. https://mnnurses.org/?

s=RN+salary+and+benefits&submit=Search

Subramanian, C. R., Yang, D. A., & Khanna, R. (2024). Enhancing health care communication

with large language models—the role, challenges, and future directions. JAMA Network

Open, 7(3), e240347-e240347. https://doi.org/10.1001/jamanetworkopen.2024.0347

U. S. Bureau of Labor Statistics. (2023). Occupational Employment and Wage

Statistics.https://www.bls.gov/oes/current/oes291141.htm

U.S. Bureau of Labor Statistics, (2022). Overview of BLS Statistics on Pay and

Benefits. https://www.bls.gov/bls/wages.htm

Wu, Y., Li, R. Y. M., Akbar, S., Fu, Q., Samad, S., & Comite, U. (2022). The effectiveness of

humble leadership to mitigate employee burnout in the healthcare sector: a structural

equation model approach. Sustainability, 14(21),

14189.https://doi.org/10.3390/su142114189