8/1/2020 Vila Health: Developing an Operating Budget Transcript
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Vila Health: Developing an Operating Budget
Introduction Locations Medical Unit Office SAMC Budget Conference Room Pediatrics Department Operating Budget Adjustments – Proposed Adjusted Budget Conclusion Credits
Introduction Vila Health: Developing an Operating Budget Budgeting may seem dry and boring, but it is crucial, since it is the process by which an organization determines what it is going to do and what specific actions it is going to take to pursue its goals. Half of this process is the operating budget, which allocates funds for day–to–day functioning.
You are in charge of the budget for St. Anthony Medical Center’s Med- Surg department. These are difficult times at the hospital; while the overall hospital budgeting process is ongoing, there have been some unexpected revenue shortfalls, and hard choices are in order.
SAMC Office Visits. Another day of work at St. Anthony Medical Center. First, you should stop by the Medical Unit Office and check in. Afterwards, you should head to the conference room.
8/1/2020 Vila Health: Developing an Operating Budget Transcript
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FY 2017 YTD (Jul – Dec)
FY 2017 Budget FY 2017 Variance YTD
OPERATING REVENUE
Inpatient Revenue $345,040,349 $700,000,000 $(4,959,651)
Outpatient Revenue $232,498,397 $525,000,000 $(30,001,603)
TOTAL PATIENT SERVICES REVENUE
$577,538,746 $1,225,000,000 $(34,961,254)
SAMC Medical Unit Office It looks like you have an email!
From: Owen Welch, CFO
Subject: Budget Forecast
Hi, this is Owen. I’m sending you this email to give you a heads–up. I know you’ve been working on the Med–Surg budget for the next fiscal year, and that you have have a pretty solid draft. Well, I just got out of a forecast meeting, and I hate to say it, but it looks like the rumors are true. I think we’re going to have to be ready to trim up to 6 percent from next year’s operating budget to address these revenue shortfalls. I’d like you to take a look at your draft so far, and then think about how you might handle this.
I know that Anna Jiang over in Pediatrics is in the same boat you’re in, but she saw the writing on the wall a little sooner and worked up a plan for cuts to their operating budget. She’ll be giving a brief presentation to senior leadership this afternoon about her plan – it might be worth your time to go sit in on that and see what she has in mind.
Thanks! I know this is a tough time. -Owen
SAMC Budget
Income Statement
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DEDUCTIONS FROM REVENUE
Contractual Adjustments
$476,543,215 $950,000,000 $1.543,215
Charity and Uncompensated Care
$6,725,412 $14,000,000 $(274,588)
TOTAL DEDUCTIONS FROM REVENUE
$483,268,627 $964,000,000 $1,268,627
NET PATIENT SERVICES REVENUE
$94,270,119 $261,000,000 $(36,229,881)
OTHER OPERATING REVENUE
Other Operating Revenue
$3,500,000 $10,000,000 $(1,500,000)
TOTAL OPERATING REVENUE
$97,770,119 $271,000,000 $(37,729,881)
OPERATING EXPENSES
Salaries and Wages $42,932,230 $88,000,000 $(1,067,770)
EMPLOYEE BENEFITS $12,624,012 $25,000,000 $124,012
PROFESSIONAL FEES $4,082,215 $9,000,000 $(417,785)
SUPPLIES $23,883,407 $46,000,000 $883,407
PURCHASED SERVICES – UTILITIES
$1,632,191 $3,000,000 $132,191
PURCHASED SERVICES – OTHER
$11,536,320 $22,000,000 $536,320
DEPRECIATION $8,455,254 $17,000,000 $(44,746)
RENTALS AND LEASES
$2,252,670 $4,000,000 $252,670
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INSURANCE $2,715,378 $5,000,000 $215,378
LICENSE AND TAXES $7,992,144 $18,000,000 $(1,007,856)
INTEREST $8,393,790 $18,000,000 $(606,210)
PROVISION FOR BAD DEBTS
– – –
OTHER DIRECT EXPENSES
$4,744,642 $8,000,000 $744,642
TOTAL OPERATING EXPENSES
$131,244,253 $263,000,000 $(255,747)
NET OPERATING REVENUE
$(33,474,134) $8,000,000 $(37,474,134)
NET REVENUE BEFORE ITEMS LISTED BELOW
$(33,474,134) $8,000,000 $(37,474,134)
EXTRAORDINARY ITEM
– – –
NET REVENUE OR (EXPENSE)
$(33,474,134) $8,000,000 $(37,474,134)
FY 2017 YTD (Jul – Dec)
FY 2017 Budget FY 2017 Variance YTD
OPERATING REVENUE
Inpatient Revenue $21,123,516 $50,000,000 $(3,876,484)
TOTAL PATIENT SERVICES REVENUE
$21,123,516 $50,000,000 $(3,876,484)
OPERATING EXPENSES
Salaries and Wages $12,157,632 $23,000,000 $657,632
Med/Surg Department Budget
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Employee Benefits $3,040,408 $5,750,000 $165,408
Professional Fees $250,160 $400,000 $50,160
Supplies $5,883,497 $10,000,000 $883,497
Purchased Services – Utilities
$27,456 $50,000 $2,456
Purchased Services – Other
$23,484 $50,000 $(1,516)
Insurance $57,315 $105,000 $4,815
License and Taxes $21,456 $40,000 $1,456
Other Direct Expenses
$972,157 $1,500,000 $222,157
TOTAL OPERATING EXPENSES
$22,433,565 $40,895,000 $(1,986,065)
NET REVENUE OR (EXPENSE)
$(1,310,049) $9,105,000 $(5,862,549)
After hearing Owen’s message and looking at the draft budget, what are your initial thoughts?
SAMC Conference Room
Budget Meeting in Progress Your counterpart in Pediatrics, Anna Jiang, is briefing management on how her department will address the budget shortfall.
Presentation by Anna Jiang
Hi everybody, thanks for coming.
8/1/2020 Vila Health: Developing an Operating Budget Transcript
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I want to jump right into this, don’t want to take up too much time. This… has not been an easy process. When I got the word that I needed to trim 6 percent from next year’s Pediatrics budget, I gulped. Six percent is a big bite, and it’s even harder when we’re dealing with it on such short notice. It’s like trying to fix a car as it’s rolling down the highway.
Anyway. My first reaction – like everybody’s, I think – was to try to distribute the cuts equally throughout all of my line items. But of course, that’s not possible. Some of them are fixed in ways that I just can’t budge. It’s not like I can just unilaterally say we’re going to pay less for licenses and taxes, for instance.
So I’ve tried to look at places where cuts are even possible, regardless of how hard they are. My first hope was that I could make up some room in the Supplies line item. But I can’t. Not enough. We can live with maybe a 3 percent trim there, but even that is pushing dangerously close to not having the right materials to do our jobs safely. Again, it’s not like we can just unilaterally decide not to wear rubber gloves one day a week.
You know where this is going. It breaks my heart to do this, but in the end, staffing is the one place where, if I push hard enough, I can create some wiggle room. We’re pretty sure that we have a couple of retirements happening in the department in the next six months. If we don’t replace them, and if we have at least one other departure – which would be expected, given normal turnover rates – I believe we can absorb the shortfall by cutting staff through attrition. We just won’t backfill the positions.
This isn’t an approach that I love – I’m well aware that this is going to increase the burden on our remaining staff, and is going to lead to inefficiency in the short term and burnout and higher turnover in the longer term. To be frank, this is an action that’s going to cost us money in a couple of years, when we’ll have to clean up the mess that this will create. But it gets us through the immediate crisis, and that’s what we need to do if we’re going to survive to deal with those other crises down the road.
Thank you.
Pediatrics Department Operating Budget Adjustments – Proposed
8/1/2020 Vila Health: Developing an Operating Budget Transcript
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Decrease to Salaries/Wages and Employee Benefits line items through attrition to achieve requested 6% reduction. Salaries and Wages
FY 2017 Budget: $21,000,000 FY 2017 Adjusted Line Items: $19,250,000
Employee Benefits
FY 2017 Budget: $5,150,000 FY 2017 Adjusted Line Items: $4,935,000
Professional Fees
FY 2017 Budget: $400,000 FY 2017 Adjusted Line Items: $400,000
Supplies
FY 2017 Budget: $9,000,000 FY 2017 Adjusted Line Items: $8,730,000
Purchased Services – Utilities
FY 2017 Budget: $50,000 FY 2017 Adjusted Line Items: $50,000
Purchased Services – Other
FY 2017 Budget: $50,000 FY 2017 Adjusted Line Items: $50,000
Insurance
FY 2017 Budget: $105,000 FY 2017 Adjusted Line Items: $105,000
License and Taxes
FY 2017 Budget: $40,000 FY 2017 Adjusted Line Items: $40,000
Other Direct Expenses
FY 2017 Budget: $1,500,000 FY 2017 Adjusted Line Items: $1,500,000
Total Operating Expenses
FY 2017 Budget: $37,295,000
8/1/2020 Vila Health: Developing an Operating Budget Transcript
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FY 2017 YTD (Jul – Dec)
FY 2017 Budget
FY 2017 Variance
YTD
FY 2017 Adjusted Line Items
OPERATING REVENUE
Inpatient Revenue
$19,203,517 $50,000,000 $(5,796,483)
TOTAL PATIENT SERVICES REVENUE
$19,203,517 $50,000,000 $(5,796,483)
OPERATING EXPENSES
Salaries and Wages
$10,204,669 $21,000,000 $(295,331) $19,250,000
Employee Benefits
$2,136,201 $5,150,000 $(438,799) $4,935,000
Professional Fees $248,175 $400,000 $48,175 $400,000
Supplies $4,662,491 $9,000,000 $162,491 $8,730,000
Purchased Services – Utilities
$26,221 $50,000 $1,221 $50,000
Purchased Services – Other
$24,303 $50,000 $(697) $50,000
Insurance $52,178 $105,000 $(322) $105,000
License and Taxes
$22,903 $40,000 $2,903 $40,000
Other Direct Expenses
$926,388 $1,500,000 $176,388 $1,500,000
FY 2017 Adjusted Line Items: $35,060,000
Adjusted Budget
Pediatric Department Budget
8/1/2020 Vila Health: Developing an Operating Budget Transcript
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TOTAL OPERATING EXPENSES
$18,303,529 $37,295,000 $(343,971) $35,060,000
NET REVENUE OR (EXPENSE)
$899,988 $(5,452,512) $3,347,034
Conclusion You have completed the Developing an Operating Budget activity. In this activity, you learned about some budget realities at St. Anthony Medical Center, and some trends to keep in mind as you develop your budget for the Medical-Surgical Unit.
Credits Subject Matter Expert: Georgann Weissman Interactive Design: Lori Olson Instructional Design: Stephen Sorenson Media Instructional Design: Keith Pille, Felicity Pearson Project Management: Nakeela Hall
Licensed under a Creative Commons Attribution 3.0 License (https://allaplusessays.com/order)
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