CALIFORNIA STATE UNIVERSITY, NORTHRIDGE
THE EVALUATION OF A BUDGET PROCESS A CASE STUDY
A graduate project submitted in partial satisfaction of
the requirements for the degree of Master of Science in
Health Science, Health Administration
by
Madeline Fry
May, 1984
The Graduate Project of Madeline Fry is approved:
California State University, Northridge
ii
ACKNOWLEDGEMENTS
Thanks go to Alan Herkimer,
Janet Reagan for
Daniel P.
their direction,
McLean and
cooperation and
motivation in completion of this project.
Thanks
also
go
to
the department
managers
of
Valley Hospital Medical Center for their responses to the
questionnaire,
to the Administration Department of
Valley Hospital and to the Budget Team at the corporate
office.
I also must thank my family, Harold, Adele and Matt
for their patience and assistance.
Special thanks to Mom
for editing and re-editing my project.
iii
TABLE OF CONTENTS
Page
ii
APPROVAL PAGE • •
ACKNOWLEDGEMENTS
iii
LIST OF ILLUSTRATIONS
vi
LIST OF FIGURES • • •
vii
CHAPTER 1 - INTRODUCTION
I.
II.
III.
IV.
CHAPTER 2
I.
II.
CHAPTER 3
I.
II.
III.
IV.
CHAPTER 4
....
Introduction
Setting of the Study
.....
...
8
....
9
..
10
.......
13
.......
22
Significance of the Problem
BACKGROUND
Background
...
.
Literature Review
-
METHODOLOGY
Statement of Problem
Sourses of Date & Their
Measurement
.........
. ....
....
Limitations .
.........
Analysis
-
2
...
Statement of the Problem
-
1
25
27
28
RESULTS
I.
Results for Objective 1
II.
Results for Objective 2
iv
......
......
29
58
CHAPTER 5 - CONCLUSION, RECOMMENDATIONS AND SUMMARY
I.
II.
III.
Conclusions •
72
Recommendations • •
73
Summary
76
77
BIBLIOGRAPHY
APPENDICES
I.
II.
III.
IV.
v.
VI.
VII.
POSITION CONTROL
.........
83
DEPARTMENTAL MATERIALS AND
SERVICES REPORT
84
DEPARTMENTAL REVENUE REPORT
85
.......
..
CAPITAL EQUIPMENT FORM
.
DEFINITIONS . . . . . . . . .
QUESTIONNAIRE
......
CAPITAL PROJECT FORM
v
...
...
...
.
86
87
88
95
ILLUSTRATIONS
Illustration
Page
•
4
1.
HealthWest Subsidiaries
2.
Valley Hospital Medical Center
Organizational Chart 11/82
5
HealthWest Foundation
Organizational Chart 3/83
6
3.
vi·
FIGURES
Figure
1.
2.
3.
4.
5.
6.
7.
Page
Valley Hospital Medical Center Inpatient Days for Fiscal
Years 1979-1983 • • • • • • • • • •
11
Valley Hospital Medical Center Average Daily
Census 1981-1983 • • • • • • • • •
37
Valley Hospital Medical Center Salary Expense Per
Patient Day 1981-1983 • • • • • • •
40
Valley Hospital Medical Center Supplies Expense Per
Patient Day 1981-1983 • • • • • • •
44
Valley Hospital Medical Center Total Expenses Per
Patient Day 1981-1983 • • •
46
Valley Hospital Medical Center Revenue/Cost Per Patient
Day 1981-1983 • • • • • • • • • • •
52
Valley Hospital Medical Center Revenue Per Patient
Day 1981-1983 • • • • • • • • • • •
53
vii
ABSTRACT
THE EVALUATION OF A BUDGET PROCESS
CASE STUDY
BY
MADELINE FRY
MASTERS OF SCIENCE IN HEALTH
SERVICES ADMINISTRATION
Valley Hospital Medical Center is a 213 bed licensed
general acute care facility with 154 general acute beds,
and 59 psychiatric beds.
HealthWest Foundation serves as the corporate parent
to Valley Hospital Medical Center.
is
a
corporation offering
HealthWest Foundation
comprehensive
health care
services.
This case study focused on the evaluation of the
budgeting process used by Valley Hospital Medical Center.
Interviews
were
conducted,
developed in order to
and
a
questionnaire
was
assess the present budget system.
Prior to this evaluation, Valley Hospital Medical Center's
budget process had not yet been analyzed.
Therefore, no
means were available for assessing the weaknesses and
strengths of its present system or, for making prudent
changes.
viii
CHAPTER I
I.
INTRODUCTION
Like managers in many other businesses,
managers in
hospitals spend approximately four to six months of every
year preparing budgets which go into effect at the
beginning of each fiscal year.
If the hospitals are to
provide high standards of medical care at the lowest
possible cost,
a basic plan which is essential,
one
through which all expenditures and revenues from all
sources may be forecasted and controlled.
This project established and examined the information
essential for evaluating the budgeting system used by
Valley Hospital
Medical Center
HealthWest subsidiary.
(VHMC),
which is a
A set of criteria for evaluating
the budgeting system was established.
The questionnaire
was then submitted to managers for completion.
Based upon
the findings, recommendations were made for changes in the
budgeting system.
1
2
II. SETTING OF THE STUDY
Valley Hospital Medical Center is a 213 bed licensed
general acute care facility with outpatient services.
Acute care resources include 154 general acute care beds
and 59 acute psychiatric
~eds.
In 1980,
the hospital
celebrated 50 years of service to the community.
Valley Hospital Medical Center changed ownership on
April 3, 1979, when it was acquired by Valley Hospital
Medical Center Foundation.
At that time, Valley Hospital
became a non-profit organization, a sister facility to
Northridge Hospital Foundation and an affiliate of the
newly established HealthWest Foundation
Foundation,
[HWF],
1980).
(HealthWest
Non profit control
and
affiliation with HealthWest has led to aggressive
management, active planning, improved reputation, and
willingness to reinvest excess operating funds in the
facility for the benefit of the local community.
1980)
(HWF,
Management emphasizes quality of service,
continued
education,
outreach activities.
community health promotion and
Employee morale has improved, the
medical staff has increased,
and utilization of VHMC has
increased dramatically since the change in ownership.
The
3
average daily census (ADC) in 1979 was 50, in 1980 was 109
and in 1983 was 120.
HealthWest Foundation serves
as
the corporate parent
of a network of hospitals, bringing together comprehensive
health care in a coordinated and economical fashion.
Illustration 1)
HealthWest is
(See
governed by a 21 member
voluntary board made up of directors elected from the
membership of the Foundation which is composed of more
than 120 community leaders.
(HWF, 1980)
Each hospital
and every HealthWest subsidiary has its own Board of
Directors that is guided generally by the policy of the
Foundation.
Valley Hospital maintains a surgical floor, a medical
floor,
a rehabilitation unit including a pain management
program,
intensive
care
progressive care unit,
unit/critical
care
wound care unit,
unit,
adult and
adolescent psychiatric ward and emergency room.
Valley Hospital provides the customary ancillary
services such as nursing, laboratory, pharmacy, radiology,
physical therapy,
occupational therapy,
and respiratory.
Some special programs offered by Valley Hospital include a
crisis intervention service, geriatric program, digital
angiography
program
and outpatient surgery.
(See
Illustrations 2 & 3)
Budgeting for Valley Hospital begins at HealthWest.
It then is discussed with the Administrative Team of
4
Illustration 1.
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Valley Hospital.
Next, each department manager at Valley
Hospital is required to meet with the Budget Coordinator
and/or their Administrative Manager in order to suggest
revisions which,
in turn,
must be approved by the
Administrator.
The final
budget packet which is distributed to
managers consists of four sections;
staffing per department,
natural
classification,
projections,
position control
(See Appendix I) expenses by
(See
(See Appendix III)
Appendix IV) and equipment needs.
Appendix II)
revenue
and capital projects (See
(See Appendix V)
The Budget Coordinator at Valley Hospital is the
manager for the overall budget process.
This person is
responsible for implementation of the budget from the time
that is
is
first discussed at HealthWest and Valley
Hospital until its final draft.
·a
III.
Statement of the Problem
The budgeting process at Valley Hospital
evaluated.
Until this was accomplished,
had not yet been
Valley Hospital
had no means for assessing the weaknesses and strengths of
the present system, nor for making prudent changes.
9
IV.
Significance of Problem
In the past, the budgeting process in hospitals has
received
However,
less
attention
than
in other businesses.
this picture is changing.
The budget of a
hospital has become an essential tool for cost control.
Budgeting was mandated in 1972, when Public Law 92-603,
(The Medicare Admendments) required hospitals to prepare a
one year operating budget and a three year capital budget
as part of the process for applying for Federal Medicare
funds.
For this reason and for the reasons listed below,
Valley Hospital had to establish a clear-cut budgeting
procedure:
1.
To assist Valley Hospital's administration in
anticipating cash needs,
equipment and project
needs.
2.
To use as one way of evaluating the ability of
department managers to control costs.
3.
To set targets for revenues and expenses which
are correlated to volume of service provided, so
as to allow evaluation of ongoing departmental
productivity.
4.
To evaluate services provided in order to
determine contributions to the whole and/or
continuation or elimination of a service.
CHAPTER 2 - BACKGROUND
In the past, the process of effective budgeting has
been hampered because of the widespread practice of promoting technical personnel to managerial positions.
At
times, this has resulted in a competent technician trying
to function in a position in which he/she has not been
trained and may not be competent.
The development of this
phenomenon has been referred to as the "Peter Principle"
which states that at the time of assuming a managerial
position,
the technically trained individual has been
promoted to his level of incompetence.
(Peter, 1969)
A
recent positive development in the health care field has
been the education and training of its own experts in
health care finance and management.
As the health care
field has grown, and reimbursement laws have changed, the
need for budgeting has become more urgent.
Hospital
census.
At Valley
there have been yearly increases in patient
This has had an impact on the budgetary system
because as the hospital grows and reimbursement laws
change,
become
careful monitoring of income and expenses has
increasingly
important.
(See Figure 1)
Such
growth necessitates establishment of clear cut budget
procedures
by
highly
trained
financial
experts.
Hospital corporations which have been growing rapidly over
the years, are gradually moving from the use of a fixed
budgeting system to a flexible system,
10
i.e.,
a system
VALLEY HOSPITAL MEDICAL CENTER
INPATIENT DAYS
FOR
FISCAL YEARS 79-83
~~----------------------------------------------------------,
LEGEND
4!1000
~ .I. .ATIENT
DAYS
..0000
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SOURCEaMONTHLY STATISTICAL IEPOIT
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12
which has the ability to set targets for revenues and
expenses which are
related
to the volume of
provided during a specific time period.
service
(AMI, 1980)
It is not only that a sound budgeting system must be
established,
but the department managers responsible for
implementing it must do so in good faith.
The solution to the control of health care costs must
come from effective and enlightened management within the
institution.
(Herkimer,
1978}
External agencies control
the amount of reimbursement the health care facility
receives for services, but they cannot control the costs
to the institution which generate those services.
Boards
of trustees and administrations, cannot control day-to-day
health care costs.
They can only establish policies that
encourage cost effectiveness and create an environment of
cost awareness.
Cost control on an operational level must
be implemented and maintained by the health care institution's own management team.
\l
'
13
II.
Although
conducted,
an
LITERATURE REVIEW
extensive
literature
search
was
in both health care services and other
industries, little was found in relation to evaluation of
the budget process.
What literature existed, explored the
evaluation of the budget retrospectively, i.e., com parisons of budgeted data to actual data.
Therefore,
the
articles reviewed dealt with these different areas of
budgeting, rather than evaluation of the budget process.
They are discussed below.
The first group of articles discussed the differences
between flexible and fixed budgets.
Traditionally, hospi-
tals have performed planning and reporting functions on a
static basis,
dynamic.
while the operations have been quite
(American Medica 1 In tern a tiona 1 [AM I] ,
19 8 0)
Therefore, hospitals' budgets have been inadequate for
controlling or measuring performance on an ongoing operations basis
(i.e.,
productivity of actual
operation).
During these times of severe cash restraints and fluctuating utilization of hospital services, the fixed volume
budget process offers little control for the department
manager other than its use in the establishment of
standards or rates for future variable budget.
(AMI,
1980)
Although these disadvantages of fixed budgets are
significant,
there are still some advantages worth
14
mentioning.
It is the familiar and traditional approach,
uncomplicated and easily understood by department
managers, and less time consuming and costly to prepare
than a flexible budget.
(AMI, 1980)
The flexible budget is based on the concept that "not
all costs are fixed for all ranges of activities".
(Herkimer,
19 8 0)
As a department's workload changes,
certain costs respond to the change,
increasing or
decreasing as the workload increases or decreases.
The
flexible budget can offer the department manager the
opportunity to adjust revenues and expenses to any
variance in the targeted volume.
Flexible
budgeting
allows
identifying three kinds of costs.
for
cost
analysis,
First, fixed costs are
those that remain essentially constant in the short-run,
\
irrespective of the changes in output volume.
(1980)
identifies fixed costs,
Joseph Nagy
and refers to them as
"Committed Costs" which are essential to any business.
Examples are depreciation,
and taxes.
lease of plant and equipment,
These costs do not vary with patient volume
and will be incurred for the life span of the hospital.
Second, variable. costs are defined as costs directly
associated with the activity levels, and therefore change
in direct proportion to the change in activity or vo 1 ume
of work output.
Joseph Nagy (1980) refers to these costs
as "Pure Variable Costs" which vary proportionately to
some unit of output.
Variable costs for hospitals change
15
with occupancy rates.
Some examples of variable expenses
are medical materials, food,
Third,
supplies, and nursing costs.
"Semi-Variable Costs"
are
referred
to by
Joseph Nagy (1980) and A. Weihimer (1978) as those most
difficult to classify,
yet they make up the greatest
portion of a hospital's costs.
These costs are a combina-
tion of fixed and variable costs.
The semi-variable costs
will change suddenly at certain intervals. (Nagy, 1980)
These costs will vary with activity but not necessarily in
proportion with the change of activity.
(Nagy,
1980)
Many labor costs fall into this category along with benefits and utilities.
Semi-variable
costs
are
the
most
difficult
hospital managers to control for several reasons.
hospital occupancy rates are seasonal in nature.
for
One,
Higher
occupancy rates are usually experienced in the winter
months as opposed to the summer months.
(Nagy,
19 8 2)
However, it is a difficult task for managers to determine
exactly at what times occupancy rates will be high or low.
Because of this, managers can have a difficult time maintaining appropriate staffing patterns for the appropriate
occupancy levels.
Second, the basic cost control difference between
step variable costs and fixed costs is that step variable
costs can be reduced, but fixed costs cannot. (Nagy, 1982)
However, it is difficult to plan for these reductions or
increases.
Some techniques used to control step variable
16
costs are, using registry pools for staffing during times
of high occupancy as opposed to hiring, scheduling vacations
during
times
of
low
occupancy
rates,
and
establishing an "on-call" program paying less than full
duty salary.
In summary,
there are several advantages to the
flexible budgeting process.
The expected costs can be
adjusted to reflect actual activity levels, and it is
therefore easier to obtain meaningful variance analysis.
The flexible budget process can serve to more adequately
contain costs, and it can "assist management in foreseeing
hospital's problems before the fact" (Nagy,
1982) through
the use of the budget model applications.
The disadvantages of the flexible budget are that it
is more time consuming to generate than the fixed
approach.
It is more costly for the hospital or corpora-
tion performing the budget process.
It may
require
additional training of the budgeting staff, and it places
greater demand on hospital personnel and requires more
financial sophistication on the part of department
managers.
There is no uniform method of establishing a budgeting system for any
sp~cific
hospital.
A design should be
developed which can be adopted to fit the needs of the
individual hospital and its environment.
budget
concept
will
provide
Certainly,
management with
a
the
more
17
realistic report for operational control of costs and
departmental analysis.
James Fremgen (1978), described budgeting in government agencies and stated that government reporting and
budgeting could be improved by following the lead of the
private
sector
techniques.
in
the
use
of
flexible
budgeting
The exclusive use of fixed budget in govern-
ment can be attributed to a basic difference in the
definition of a budget.
The government agencies use
budgets as a "legally imposed maximum level of spending
for the fiscal period, while private industries view them
as tools for comparison of costs to levels of output
activities."
(Fremgen, 1987)
No corporate management
would arbitrarily impose a limit on total operating costs
without regard to the demand for the firm's products or
service.
(1978)
Yet, this is what the legislative bodies
do when they appropriate fixed amounts of money for spending by government agencies during a period.
Fremgen draws several implications regarding the use
of fixed budgets for government management.
First, is
that
as
managers
may
regard
their
budgets
restrictions on their spending authority,
legal
not as manage-
ment tools for planning and control of costs.
Costs are
considered under control if actual costs are below the
legal
maximum
allowed which overlooks the notion of
efficiency, "a normative relationship between the costs
18
and the output or accomplishments of an organization."
(1978)
His second implication is that while costs may be
fixed over a period, government operations are not fixed.
(1978)
Demands
for
government
significantly and once
actual
services
variable
change
costs
exceed
budget, this means there has been an increase in demand
and the result is a budget squeeze.
Third, the consequences of "fixed budgets in government is that
increases
in demand
are
regarded by
management as problems, not as opportunities."
added
pressure
in
government
agencies
(1978)
is
An
that
administrators are weary of reducing total costs because
this will result in budget cuts for the following year.
Finally,
Fremgan describes
budgets in government.
the role of flexible
He states that in reality, there
should be no inherent barriers to the use of flexible
budgets in government if everyone involved in the budgeting process would be willing to make the necessary initial
effort.
In summary,
flexible budgets could aid management's
planning and cost containment within the constraint of the
fixed spending ceilings.
An additional option would be to
use flexible and fixed budgets together in government.
Government, like health care, must modernize its budgeting
procedures.
19
William 0. Cleverley's article,
hospital
budgeting systems.
(1975) described two
The conventional
budget
approach and the input-output budget (I-0) are compared as
a means of determining how each effect four management
decisions; pricing, output, planning and cost control.
(1975)
The study site was a
210
bed,
not-for-profit
hospital which closely paralleled Valley Hospital in size
and status.
Cleverley used two budget systems:
conventional American Hospital Association system,
budget system patterned after an I-0 model.
the
and a
Both systems
contained defined mathematical relationships which were
used to determine total and departmental costs for
specified
services.
The
difference
between the
two
systems was the nature of specification and the formality
of the mathematical system.
Cleverley
concluded
that
it was
difficult
to
determine the superiority of either of the two systems on
management decision making.
The I-0 budget would have
produced substantial changes in posted hospital rates for
individual revenue producing cost centers, but probably
would have no impact on hospital output determination.
The potential impact on hospital "output" was harder to
assess due to
1)
the absence of validated theory of
hospital objectives, and 2) the inconclusiveness of the
hospital administrator's control in this decision area.
(1975) However, other than these two factors, these two
budgets did not generate meaningful differences with
20
regard to planning.
The I-0 approach promises to be a
more accurate system for cost control and planning because
it generates objective signals for investigating variances
of expenses from budgeted levels.
The impact of "cost
control" decisions was determined by the size of the
budget variances.
The two systems compared variances for
thirteen reporting periods, and the I-0 model offered
significant potential for changing the management cost
control
decisions,
e.g.,
management investigating budget
variances in the hospital departments.
An
article
by
Mark
Covaleski
and
Mark
Dirsmi th
(1981) discussed budgeting in the nursing service area.
According to them,
"The bonds between budgeting and politicing are
intimate. Realistic budgets are an expression
of practical politics.
The allocation of
resources necessarily reflects the distribution
of power.
Budgeting is so basic it must reveal
the norm by which men live in a particular
political culture for it is through the choices
inherent in limited resources that consensus is
established and conflict is generated."
(Covaleski and Dirsmith, 1981 p.78)
They go on to say that the nursing administrative team is
involved in budgeting,
because such participation
is
important to its staff who depends upon its ability to
acquire and control hospital resources needed for the
delivery of health care services to the patient.
Nursing
executives must be intimately involved in the hospital's
internal political atmosphere with respect to budgets,
21
since nursing expenses can account for as much as 70% of
the hospital's operating expenditures.
Similarly, Timothy Porter-O'Grady
(1979) states that
because nursing power is the administrator's greatest
financial concern, nursing administration must spend time
with budget preparation.
Manpower needs include staffing
for patient care, administrative responsibilities, and the
setting of goals and objectives.
Porter-O'Grady concluded
that it is essential for nursing administration to develop
skills in exercising judgement in budget preparation.
(1979)
Careful planning and fiscal control of present and
future budgets are the basis for sound fiscal management.
It is through the choices inherent in the allocation of
limited hospital resources that hospital bureaucratic
consensus is established and conflict is generated and
resolved among its members and subunits.
(1979)
CHAPTER 3 - METHODOLOGY
I. Statement of the Problem
Managers
of
modern he a 1 th care institutions are
trying to provide high quality health care at the lowest
possible cost.
1982)
(American Hospital Association
[AHA],
In an effort to accomplish this, government, the
single largest purchaser of health care,
has established
an extensive system of health care regulations that must
be considered in the development of all business plans for
health care institutions.
(AHA, 1982)
Within the past
ten years, as the business of health care has grown, and
as
the
involvement of both private and government
regulators has increased,
i t has become necessary for
hospitals to develop and monitor solid business practices.
The evolution of the planning - budgeting process promotes
a
systematic
method
of
management
accountability at all levels.
reporting
and
It also produces a unified
and more clearly understood frame of reference for future
planning and budgeting.
Ultimately, the process should
strengthen management's ability to anticipate and respond
in an increasingly complex and regulatory environment.
(AHA, 198 2)
Many health care institutions are recognizing the
value of an effective budgeting system and more and more
health care institutions are installing computer systems
to aid in this process.
Companies are hiring consultants
22
23
to train individuals
in computer applications and
budgeting and are employing well trained financial experts
in all aspects of health care finance, e.g., reimbursement
specialists,
insurance
specialists,
budget
specialists,
specialists,
contracting
and
management
information specialists, etc.
The importance of an efficient budgeting department,
budgeting team,
overlooked.
This
and budget system can no longer be
Budgets are tools for survival.
case
study
describes
and
evaluates
HealthWest's/Valley Hospital's present budgeting process.
The first section describes a
systematic process for
establishing a budget and shows how HealthWest's budgeting
system fits
into this format.
discusses the attitudes of
The
v~rious
about the budgeting system.
second section
levels of management
The third section considers
and analyzes the results of a questionnaire completed by
department managers of Valley Hospital.
Recommendations
are made based upon the above.
Objectives
The
goal
of
this
project
is
to establish an
evaluative tool for HealthWest's and Valley Hospital's
budgeting system.
The objectives which led to the
completion of this project's goal were as follows:
1. To
describe the present HealthWest/Valley Hospital Medical
Center budgeting system and its process.
2. To identify
24
strengths and weaknesses of the present budgeting system.
3. To recommend changes in the budgeting system.·
Definitions
A budget
is
defined by the American Hospital
Association (AHA, 1982) as "a document which identifies
the expected resources and expenditures for a given future
period and reflects the nature and source of these
resources and expenditures."
For other definitions of
terms used throughout this paper, the reader is referred
to Appendix VI.
. 25
II SOURCES OF DATA AND THEIR MEASUREMENT
This study examined the budgeting system of Valley
Hospital ..
A questionnaire was developed in order to
evaluate the system.
It was distributed to thirty
department managers and all responses were collected
within a two month period.
coded,
entered,
The responses were collected,
and then analyzed using an Apple
computer and the software packet,
"SpeedStat".
II
Specific
statistical characteristics were chosen by the writer to
display the results, such as frequency percent, mean, and
the standard deviation.
Questionnaire Design
The questionnaire was developed for the purpose of
assessing the attitudes and knowledge of managers who were
responsible for the budgetary process.
reviews were conducted.
One was
a
Two literature
search of budget
process in health care only, and the second was a review
of budgeting process for businesses in general.
questionnaire consisted of seven sections:
1.
Planning Goals and Objectives
2.
Units of Service Projection
3.
Staffing and Payroll Expenses
-Payroll and Related Expenses
4.
Capital Expenditure Budget
5.
Revenue Budget
The
26
6.
Non-Salary Expenses
7.
Performance Reporting
The questionnare was designed so that the respondents
remained anonymous in order to increase the objectivity of
the answers.
An explanation of each section of the questionnaire
was provided.
approximately
Each of the
ten
questions.
seven sections
contained
(See Appendix VI I)
The
choices for replies were as follows:
1.
Always
4.
Don't Know
2.
Sometimes
5.
N/A Not Applicable
3.
Never
In addition to the survey of managers, interviews and
discussions were conducted with sixteen people at
HealthWest and Valley Hospital who were involved in the
budgeting process.
At the corporate level they included
the Budget Director and Budget Analysts.
level,
At the hospital
interviews were conducted with ten department
managers,
the
Administrator,
Administrator.
Director of Nursing,
the
Assistant
the Chief Financial Officer and the
27
III ANALYSIS
Descriptive
distributions,
statistics
percentages,
such
as
frequency
standard deviations,
and
averages, were used as the media for describing the survey
data.
The questionnaire was developed by first reading
about budget and financial systems, and then by using this
material to explore the most significant aspects relating
to evaluation of the process.
The
questionnaire
had
seven
sections
with
approximately ten questions each to be answered by
multiple choice.
There were four open ended questions
scattered throughout the questionnaire, which were not
answered by anyone.
28
IV LIMITATIONS
TO THE STUDY
This case study provided a descriptive profile of the
budgeting system of Valley Hospital Medical Center.
The
problems, conclusions, and recommendations are valid for
this one facility.
However, this questionnaire would have
to be distributed and completed at other facilities in
order for the data to have general applications in other
health care institutions.
Other HealthWest facilities
and/or facilities outside of the corporation could use
these tools and information as the means for examining and
improving their budgeting systems.
CHAPTER 4 - RESULTS
The first objective is divided into four sections.
First to be discussed is the structure necessary for
decision making.
Secondr prerequisites to the budgeting
process are described.
enumerated.
Third, the budgetary tools are
Last, the budget process is described.
The first ingredient is for a hospital to have a
specific
structure
for
decision
making.
Heal thWest
Foundation, is governed by a 21 member voluntary board
made up of directors elected from the membership of the
Foundation, which is composed of more than 120 community
leaders.
(Valley Hospital Medical Center, 1982)
This
Governing Board has the responsibilities for the general
planning.
Its duties include review of the short-term and
long-term
goals,
objectives
for
the
hospitals,
determination of budgeting objectives and approval of the
completed master budget.
Valley Hospital, under the umbrella of HealthWest, is
directed by a seven
member board which is the Executive
Committee of HealthWest Foundation.
The Administrator (or
Chief Executive Officer) and the Vice-President of Finance
at the hospital level are jointly responsibile for the
overall formulation and execution of the budgeting
process.
They connect the goals, policies and guidelines
of the Governing Board to
hospital level.
budget preparation at the
Also included in all major budgetary
29
30
decisions are the other members of the administrative
team.
This includes the Vice-President of Professional
Services, i.e., the Assistant Administrator, and the VicePresident of Patient Relations,
i.e.,
the Director of
Nursing.
At the corporate level, the Budget Director assumes
all procedural responsibilities for preparation of the
budget.
The director has various responsibilities, the
first of which is to insure that all forms are properly
prepared and that historical statistical,
expense and
revenue data are collected and delivered on a timely
basis.
The director
also coordinates units of service
forecast and formulation of assumptions regarding expected
volume.
Further, the director coordinates the review and
summation of departmental estimates and prepares the
operating, cash, and capital expenditure budgets.
Also at the corporate level,
a Finance Committee
insures that none of the diverse aspects of the hospital's
operations and budgets are overlooked.
Both HealthWest
and Valley Hospital Medical Center have representation on
this committee.
Included on this committee are approxi-
mately eleven individuals from various large corporations
as well as about ten to fifteen members of the various
other HealthWest subsidiaries.
The Director of Finance
for Valley Hospital is usually present at the meetings in
order to give the financial review.
The Finance Committee
reviews and recommends for approval Valley Hospital's
31
budget prior to the final submission to the Governing
Board.
The second step in the budgeting process is to
establish prerequisities.
First, the corporation and the hospitals must make
~
co_!!!mi t_!!!ent to long .range planning and management of its
Unless
O£erati£~
top management recognizes
the
importance of planning for the hospital's future, there is
very little to be gained by going through the motions of
the budgeting process.
Valley Hospital fulfills this
prerequisite at the hospital level, and this is also true
at the corporate level at HealthWest.
Next,
!!!U~t
£biectiv~
have
foundation
well=d~fin~d
of
a
~£al~
budgetary
and
process
is
the hospital
the
The
overall
integration and achievement of the goals and objectives of
the hospital.
1977)
(California Hospital Association
[CHA],
As the hospital follows the budgeting plans, it can
keep on track towards
its
long-range goals.
This
definition of goals and objectives is the first step taken
at Valley Hospital during the budgetary planning state.
Further,
the
must have a
ho~£ital
mana~ement
structure which permits and encourages a responsible
accounting system.
Hospital management must be committed
to an accounting system which places financial management's
Results
responsibilities
should
be
upon
based
particular
upon
individuals.
established
plans.
Meaningful performance reports can then be provided to the
32
appropriate levels of management.
At Valley Hospital,
this kind of accountability is being initiated.
In addition,
the hospital must accummulate adequate
statistical data.
Adequate statistics a:r;e essential for
developing a budgeting system and determining the performance of a department.
Statistics are important tools to
be used, not just in terms of dollars and cents, but in
terms of the amount of
produced.
work performed,
and results
{CHA, 1977)
Then, too, a hospital must have a formal performance
reporting system.
The development of effective controls
will be facilitated and corrective action will be taken
with greater confidence if periodic performance reports
are distributed to all
levels
of
management.
These
reports should include performance standards designed to
evaluate the hospital's output.
Finally, the completed budget should parallel the
organizational chart, the accounting system and the formal
reporting
system.
Projected
data
used
to
determine
expenses, should recognize trends suggested by historical
data, and should also incorporate both new and established
policies,
goals and objectives.
In this fashion,
the
budget will flow from administration to department heads
so that close scrutiny of this data will provide reliable
projections.
The next step in the budgeting process is to establish budgeting
tool~
which
will
be described below.
33
Organizational charts are the first tools.
One chart must
show the corporate organizational structure and the other
shows the internal structure of the specific hospital,
in
this case, Valley Hospital.
The latter chart establishes
formal lines of authority,
sets limits on the span of
control
unity
and
recognizes
of
command.
(See
Illustrations 2 & 3)
The second tool is an accounting chart which correlates with the hospital's organizational chart.
It is
essential that department managers familiarize themselves
with this.
The third tool is the formal budgeting plan which
coordinates a series of actions performed by a number of
people consisting of planning,
forecasting,
managing and controlling the budget.
coordinating,
In addition to the
above formal budgeting plan, the fourth tool, the budget
calendar,
establishes target dates for specific tasks to
be completed and to whom these tasks have been assigned.
(Herkimer, 1970)
It also helps to maintain order in the
budgeting process.
Fifth,
a budgeting manual assists the corporate bud-
geting team, the budget committees, administration and the
department managers in the execution of the entire budget
process.
The final
tool is the appointment of a
B~dget
Coordinator who assures orderly and timely development of
the budget program.
~
'
34
The budgeting process is now ready for implementation.
It begins with the determination of the hospital's
goals and objectives.
"Goals are an end towards which
efforts are to be directed while the objective is the
milestone on the road to achieving a goal."
Foundation
(1983)
understandable,
Goals
must
and achievable.
be
(HealthWest
measurable,
The overall goal for
Valley Hospital is to provide quality patient care to the
community in an effective and efficient manner.
Following
the determination of overall corporate goals and objectives, each of HeathWest's separate hospitals provides its
own goals and objectives.
At Valley Hospital,
each
budgeting season begins by doing this. Valley Hospital's
1983-84 goals and objectives include improvement of the
continuity of care, continuing
programs,
integration of
development of existing
educational
programs,
establishment of new programs, improvement of departmental
knowledge of statistics and financial data, strengthening
of administrative-physician relationships, improvement of
employee morale,
increase in hospital admissions,
and
enhancement of Valley Hospital's position in the hospital
provider field.
Department managers can add further ideas
by submitting their goals and objectives to their
administrative manager.
Although HealthWest has a master plan for long-range
projections,
including goals and objectives,
these plans
35
are not sufficiently communicated and integrated at the
hospi ta 1 level.
At the present time on the hospital
level, the yearly budget is prepared by the budgeting team
and is channeled throughout each department of the
hospital.
Therefore, at the hospital level, the budget
preparation is not built upon the goals and objectives of
HealthWest.
If
these
goals
and
objectives
were
communicated, the hospital's goals and objectives would be
more congruent with HealthWest's master plan.
Forecasting Units of Service is another initial step
in the budgeting process.
The success of the budgeting
system depends upon selecting units of service which best
relate departmental production (output) to direct costs
(input) and applicable revenues.
The forecast of units of
service is a key factor in projecting staffing and certain
expenses and revenues for the budget.
Association, 1977)
(California Hospital
At Valley Hospital the revenue produc-
ing departments are budgeted by HealthWest which measures
volume of service rendered to patients, while the nonrevenue producing departments
measure
the volume
of
support services rendered to patient care departments.
HealthWest examines three basic elements when
forecasting units of service;
collecting,
anticipated
historical trends and data
physician
utilization,
i.e.,
admissions, discharges and average length of stay, and
significant internal and external factors.
Hospital,
At Valley
following the initial units of service forecast
36
done at HealthWest, a review of this forecast is conducted
by Valley Hospital administration and its department
managers.
At this point,
historical data becomes
exceedingly important when administration reviews and
changes
the
Seasonal
Heal thWest 's
units
utilization variances,
of
service
forecast.
legislative changes,
patient mix changes, the increase or decrease of ancillary
services and the internal environment are all considered
when units of service forecasts are prepared.
The
department managers at Valley hospital contribute to the
data gathering process as well as to the review and
acceptance of the budgeted units of service for their
departments.
figure
L
An example of a unit of service is shown in
In this graph,
the units of services are
projected patient days for the nursing departments.
This
figure is arrived at by adding the total patient days and
dividing by 365 days in a year. The finalized number for
Valley Hospital's yearly average daily census
projected at 125.
was
Figure 2 shows the increase in Valley
Hospital's average daily census.
During the first six
months of 1983, the census was at a peak.
A predictable
seasonal pattern may also be seen on this graph.
Because
of The Tax Equity and Fiscal Responsibility Act (TEFRA),
the Diagnostic Related Groups
contracting legislation,
(DRG)
regulations,
and
hospitals were thrown into a
budgeting cycle for 1983 without knowing the impact of
these various new regulations.
VALLEY HOSPITAL MEDICAL CENTER
.AVERAGE DAILY CENSUS
1981--1983
1'50
uo
~..',
130
/
••
Ul
:::1
120
Ul
z
w
u
>-
"..J
H
..- ----
"---..
- - - . -' '
-
110
/
------
·.
"
/
__..
./ ~ '
'.._ )<.....·
/ '- - - - ,
/
" ,'
/
/
'
\ .\
-- -
\
/
'
'
',
'...
-
' \\
'
',
'._...--
\__
-··\ '·-'-..
'-~
"',;
I
1
'7
/
'
/7'
... · · ;
I
-~----
~,,.~-~
' \
''-...._
',
'
-- ---~
I I
1993
'
I
I
.,
;-;,
\'
'-.._
\ '
\
'
' 1902
\
1981
_______ ,
100
<
Q
w
Cl
<
0:
w
>
<
go
'Tj
f-'·
tO
.,
eo
~
(!)
70
N
DO
50
.11\N
FEB
MAR
APR
MAY
JUN
MONTHS
JLY
AUG
SEPT
OCT
l«lV
IEC
AlnNEST 10/93
w
--.1
38
The most significant operating expense category in
the budgeting process is the payroll.
For most hospitals,
salary and related expenses constitute approximately 60%
of
the
total
operating expenses
of
(California Hospital Association,
the
institution.
1980)
At Valley
Hospital, salaries and wages constitute 50% of the
expenses. Therefore, a key to successful budgeting is the
development of realistic payroll expense projections.
There are three types of staffing.
(CHA, 1980)
The first
is fixed staffing such as administration, personnel and
engineering which is developed for the present level of
employment.
This is a fixed monthly salary budget.
The
second is variable staffing such as bedside nursing and
other ancillary departments in which the numbers of staff
change according to the departmental activity.
Here, it
is necessary to develop specific staffing plans and objectives with considerations of such factors as the size of
the hospital, the seasonal utilization patterns, usage of
ancillary services, and labor relations.
st~ ~taffing
The third is
such as nursing and laboratory which
utilizes such resources as nurse registry and call parttime employees.
At Valley Hospital,
the department managers must
complete a Request for Additional Personnel Form for
Administrative approval before considering the hiring of
additional personnel.
The departmental managers must
justify any request from a manpower, operational, and
39
monetary perspective,
e.g.,
change from a Licensed
Vocational Nurse (LVN) to a Registered Nurse (RN),
and
provide any other substantiating information which will
aid administration in this decision.
Staffing was reviewed at Valley Hospital by using
what is called a "position control system".
1)
(See Appendix
This is a departmental summary provided by the
HealthWest budgeting team which listed the name of every
employee, job status, benefit status, hire date, hourly
salary and annual salary.
Each department had to update
and correct its own position control.
both HealthWest
and Valley Hospital
accurate count of employees.
When completed,
had
an updated,
After the position control
had been reviewed and finalized, the payroll budgets were
then developed.
The purpose of the payroll budget is to convert fulltime employees to a budgeted payroll expense figure,
including related fringe benefits using an average salary
per full time employee.
1980)
Medical International
[AMI],
Figure 3 shows that for the first five months of
1983, patient days were increasing at a faster rate than
the salary expense.
This means that the hospital was
running with increasing efficiency.
It also shows that
the department managers were able to adjust, or flex their
hours,
in relation to the increase or decrease in patient
days.
For the months of May to June, the sharp increase
in salary expense per patient day may be accounted for by
~
'
VALLEY HOSPITAL MEDICAL CENTER
SALARY EXPENSE PER PATIENT DAY
1981--1983
eoo
410
400
)o
<
0
~
ltGn I
no
Jt882J
z
...
Ill
~
800
<
L
'z
Ill
no
Ul
Ill
tL.
200
)(
Ill
)o
l"rj
tiD
1-'·
lQ
1:
<
-'
<
~
11
co
tOO
.
Ul
w
•o
0
J~N
P'l•
M~tt
~..It
M~Y
JUN
MONTHS
JLY
~UG
Uf'T
OCT
NDY
DIEC
HEM. THIIIIT I Dill
,J:>.
0
41
the
seasonal
decrease
in census
without appropriate
flexing by the department managers.
From June to August,
census decreased and salary expense either increased or
remained the same.
The numerator increased faster than
the denominator, meaning that the hospital was running
less efficiently than the first six months of 1983.
42
After staffing projections are reviewed and finalized
for each department, the Payroll Budget can be developed.
Payroll and fringe benefit compensation converts full-time
equivalence to budgeted payroll expenses, including fringe
benefits, using an average salary per full-time employee
or natural
classification of positions.
Hospital Association [CHA], 1977)
(California
Data collection for the
payroll and related expenses should include accurate estimation of budgeted PTE's, accurate computation of current
average salaries per FTE or natural classification, knowledge of hospital assumptions regarding pay increases,
estimation of overtime,
historical
call-back and part-time based on
data and accurate computation of budgeted
fringe benefits.
At Valley Hospital, this portion of the
budget process
was extremely time consuming for the
department managers,
since the departmental position
control records are updated only annually and were at
first, very inaccurate.
Also, some department managers
did not understand how HealthWest arrived at overtime,
call-back, and fringe benefit calculations, and therefore
did not know how to verify the data reported to them by
HealthWest.
The next step in the budget process is for each
department manager to be involved in the
Bud~eting
ExEen~e
Procedure.
Non~alaEY
Only through direct
involvement with the department will
the department
manager fully accept responsibility for operating within
43
the budget and will be accountable for explaining
departmental variances accurately.
At
Valley
Hospital,
(CHA, 1980)
the
responsibility
forecasting the nonsalary expenses rests
HeathWest budgeting team.
historical
provides
data
the
and
with the
Calculations are based on
seasonal
initial
for
variances.
calculation
and
HealthWest
then Valley
Hospital's budget coordinator distributes and explains
this to the department managers, who in turn can then meet
with their administrative managers to discuss the
forecasted monthly allocation of nonsalary expenses and
make changes where appropriate.
The two major nonsalary
expenses for Valley Hospital are supplies and professional
fees.
Supplies constitutes 16% of the total expenses and
professional services constitute 12%.
Supply conservation is now a necessity,
although
earlier hospitals had a somewhat casual attitude about
supply conservation.
The reason for the present attention
to supply conservation is because of the governmental caps
being placed on hospital reimbursement
1 im its ,
M~die;: a i d I C a 1 caps ,
and
(i.e.
DR G ' s ) •
Medicare
Fi gur e
4
illustrates one of the dilemmas created for hospitals by
the 1983 TEFRA legislation.
sharp increase
illustrates
The 1983 February to April
in supply expense per patient day,
Valley
Hospital's
purchase of supplies.
sharp
increase
in
its
This was done to assure maximum
reimbursement under the TEFRA legislation.
Valley
VALLEY HOSPITAL MEDICAL CENTER
SUPPLIES EXPENSE PER PATIENT DAY
1981--1983
•ao~----------------------------------------------------------------------------------~
no
).
<
0
...z
bl
......<
...
bl
'Ul
z
Ill
L
X
Ill
100
eo
eo
..."'
70
II
eo
Ill
.J
L
L
:J
1-Ij
1-'·
lQ
ct;
ro
.
~
50~----~--~-----+----~----~----.-----~--~~---+----~----~----~--~
JAN
I'U
MA.
AI".
MAY
JUN
JLV
AUG
IEPT
OCT
NOV
. .C
MONTHS
HEAL THWEIT 10/U
~
~
45
Hospital purchased approximately three months' supplies at
this time as a means of increasing its supply
patient day.
per
This then enables Valley Hospital to
increase its "base year" reimbursement.
discharges
~osts
were
The costs per
determined during the base year and
therefore hospitals tried to increase their costs per
discharge in their base year in order to increase their
reimbursement for the following years to come.
For the
months of April to July, the hospital was decreasing its
inventory of those previously purchased supplies.
July,
1983 showed supply expense dropping below both July of
1982 and July of 1981.
Figure 5 shows that Valley Hospital's expense per
patient day had not increased sharply, and in fact, was
relatively close to the 1982 figures.
In the month of
September, 1982, administration requested that managers
especially monitor their expenses per day as the census
was decreasing.
In response to this request it can be
observed that managers reacted favorably during the months
of October and November as the 1982 line begins to drop.
This is then carried over into the first few months of
1983 with May and June very close to the 1982 portion.
The next process in budget preparation is the capital
expenditure budget.
must
plan
satisfied.
so
that
The department heads and supervisors
their
facility's
needs
will
be
The output resulting from quantification of
this plan will be the Capital Budget.
Decisions with
46
Figure 5.
..
~
•
0
~
u
W<
I
w~
~
z
¥
UZ
w
...
•
IL
_Jt-t
<~
U<
!Ic
HQ_(Y}
CD
wo::rn
~
,J
""
~W.-4
0...1
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~W<D
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,.c
l:
z
t-t(J}Ol
Q...Z.-4
lr
IL
UlW
c
IX
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47
respect to capital expenditures are among the most
difficult, primarily because of the long-term nature of
these committments.
Specific definitions of capital expenditures may very
from corporation to corporation.
Capital expenditures are
usually for items which have a useful life of more than
one year and exceed certain minimum dollar values.
Capital expenditures include facilities, equipment and
improvements.
The 1972 amendments to the Social Security
Act (Public Law 92-603) require hospitals to have a three
year plan for capital expenditures as a condition for
participation
in
the
Medicare
program.
(California
Hospital Association, 1977)
The
procedure
department managers
Equipment Form,
at
Valley
Hospital
to submit a
is
Request for
for
the
Capital
(See Appendix 4) which must be completed
before consideration can be given by their administrative
managers.
Since three year budgets are required by Joint
Commission for Accreditation of Hospitals (JCAH), those
requests which gain approval are allocated on a three year
basis.
The first year allocation usually is an "urgent
piece" of equipment
licensure).
(i.e.,
necessary for continued
The second year allocation is for the
essential requests, and the third year is allocated for
desirable pieces of capital equipment and their expenses.
Department managers are requested to determine the cost of
the item based upon three written estimates of the cost of
48
the equipment.
Although administration and department
managers meet for discussion of capital requests,
the
final approval of capital equipment at the hospital level
is made by the Board of Directors of HealthWest.
1983-84 capital expenditures totalled $700,000.
The
Some of
the major capital expenditures were to purchase digital
angiography equipment, neonatal respiratory equipment and
furniture.
The project expenditures for the year 1983-84
totalled $1.9 million Some of the major capital projects
were the creation of an obstetrics unit, remodeling the
psychiatric
pavillion,
and
remodeling of
the entire
seventh floor.
The next step in the budget process is the creation
of the Operating Budget.
This Operating Budget begins
with a projection of revenues for budget year prior to any
rate adjustments.
(CHA,
1980)
Revenues are gross
increases in assets or gross decreases in liabilities
recognized and measured in conformity with generally
accepted accounting principles, that result from those
types of profit-directed activities of an enterprize that
can change owner's equity.
(CHA, 1980)
There are three types of operating revenues which
must be budgeted in most hospitals.
The first is Daily
Patient Services Revenues which are a direct outgrowth of
the units of service forecast.
They include revenue from
daily patient services which arise from the provision of
routine services such as room and board,
and general
49
nursing services to hospital patients.
Also included are
revenues from nursing and professional services such as
nursing services of the operating room, recovery room,
central supply and professional
fees
and/or other
ancillary services.
The second is Other Operating Revenue which includes
revenues derived from nonpatient care services such as
revenue from education programs, cafeteria sales, gift
shop revenue,
television rentals,
and transcription fees.
The third type of revenue is Nonoperating Revenue
which includes revenue not directly related to patient
care, patient service or the sale of related goods.
1980)
(CHA,
Examples include unrestricted funds, i.e., grants
and gifts, donated services, gain on sales of capital
assets, and net operating profit from nonrelated business
operations.
Deductions from gross revenue are included in the
Operating Budget.
categories.
They can be classified into four major
The first is charity care.
A considerable
volume of services is provided to financially indigent
patients.
As
a
result,
a
difference arises between
revenues recorded at established rates and the amounts
received from the indigent.
The second category of deductions is bad debts.
Bad
debts arise from the uncollectability of the accounts of
patients who have not met their financial obligations to
the
hospital.
Bad
debts
can
occur
under
various
50
circumstances,
e.g.,
from the economic conditions,
admissions screening and collection policy and procedures.
The third category of deductions is contractural
allowances which represent the differences between the
reimbursement to the hospital by various insurance and
government agencies and what the patient would have paid
on a full charge basis.
The fourth category of deductions is
discounts
which
hospitals
sometimes
courtesy
grant
to
their
employees.
The major revenue producing departments at Valley
Hospital
are nursing,
radiology,
and pharmacy.
central
supply,
laboratory,
These departments accounted for
77% of the total revenue, with nursing alone accounting
for 43%.
The revenue budget is necessary so that Valley
Hospital
can establish a basis
evaluation.
was
for
rate
setting
and
At Valley Hospital, the revenue projection
based upon
conservative
the
lowest
forecast
room
rate.
because
This
different
accommodations have different rates,
is
a
room
and thus Valley
Hospital's revenue may be underestimated.
On the corporate level, the Board of Directors of
HealthWest determines
the "excess of revenue over
expenses", or profit to be made by each facility.
The law
states (IRS Code 501-C-3) that the profit made at the end
of the year is allocated back into the corporation.
In
51
this
way,
the corporation has funds available for
upgrading the facility,
new corporate and hospital
programs, community outreach, and employee/management
education.
This
contrasts
with
the
"for-profit"
organizations which have shareholders to whom profits are
distributed.
Therefore, contrary to popular belief, both
not-for-profit and for-profit hospitals are in business to
make money.
The profits made and the ways in which they
are used are different.
Figure 6 shows that in 1979 the differential between
cost per patient day and revenue per patient day was
small.
In each successive year, the gap widened since
revenue _per patient day increased faster
However,
than costs.
this increase in the gap between revenue per
patient day as compared to costs per patient day looks
more favorable than it should since the graph does not
include a picture of the contractural allowance portion.
It is interesting to note that Valley Hospital's cost per
patient day in 1979 and 1983 has remained constant at
about $600.00.
The revenue per patient day has only
increased about 30% from 1979 to 1983.
Considering world-
wide inflation plus enormous attention given to the rising
health care costs, Valley Hospital's increase in revenue
per patient day seem a most reasonable figure.
Figure 7 shows a number of situations.
First, for
all three years of the months May, June and July, revenue
increased.
This was due,
in part, to the decrease in
..
VALLEY HOSPITAL MEDICAL CENTER
REVENUE-COST/PATIENT DAY
FISCAL YEARS 1979-1983
1000~~~~:...:...:::::..-~
eeo
-..a
NO
100
MO
eeo
840
ezo
100
>
<
D
780
780
[AEVE-..:EIPA1iENToAv]
740
7ZO
.:< ...,
eeo
700
I.
e.«!
....
800
•u'
0
I
Ill
::J
z
Ill
>
Ill
~
NO
NO
11410
540
NO
1100
480
480
440
4ZO
400
rcos'I'.IPAT'IEN'I' DAY-]
"::
f-J·
lQ
~
...,
1-1
ro
MD
140
.
0\
NO
100
aeo
240
220
,.., ---------.o.=.----------..~.--------,..,
.... --~~~~::
-;.~,---------....
....
....
210[__________
200
117.
YEARS
SOUIICia CHFC IEPOITI
Ul
1\.)
p
53
Figure 7.
I
'j
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0
~
00
~
w
1z>w<
u
00
~
I
~
H
Uo
~
L
..J,_
I
.u. . w(Y)
!
<z
00
o ... m
wl-m
l:<"""
a..,
,.
<
,.c
<w"""
1-a_ID
... m
a...w"""
(f):J
oz
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wW
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•
'
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r•
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en
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AVO
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54
elective procedures during the summer months,
revenue per patient day.
July.
increasing
Revenue decreased slightly after
In October and November of 1981 and 1982, census
decreased again when more elective patients were deferred
until after the holidays resulting in increased revenue
per patient day.
Second, revenue per patient day was lowest during the
first six months of all three years.
Third, low points of
each of the three years occur only once with the revenue
curve otherwise moving upward.
This was due in part to
low points being followed by rate increases.
Fourth, there was a marked difference in the change
in revenue per patient day between 1981-82 and 1982-83
This could be explained by sharp rate increases tied in
with inflation.
The
next
step
in
the
evaluation and rate setting.
budget
process
is
rate
The object is to establish
rates that will be sufficient to cover the total financial
requiremepts of the hospital.
Rates charged for each
individual service should reflect properly the operating
expenses of the service rendered plus an equitable share
of other financial
needs for which the patient is
responsible.
Total financial requirements include operating costs
and other financial needs.
Operating costs consists of
salaries, wages, benefits, professional fees, supplies,
purchases,
insurance,
and
depreciation,
etc.
These
55
various elements must be identified,
quantified,
and
allocated to the various revenue producing departments as
part of the rate setting process.
Rate evaluation and rate setting at Valley Hospital
is accomplished through an informal procedure.
Currently,
when a rate increase is being discussed, a phone survey is
made
during
hospitals.
which
time
rates
are
secured
from
area
On the basis of this survey, Valley Hospital
will then make a judgement which seems reasonable and in
this way, sets the new rates.
There are different rates
for room and board depending upon the patient's choice of
accommodations.
Valley Hospital's administrative team
determines when and why a rate increase will be made.
new rate
must
be
approved by
the
Finance
Committee
consisting of Heal thWest' s corporate executive team,
administrator,
The
the
and the chief financial officer at Valley
Hospital.
A further component of the budget is the cash budget.
This is a plan for projecting and controlling cash flow
and balances.
The basic objective of the cash budget is
to determine whether sufficient cash resources will be
available at the proper time to meet all obligations
(operating and non-operating)
1977)
of the hospital.
(CHA,
The cash budget is a summary of cash receipts,
(patient billings which constitute the largest item of
cash receipts)
dispursements,
(salaries,
wages,
supplies
and other departmental expenses) and monthly cash balances
56
for
the
budgeted
period.
This
budgeting
process
is
extremely important for hospitals since adequate cash
balances must be maintained in the hospital if it is to
meet its financial and service requirements.
The last procedure of the budgeting process is
performance reporting.
management cycle.
This
is a
vi tal
part of
the
Performance reports must convey the
right information to the right people at the right time in
an
easy,
understandable
Association [CHA], 1980)
form.
(California
Hospital
Several fundamental questions
should be considered when designing performance reports.
(CHA,
1977)
First,
is the data relevant?
And is it
presented in a way that will insure proper management
action?
Second, is it timely?
Will management be aware
of the facts in time to respond if correction or action is
to be
taken?
Third,
is
the data accurate?
management have confidence in the reporting data?
is
the
format?
data
presented
in a
clear
and
Does
Fourth,
understandable
Can the data be used for comparisons to budgeted
data versus actual data?
At
Valley
accountable
for
Hospital,
their
managers
should
department's
be
held
performance.
Performance should be evaluated only if department
managers are fully aware of what is expected of them by
Administration.
The department budgets are tools for
department managers to be used in effectively monitoring
their department's performance.
The performance reports
57
are also management tools for Administration which must
monitor departments and conduct evaluation of department
managers.
The problems of performance reporting are threefold
for Valley Hospital.
One, managers at the departmental
level are relatively inexperienced and are new to the
management field.
This is a
factor often negatively
affecting the quality of managerial work performed.
Two,
monthly computation and analysis by HealthWest
of essential data secured from Valley Hospital department
managers lags 2 - 2-1/2 months behind the original time of
data submitted.
This
makes meaningful discussion of
performance reporting nearly impossible because the data
is chronically out of date.
Although there are some
managers who keep track of the information without relying
on the reports generated by HealthWest, the reports still
serve as vital pieces of information which are not being
used properly.
Three, Administration presently does not consistently
demand responsible
submission of data on
prearranged schedule.
a
specific
Administration will institute a
procedure for performance reporting, follow this for a few
months,
and then will neglect to pursue this further.
Recently though,
with great determination and effort,
Administration has been making a concerted effort towards
consistency.
58
RESULTS TO OBJECTIVE #2
The second objective was developed to assess the budgeting
system at Valley Hospital.
Information was obtained on
the budgeting process of Valley Hospital by distributing a
questionnaire to 30 department managers and examining and
defining their responses.
Out of a total of 30 managers
returning the questionnaire, only 25 were included in the
survey, since the remaining 5 were not responsible for
last year's budget.
After reviewing the questionnaire
with the Administrator of Valley Hospital, 3 to 5 of the
most important questions were chosen per section for
discussion.
In this way,
the central concept of each
question was distilled and scrutinized, thus avoiding
discussion
lengthy.
that
would be
unnecessarily
detailed
and
Another basis for selection of responses for
discussion was based upon the extreme nature of the
answers
to
a
specific question,
i.e.,
those
answers
falling into category 1, "Always" or category 3, "Never".
Responses falling at or above the mean of 1.9, i.e., just
below the
"Sometimes" category are
unsupportive or negative responses.
considered
to
be
Responses of 1.8 or
below are considered to be supportive or positive
responses.
p '
59
A.
PLANNING
A1.
Does Administration support the budget?
This response had a relatively high degree of consensus,
with a
mean of 1.5.
The frequency percents for both
values were about even, with the "Always" category at 46%
and the "Sometimes" category at 55%. The mean of 1.5 leans
towards the "Always" category.
The high degree of
consensus among department managers tells us that they
believe Administration supports the budget.
A2.
ho~E!tal ~oal~
Are the
and
£biecti~~~
clearlY
defined? This response showed a consensus in category 2,
"Sometimes" with a frequency of 75% and a cumulative
frequency
categories.
of
92%
in
the
"Always"
and
"Sometimes"
The mean of 1.9 indicated that managers do
not experience organizational leadership from the top on
down as being consistently defined.
A4.
Is the development of your departmental budget a
shared process between you, Administration and HealthWest?
The mean of this response was
deviation less than 1.0.
"Always" category and
1. 7,
and the standard
Almost 41% responded to the
the cumulative frequency of
categories 1, "Always" and category 2, "Sometimes" was
over 85%.
The department managers were of the opinion
that the development of the budget is a shared process.
60
A8.
If you had questions regarding the budget,
Budget Coordinator available to answer questions
appointment or
~as
the
£l either
£l ehone?
The mean of this response was 1.6 with a
deviation of less than 1.0.
standard
There was a high degree of
consensus depicted by a cumulative frequency for the
"Always" and "Sometimes" category of 95%.
This response
indicates that the department managers felt that the
Budget Coordinator was available for questions and
answers.
All.
Do you feel
budgeting
~
HealthWest's inservice training for
adequate?
This response generated a mean of 2.3, falling between the
"Sometimes"
category
and
the
standard deviation was .66.
"Never"
categories
was
The
This shows that there was
consensus in the responses of category 2,
category 3, "Never".
category.
"Sometimes" and
The cumulative frequency for these 2
almost
59%.
These
figures
give
considerable weight to the fact that HealthWest does not
provide inhouse training, and that improvements should be
made.
Eight responses fell into the "Don't Know" and "Not
Applicable" categories.
,,
'
61
B.
UNITS OF SERVICE FORCAST
B1.
~
the budget a meaningful, i.e., useful tool, to you
as a manager?
The consensus here is with category 2 or "Sometimes" with
a mean of 1. 7.
This indicates that the budget is used by
department managers as a guideline for watching revenues
and expenses from month to month.
But, because it does
not take into account census fluctuations,
always a
reliable managment tool.
HealthWest
budget
process
must
it is not
Therefore,
acquire
the
some
characteristics of a flexible budget system which takes
such variables into account.
B2.
Do you understand the unit of service forecast for
your department?
The response to this question had a mean of 1.3 and a
standard deviation of .58 indicating that those managers
who did respond,
forecast.
did understand their unit of service
More than 60% of the responses were in category
1, "Always".
It is interesting to note that 13% replied
in category 4 or "Don't Know".
This could be
the
responses of the unmeasured departments such as Admitting
and Switchboard which are not familiar with their units of
service since they have not been forced to participate in
forecasts.
Regardless of the reason for the 13% response
62
of "Don't Know", it must be considered as undesirable, and
therefore necessitating change.
All departments' units of
service should be identified and predicted in the budget.
B7.
When you received the preliminary unit of service
forecast from HealthWest, did you have time to meet with
your administrative manager to review or ask questions?
The responses had a narrow distribution, with 88% responding
in category 1, "Always" and category 2, "Sometimes".
The
mean was 1.8, falling somewhere between category 1 Always"
and category 2,
"Sometimes". This indicates that managers
are of the opinion that the budget process does allow
sufficient time for discussion and review and is therefore
used as a management tool.
B9.
Was the Budget Coordinator effQctive in responding to
problems which arose in the volume forecasting process?
The mean of this response was 1.8, falling between
category 1 "Always" and category 2 "Sometimes".
The
Budget Coordinator was therefore perceived by managers as
being responsive to the questions and problems of the
department managers.
C.
C1.
PAYROLL BUDGET
Did you have sufficient tim£L i.e.,
one week,
to
63
revise your department's employees listing provided to you
£y HealthWest? i.e., the "position control".
This response shows a mean of 1.5, and a .69 standard
deviation
indicating
that
managers
felt
they
sufficient time to update the position control.
had
The
frequency percent indicates that almost 60% replied in
category 1, "Always", yet almost 40% answered in category
2, "Sometimes" and category 3, "Never".
C2.
Was the final copy of the position control returned
to you from HealthWest
within~
to
2 working days?
The frequency percent distribution shows about half the
answers fell into category 2,
"Sometimes" and half in
category 3, "Never" with a mean of 2.3.
This response
reveals that most managers were of the opinion that the
position control was not returned to them on a timely
basis.
cs.
Did you meet with your administrative manager to
discuss either adding or subtracting employee personnel?
Over
70% of the
responses answered in category 1,
"Always" with a mean of 1.3.
The discussion of personnel
additions and subtraction occurs not only at the time of
budget preparation, but throughout the year which may
account for the positive results.
This indicates that the
department managers had adequate discussion time with
64
their administrative manager both throughout the year and
at budget time.
C10.
Do you
compare
your department's
actual
salary
expense, from the trends report, with budgeted?
The mean of this answer was 1.3, with 100% of responses in
category 1 or 2.
This shows that managers do use the
trends report to compare actual with budgeted salary
expense.
D.
CAPITAL EQUIPMENT AND PROJECTS
Dl.
Are
certain
what
constitutes
a
expenditure, both in terms of dollars and expenses?
The frequency percent for category 1, "Always", was 73%
and category 2, "Sometimes", was 23%.
was 1.3.
The mean response
The cumulative frequency for categories 1 and 2
was 95%, showing a high degree of consensus.
Department
managers understand the meaning of capital equipment.
-This
is
extremely
important because of
the
large
expenditures associated with capital investments.
D3.
Did your capita1 equipment requests parallel the
hospital's long term goals and objectives?
The response distribution shows that there was a high
degree of consensus or predictability in this response,
with
a
mean of 1.4.
The
frequency distribution for
65
category 1,
"Always",
"Sometimes", was 44%.
was
56% and for category 2,
Managers are of the opinion that
their capital equipment requests parallel the hospital's
long-term goals and objectives.
D5.
Do you feel capital projects parallel with Valley
Hospital's and HealthWest's
long term commitments
to
maintaining competitiveness in the health care field?
Category 1, "Always", showed a frequency percent of 37%.
Category 2, "Sometimes", had 50% and category 3, "Never",
displayed 13%.
The mean for this reply was 1.7 indicating
that capital projects parallel the long-term commitments
of HealthWest in maintaining competitiveness in the health
care field.
The standard deviation was 6e6.
This
response was unexpected inasmuch as 13% of the managers
are apparently unaware of the numerous capital projects
which HealthWest is presently undertaking as a means of
asserting its position in the health care field,
development of an obstetrics unit,
e.g.,
remodeling of the
psychiatric unit, remodel of the entire 7th floor, etc.
D12.
Were your
reguest~
for the Ca£ital egui£meg!
submitted to your administrative manager reviewed on a
tim~
basis?
i.e.,
.!.
to
!
days?
The mean was 1.4, and more than 65% of the responses fell
into category 1, "Always".
Therefore, 65% of the managers
66
felt that this process was conducted in a timely fashion,
whereas 35% did not.
Perhaps a contributing factor to
this positive response was that capital pieces required
for each department were periodically discussed throughout
the year;
and therefore required only 1 to 4 days
discussion at budget time.
D14.
Did
yo~
h~ve
in£Et into
it~
deci~ion
for the
acceptance or rejection of the capital project?
The mean for this response was 2 showing that managers did
not feel they had sufficient input into the decisions
regarding capital projects, falling
~n
the "Sometimes"
category.
The standard deviation was .66.
consensus.
In category 1, "Always", the frequency percent
was 22%.
degree of
Category 2, "Sometimes" had 55%, and category 3,
"Never", also had 22%.
The cumulative frequency of 78%
for categories 2 and 3, indicate that managers did not
have input into decisions about capital projects.
D15.
Were you notified of the final
decision of the
capital project and its cost?
The mean of 1.7 fell between category 1, "Always", and
category 2, "Sometimes".
The cumulative frequency for
categories 1 and 2 was 83%, showing that the department
managers believed they were notified of the final capital
projects when the final budget was distributed.
67
E.
REVENUE FORECASTING
El.
Were you consulted £y HealthWest about forecasting
the revenue prediction for your department?
The frequency percent was 72% for category 3, "Never".
The mean was 2.6 with a standard deviation of .68.
forecasting must change in this respect.
Future
Department
managers have important statistical data and documentation
of variances which will greatly enhance the accuracy of
projections made by the HealthWest budgeting team.
Also,
in the interest of good working relationships, HealthWest
should consult the department managers.
E4.
Do you use
the Trends Report to compare actual
monthly revenue to budgeted monthly revenue?
This
response showed a
deviation of .49.
mean of 1.4 and a standard
The result of the frequency percent for
category 2, "Sometimes", was 42%.
This
satisfactory for the budgeting process.
reply is not
Although Trends
Report prepared by HealthWest is distributed 1 to 2 months
late, managers felt it was not impossible to use this data
as a current basis for comparison of actual to budgeted
data.
E9.
Do you meet with your administrative manager to
discuss the variances which you found?
~
'
68
The mean for this response was 2.0, falling into category
2, "Sometimes".
This response tells us that department
managers and administrative managers are not using the
available data in order to improve accuracy of reporting.
The cumulative frequency percent for categories 1 and 2
was 78%.
"Never",
However,
there remains
22%
in category 3,
who do not meet with their administrative
managers to discuss their variances.
F.
NONSALARY EXPENSE
F2.
When you
~ere
unsure of how an expense i te,!!! was to be
allocated, did you call upon the Budget Coordinator for
assistance and explanation?
The mean to this response was 1.9, falling between
category 1, "Always" and category 2, "Sometimes".
The
cumulative frequency percent for category 1, "Always", and
category 2, "Sometimes", was 72%, indicating that many
department managers did not utilize the services of the
budget coordinator.
Further improvement of this percent
would be desirable.
F3.
Did you review the forecasted expenses
administrative head?
necessary?
~ith
your
If so, were drastic corrections
If so, did you contact the Budget Coordinator
about the many changes?
69
This response had a mean of 1.4,
"Always and category 2,
between category 1,
"Sometimes".
More than 60%
answered in the "Always" category showing a relatively
high degree of consensus.
which was very small.
The standard deviation was .64
Although department
managers
initially did review the forecasted expenses with their
administrative head, they did not utilize the services of
the Budget Coordinator when there were drastic corrections
necessary.
This
indicates an underutilization of
available resources.
F4.
Did you make monthly comparisons of your actual
expen~e~
variances?
with
bud~eted?
!f
~o,
did you find
lar~e
If so, did you document the variances so that
next year's budget will be more accurate?
This response indicated that managers do make monthly
comparisons of actual nonsalary expense items to budgeted.
The
mean was
1.3 with a
shallow deviation of .48.
Approximatly 64% of the responses fell into category 1,
"Always" and 36% answered in category 2, "Sometimes".
The
responses to this question indicated that department
managers do make monthly comparisons of actual nonsalary
expenses
to budgeted.
The
mean
for
F4A
indicating that they did find variances,
was
2.2,
and that
according to F4B, managers did document the variances.
This documentation will be useful in preparation for the
following year's budget.
70
G.
PERFORMANCE REPORTING
G1.
Are you asked
monthlX
~u~~aEY
£x
your administrative manager for a
~howin~
re£ort
department's performance?
v~riance~
in your
If not, do you analyze and
document your department's performance on your own?
The mean to this response was 2.4, with a standard
deviation of almost 1.
The frequency of category 3,
"Never" was 59%. Answer G1A shows a mean of 1.3 and a
shallow standard deviation of .54.
category 1,
The frequency of
"Always" reply was 74%.
This response
indicated that managers sometimes required to submit
monthly summary reports to their administrative manager.
However,
the department managers take it upon themselves
to analyze and document their department's performance.
Since department managers are already performing this
function on their own, the resistance to instituting a
formal reporting mechanism should not be great.
G4.
Does Administration provide feedback to you regarding
the hospital's overall productivity?
The mean of 1.3 and the standard deviation of .56 shows a
consensus falling in category 1, "Always".
The frequency
of responses showed 16 in category 1 and the frequency
percent in category 1, 67%.
This response shows that many
managers believe that they are kept informed about the
hospital's overall productivity and financial
status.
71
However,
33% did not feel this way.
Apparently,
the
communication mechanisms such as monthly departmental
managers'
meetings,
and distribution of productivity
reports, seem to be fairly effective.
G6.
Are your expectations clearly pinpointed
Ex
your
administrative manager?
This response shows a mean of 2, falling at category 2,
"Sometimes" indicating that expectations are not clearly
pinpointed by administrative managers.
deviation was
category 2,
.52.
Such a
"Sometimes",
The standard
large percentage,
73%
in
indicates that managers believe
that their expectations are pinpointed only some of the
time.
However, there were 13% in category 1, "Always",
who felt that their expectations were clearly understood
at all times as well as 13% in category 3, "Never", who
believed that their expectations were never pinpointed.
CHAPTER 5 - CONCLUSIONS, RECOMMENDATIONS & SUMMARY
CONCLUSIONS
As Valley Hospital becomes an integrated part of the
HealthWest Foundation,
it is slowly evolving into a
financially sound institution.
This study assessed strengths and weaknesses in the
present budgeting practices.
Recommendation for changes
were made based upon these findings.
In general, the responses to the questionnaire were
positive (i.e., categories 1
&
in category 3, or "Never".
managers
of Valley Hospital
2) with very few responses
This indicates that the
believe that
the budget
process produces their departmental budgets in a shared
management style.
The responses show that managers do use
their budgets as management tools and they are aware of
the importance of the budget.
Budgetary procedures should
be systematized and updated to reflect current changes in
legislative and insurance requirements.
72
,,
73
RECOMMENDATIONS
1.
The
for
for
The
fit
corporate goals and objectives must be clarified
Valley Hospital's administrators so they can plan
the hospital's growth and financial viability.
hospital 1 s goals and objectives must reciprocally
into the corporate goals and objectives.
2.
A Budget Committee could be developed consisting of
top management personnel from HealthWest, Valley
Hospital Administrators and the Budget Coordinator.
This committee would monitor the preparation of the
budget.
It is important to secure the participation
and cooperation of staff members on the hospital
level so that the budget will not be felt to be a
creation of the corporate structure, but instead a
shared effort.
3.
The budget data entries at HealthWest could be made
by keypunch operators and not by the HealthWest
budgeting team. This would free the budgeting team
which could be spending its time analyzing and
confirming data which is to be used in the
formulation of the budget.
4.
The historical statistics must be made uniform so
that a sound base can be established for analyzing
data.
5.
A simple budget manual
could be compiled by the
Budget Coordinator for the department managers. This
manual could contain organizational charts of both
HealthWest and Valley Hospital, plus an updated Chart
of Accounts, Budget Forms and instructions, and
telephone numbers of individuals at HealthWest
involved in the budget building and financial
controls, i.e. accounts payable, payroll, etc.
6.
Because of the recent changes in
reimbursement
regulations, the unit of service forecast, or volume
forecast is more crucial than ever. Cost per unit of
service must be reexamined and assessed according to
patient type (i.e., Medicaid [Cal], Medicare, private
insurance, etc.), or according to diagnostic related
groups (DRG's).
The relationship between unit of
service revenue and expenses must be carefully
monitored, because of the financial significance to
the hospital.
'
74
7.
Several changes could be instituted in the staffing
and related expense items of the Budget:
A.
Nursing Administration
and the corporate
HealthWest Budget Team may want to use the
previous year's historical census data as a
means of establishing standards for various
levels of care. In this way, the hospital will
be able to predict fairly accurately the
staffing requirements for the following year.
B.
The relationship of labor hours to job classification (i.e., Registered Nurses, Licensed
Vocational Nurses, etc.), could be established
by examining the historical levels of increased
care.
Fixed and flexible staffing requirements
could then be anticipated. The projection of
workload and level of care each month could also
be anticipated.
Staff vacations could be
arranged during low census periods.
c.
A vacancy
rate
for employees could be
established based on historical vacancy rates.
In this way, the hospital would not overestimate
its salary-wage expense.
D.
A turnover rate could
also be established
because a new employee will often be hired at a
lower step than the previous employee in that
position. This is another way to avoid overestimating the salary, wage, and benefit budget.
8.
Because of legis la ti ve changes, the forecasting of
revenue for 1984-85 will be a more difficult task
than formerly.
In the past, Valley Hospital
forcasted by first examining its historical patient
mix and then predicting its revenue based upon this.
However, there are now changes in reimbursement
rules, e.g., the new Medicare diagnostic related
groups, and the Medi-Cal limits which makes these old
historical figur~s less meaningful.
The new method
will have to then examine the type of admission, and
define length of stay for various patient types in
order to predict the reimbursement from these various
sources.
Then, HealthWest will be in a better
po$ition to institute a procedure for determining
revenues based upon this information.
9.
HealthWest Budgeting Team could give priority to the
prediction of the revenue budget of the major revenue
producing departments. Since 77% of the total gross
75
revenue is produced by Nursing, Central Service,
Laboratory, Radiology and Pharmacy, priority should
be given to the prediction of the revenue budget of
these major revenue producing departments.
Predicting this portion of the budget will
immediately begin to give Administration a good idea
of what is being forecasted for the coming year.
10.
Analysis of all variances could be made and
documented on the hospital level by the department
managers. This information can become a valuable
tool for scrutinizing expenses and making comparisons
from one year to the next. The budgeting team could
work with the managers towards improving the accuracy
of the budget predictions.
11.
The transition from a fixed budget system to a
flexible budget system could be initiated over the
next few years.
This could offer several advantages
such as having the ability to adjust the budget to
reflect actual activity levels, having the ability to
adequately contain costs, having the abi 1 i ty to
assist management in identifying the hospital's
problems before the fact through the use of budget
mode 1 applications, and to assist in obtaining
meaningful variance analysis.
76
SUMMARY
The task of this project was to develop a budetary
tool for evaluation of Valley Hospital's budgetary
process.
An indepth literature review was conducted.
The
budgeting process was described in general terms and then
made
specific for Valley Hospital
Following this,
and HealthWest.
a questionnaire was developed, submitted
to managers, analyzed, and discussed.
Recommendations
were made for improving the budgeting process for Valley
Hospital and HealthWest.
Although this is a case study of only one hospital's
budgeting process, it can be revised and modified for use
at other facilities.
77
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Operating Report Fiscal Year 1982-83.
Annual
Author.
.,
DF.PT NAHF.
Dr:PT NUMBER
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STIITISTIC
N/11'11:"
Sl'IIT l'cR Oil f'/:R 021 Pl:"li 0.31 PER 0111 Pf:"R 051 PF.R 061 PF.fl 071 /'f!R.Oill PEfl O!ll f'fifl 101 Pf:"R 111 PER 121
NO.JULY 631/IUC
ll3ISI:Pr 83IOCT 63INOV 63IDEC 83IJ/IN BIIIFF.B IJitii'//IR 8111/II'R fliiii'//IY BIII.!UNI:" 8ltl
TOT CS lTl:"I'IS
111611
(l'f:R DIIYI
235 1171.32
12806
1113.10
109'!3
365.'f7
112!!1
3611.23
15333
511.10
111156
lt56.65
REVENUE RATE
13306
~2!l.23
17.012
11111.21
J3lt?.lt
lt33.03
13306
ltll3.53
136&11
ltlt0.58
12638
lt21.27
TOTIIL
157 5111
••3o. 37
BY PiiR IOD
STill'
I'EU Oil PER 021 Pl:"R 031 P/:/1 0~1 PER 051 Pf:R 061 PER 071 Pf:'R IIIli PCfl fl!ll PER 101 PER 111 PER 121
NO JULY 6.11/IIJC 8JISI:TT 113IOCT 83INOV 8.liDl:'C 83IJIIN
llltiFfH 811IHIIR 8111/IPR 81111'1/IY 81liJUNE 8111
Sl'IITlSTIC
NIIMf:'
235
TOT CS Il'l;'MS
17.011
F7 .Ott
17.011
1'1. ()It
17.011
1'1. 011
17 .Oil
1'f. ()It
1'1. Oil
1'1. ()It
17. Olt
17.011
REVENUE 81' PERIOD
STill' IS1'1C
N/11'/t:
ST /IT· I'F.R 0 I I /'F.!? 021 PER 0.11 PEl? 0111 l'f:.'f? 051 PT:'Ii 061 PER 071. Pl:'ll Oil I PEl? O!l I f'i:R 10 I PER Ill PI:'R 121
NO JULY 631/IUG 63ISEPT fl3IOCT 61INOV
6.1IDEC 6JIJAN 611IFEll fiiiiMA/1
6'11111'11 81111'/AY 611IJ/JNF. 8111
TOT CS ITEMS
235
;;rrll!l'/l
2162111
16691!0
Hl2.19!l
2612711
2111216
2267311
20116611
2?.137115
?267311
232732
TOTAL
21!)352 2,6811,039
>'
to
to
(j)
::l
REVF.N/JE PERCF.NTIIGF:S BY P/ITIENT TYPI:' I
PIIT 1'YP£
f'IIYOR
PliR 0 I I l'f:'R 021 PER OJI Pf:"U 0111 PI:R 051 PEU 061 Pl:'R 0'/ I 1'1:'/i Oil I I'I!R O'll f'/:'fl 10 I P£R 111 PER I;? I ST liT NO.
' JV!.Y 6 31 /1/JG
631 SF:PT 631 OCT 63 I NOV 631 o~·c 63 I JIIN 6'11 FHB fllrl f111R IIIII API/ fllll MIIY 8111 JUNE filii
INPATIENT
1101 INf'IIT/NT
SU/Jl'OT /11.
7!J.Oil
79.01)
SURTOI'IIf.
TOT/It
21.00
21.00
100.00
no
no
7!!.00
7!1.00
'1!1.00
7!1.00
·rn.oo
79.011
79.00
7!!.00
7!1.00
79.00
'7!1.00
7!1.00
7!1.011
'7!1.00
21.00
;>1.00
1110.00
21.00
21.00
100.00
21.0(1
? 1.110
100.00
21.00
21.00
100.00
<'1.00
21.00
100. (II)
21.00
?1.00
100.00
21.00
? 1. no
1011.110
?1.00
1'1.00
101).00
10il.IJO
'19.
'7!l.
Of'
500 OP
Q,
1-'·
P/11'0/l
:01.111)
'/!1. 00
'/!J.OO
79.00
7!!.00
79.110
79.00
235
?1.110
21.00
21.00
100.00
21.01)
21.01)
235
too. no
:><
H
H
H
co
Ul
86
Appendix IV.
HEAL TH'.·i::ST
1984 CAPITAL PROJECT
2.
Department
BU~GET
FOR~
I!:
~ame:
Descript:on:
4.
Cos:
~o
~st.
Co~~letion
Star-t Date:·
C~~~lete:
--.(~~~ic-n~t~h--.1----------~y~·e--a-r
Date:
5.
::r.gi:~ce:~:15
6•
Ac:::::. n::. s t :-at c r IV. P • Appro v a 1 :
...,.
(Year)
(Hon-cnl
Co:-lstructicn initials:
HEl-.LT:-!:·l::ST
1954 CAPITAL
1.
C:nti~y
?~O~EC7
BCDGET
FOR~
~:c::7~e:
II:
3.
Descri~~icr::
4.
Cost to
Ccmp~ete:
St·a r t
Da t e :
(r.iO;lthj
Es~.
Co::l;;letion Date:
Ulontn)
5.
Engincerin; or Construction initials:
6.
~c:::inistrato:-/'l.?.
Approval:
(Year)
Year
87
Appendix V.
HEAL TH~iEST
1984 CAPITAL
E~UIPME~T
BUDGET FORM
~Jame:
1.
Entity
2.
Depar~ment
3.
Description:
4.
Purchase
5.
?rioritJ·:
6.
Month/Year Purchase Scheduled:
7.
Purchasing Agent's
ini~ials:
8.
Administrator/V.P.
A~?roval:
~arne:
?~ice
If :
~ach:
E.SSE;.ITIAL
URGENT
DESIRABLE:
~EAL TH\·iEST
1980 CAPITAL EQU!?MSNT su:GET FORM
1.
Entity
2.
Department Name:
3.
Description:
4.
Purchase Price Each:
t~ame:
Priority:
URGC:NT
:l.
u.
Quantity:
ESSE:ITIAL
6.
Month/Year Purchase Scheduled:
7.
Purchasing Agent's initials:
B.
Ad~inistratcr/V.P.
Approval:
DESIRABLE:
88
APPENDIX VI
DEFINITIONS
1.
Actual Costs
real
(AC) - Represent the current costs or
costs spent for
the present
or
immediate
accounting period.
2.
Admission - An inpatient admission is the formal
acceptance by a
hospital
of a
patient who is
to
receive physician services.
3.
Ancillary Services - These are
treatment services,
special diagnostic and
such as lab tests,
x-rays and
operating operating room, etc.
4.
Av~rage
Daily
Cen~u~
-
The
average
number
of
inpatients maintained in the hospital each day for a
given period of time.
This is usually calculated by
counting the number of patients in the hospital every
midnight.
5.
Average Length of Stay (ALOS) - Average stay, in days,
of inpatients in a given time period.
This can be
calculated by dividing the number of patient days by
either the number of admissions or the number of
discharges and deaths.
6.
Bad Debt - An account receivable which, although the
patient has the ability to pay,
is regarded as
uncollectable and is charged as a credit loss.
7.
Budget - This represents the quantification,
usually
in financial terms, of management's plans, goals and
89
objectives, for a period in the future.
8.
Budgeted Costs - These are the results of management's
estimates for future expenditures and future costs.
9.
Cash Budget - A projection of cash receipts, dispursements and balances for a given period of time.
10.
Capital
Expenditure Budget - This
process of
the
budget plans and controls expenditures for property,
plant and equipment items.
11.
Contribution Margin - The excess of revenues over
variable costs.
12.
Cost Center - An organizational unit whose costs are
separately accummulated in the charts.
13.
Deductions From Revenues - These are revenues which
are
uncollectable
by
contractural adjustments,
reason
of
charity
care,
courtesy discounts and bad
debts.
14.
Direct Costs - These are controllable costs, which are
charged directly to the using department's general
ledger accounts.
requisitioned
subordinates.
Usually these costs are expenditures
by department
managers
or
their
The department manager has considerable
control over these costs.
15.
Expenses Costs - These are costs that have been used
up, or consummed in carrying on some activity and from
which no measurable benefits will extend beyond the
present.
90
16.
Fixed Budgets - This
is the tradi tiona 1 approach
requiring a single activity level.
It is not easily
adjusted to reflect actual activity levels.
17.
Fixed Costs - These are expenditures which tend to
remain fixed or relatively constant regardless of the
volume of work output, i.e., insurance, depreciation.
18.
Flexible Budget - A budget prepared in such a manner
that it can be adjusted to reflect what expenses
should be at any level of activity within a relevant
range.
It is easier to obtain proper and meaningful
variance analysis than is with the fixed budget.
19.
Goal - This is a general,
result to be accomplished.
overall statement of a
It is prepared at the
corporate as well as the organizational level.
20.
Governing Board - This is the policy making body of
the hospital.
21.
Gross Revenues - This value, at the hospital's full
established rates, of services rendered and goods sold
to patients during a given period of time.
22.
Historical Costs - These costs are used to establish
trends for the basis of future cost projections.
Past
costs.
23.
Indirect Costs or Noncontrollable Costs -
This
includes those "allocated" or "overhead" expenditures
over which the department manager has little or no
control and which are not usually included in the
departmental budgets.
.91
24.
Intermediate Planning or Traditional Planning - Most
operational budgets are confined to a maximum of 12
months. This budget period is recommended for most
detail operations, capital and cash budgeting.
This
is the most commonly used in hospitals.
25.
Licensed Vocational Nurses (LVN) - This classification
includes nurses employed in the performance of direct
nursing care to patients.
26.
Long Range Plans - These plans can,
and often do,
exceed five years, but for financial budgeting, five
years is a long period.
27.
Management £y Objectives - Successful planning is
determined by management's ability to establish
realistic and measurable goals and objectives.
Measurability allows management to compare actual
operations against the budget.
Each level of manage-
ment has specific responsibilities in relation to
developing and writing goals and objectives.
28.
Master Budget - This budget contains all of the planning documents, including the operating budget, the
cash budget, the capital budget, a projected balance
sheet,
and other appropriate projected financial
statements.
29.
Net Income - The excess of revenues over expenses for
a given period of time as presented in the corporate
income statement.
92
30.
Net Loss - The excess of expenses over revenues for a
given period of time as presented in the. corporate
financial income statement.
31.
Net Revenues - The excess of gross revenues
patient services over revenue deductions.
from
Also called
net earnings from patient services.
32.
Objective - This is a specific, narrow statement about
a detailed,
measurable end to be achieved at the
department or corporate level.
33.
Operating Budget - In general,
the term operating
budget designates three separate parts of an overall
plan.
1. The statistical or historical budget, 2. the
expense budget,
and 3. the revenue budget.
The
operating budget can be used as synonym for expense
budget.
34.
Organizational Chart - A diagrammatic illustration of
the
manner
in
which
a
hospital
is
organized
internally.
35.
Patient Day - The unit of measure denoting lodging
facilities
provided and services rendered to one
patient between the census taking hour onto successive
days.
36.
Percentage of Occupancy - The ratio of actual patient
days to maximum patient days as determined by bed
capacity during any given period of time.
37.
Planning- The process of establishing programs for
the achievement of objectives.
93
38.
Position Control
Plan
-
A management tool
for
controlling the number of employees on the hospital
payroll
and
for
assuring
the utilization of each
employee to the point of maximum effectiveness.
39.
Registered Nurses (RN) - This classification of nurses
perform direct nursing care to patients.
nurses
performing
supervisory
Registered
functions
must
be
classified as management.
40.
Relative
Value
Unit
(RVU)
- This
assigns
to each
procedure a weighting factor based on the estimated
level of effort for a particular procedure compared to
other procedures in the department.
41.
Responsibility Accounting/Reporting - This is a system
of accounting which accummulates and communicates
historical and projected monetary and statistical data
relating to revenues and controllable expenses
classified
according
to
the
organizational
units
producing the revenues and the responsibility for
incurring the expenses.
42.
Revenue - This results from the sale of goods and the
rendering of services and is measured by the charge
made to patients,
clients,
for goods and services
provided to them.
43.
Semi-variable Costs - This type of cost is probably
the most difficult to project.
These costs are
partially variable and partially fixed in behavior in
94
response
to
change
in
volume,
i.e.,
labor,
electricity.
44.
Short Term Planning - This type of period can be used
for budgeting purposes.
Short term plans are usually
for 1 to 12 months.
45.
Standard Rates - These are the building blocks of a
variable budgeting control system.
They are carefully
developed rates established by management as desirable
rates per unit of service.
Standard rates express in
financial terms the amount that specific tasks should
cost per production unit.
46.
Variable Costs - These costs tend to change directly
with and are related directly to the volume of work
output, i.e., food, linen.
95
DIRECTIONS FOR COMPLETION OF THE QUESTIONNAIRE
Appendix VIL
1)
Circle the one best answer as i t relates to your
department's budgeting process.
2)
The entire questionnaire should take 20-25 minutes to
complete.
3)
Please be honest in your responses and remember your
responses remain anonymous.
4)
Once I have received the questionnaire back, I will
key the results into a computer which will aid me in
analyzing th& results.
5)
I
will
then
evaluate
the
results
and
make
recommendations for VHMC based upon this information.
Please return the questionnaire by November 28, 1983 (the
Monday following Thanksgiving).
I am trying to complete
my Masters Thesis by the end of December, so a prompt
return of the questionnaire would be greatly appreciated.
Thanks for your participation in this study.
Madeline Fry
Administrative Analyst
96
This questionnaire relates to the VHMC Budgeting
System and more specifically to the budgeting process
which HealthWest uses for its facilities.
The questionnaire is broken down into seven sections.
I will briefly describe each section below:
1)
Pla_£ni!!S: - the way in which planning was
accomplished for the hospital in relation to the
budget; the achieving of the hospital and
departmental goals and objectives (Questions 114)
2)
Units of Service - the way in which your
department's Units of Service were determined~
the process that the department head goes
through for satisfactory completion of Units of
Service forecast (Questions 14-22)
3)
Payroll Budget- the process of determining
allocation of employees~ the analysis of
variances in salary expenses (Questions 22-23)
4)
Capital Equipment and Projects - the process by
which Capital equipment and projects are
accepted and rejected~ and the way in which a
decision is made (Questions 34-49)
5)
Revenue Forecasting - the process by which
departmental revenue is determined~
the
documentation of revenue variances of actual
versus budgeting revenue (Questions 50-60)
6)
Non-Salary Expense Budget - the process by which
this is calculated on a departmental basis,
documentating monthly variances of non-salaried
expenses (Questions 61-64)
7)
Performance Reporting - the process by which
budget-related dat_a is reported by you to your
administrative head~ the budget as a control
mechanism.
Please circle the appropriate number for. each question:
1 = Always
2 = Sometimes
3 = Never
4 = Don't Know
5
=
N/A
-
Not Applicable
Within the questionnaire there are four questions that
have space available for your comments.
97
Appendix VII.
FLAiiN I~G
A.
l. Does adrr.in1strat1on support the
budcet?
2.
16,7% 1
I'·~·
5. Do you and your administrative
manager identify goals and
objectives that specify the
deoartment'~ functions and goals
for the fiscal vear?
50.0%
1
4
6.l~Fj
85.5>;
2
I
II
41.7
2
r- 6"1
!n
I
I
I
5
162.5";
29.2%
1
I
2
I
" """ , .,
,, "'""
,, th.f,.!0. I
budget,
was '"""
the Budget
C~ordinaton
J
9. If the Budget Coordinator was
unaJle to answer your questions
i:nmediatei_:t, aid sne reply with
tne answer in a t1mely fashicn,
1.e. ~ithin one to two aays?
.3 ,.,
~
5
I
5
12.1
5
1.7
4
3
4
I
--,I
..' ·;'·
I
4
2
1
2
l
I
'
1'·:·
4
I
I
I
I~
1•• o
-
5
I
I
5
I
I LS
I
I
-
I! 1.5
I
I
I
:::>. 0"
,,
I
4
3
I
50. 0~- 30.0%
I
I
I
50.0%
Ii
I
g. 3?;
Il.S
I1.9
Ii
I
I
I
i
7. .:l.re c:)ITlrnunications regarding the
importance of the budget clearly
t::ammunicated from VHMC Administra~
t ian to :ne deo art:nent head 1eve 1 ..
I
3
goals and 157.1:: 1 38.H
paralle to tne
2
ocals and abjec':.ives? ' l
aepar~~ental
obje~tives
1
hoso~t~l 1 $
ava:laoie to answer questions
e~ther bv aooo1ntment or bv ahone
4
I
I
I
I
t
8.
I':
~·
3
8.3%
3
75.~%
4. Is the development of your departi 40 • 9% 45.5%
mental budget a snared process
1
2
between you, administration and
Yealthwest?
I
6. Are your
--
'
J
14\S%1 54.4%
2
Are tne hospital's goals and
Jbjectives clearlv defined?
3. Are the hospital's goals and
objectives realistic?
-
'
lo. n:~ I
I
:
3
I
I
5
I
I
I
I
I
~.o
I
I
4
II , -
5
I
I :.5
I
10. 'linen you c:-~!:1 are for your depart- b:: . 2 ,;
ment's yearly ~udget rec~est, ao J
you c~r.c~rrently tnink ~n terms o1 1
;ana-r~nae olannina?
,,
~--
34.3%
z
47.1%
Oo·you feel HealthJiest's inservic)l.S%
training for budgeting was
1 l
ade<:u-·~e?
2
1
!7"' •)•· I . - -~
12. Does the budgeting precess stimu-~ ~- " 1 .Lo. ,,,
i ate your awareness of expenses
!
2
to vcur t::e~ 2.r~::-:ent?
I
3
I
I
1
...,
4
5
-1
5
)t
I~-;~·,
I
I
Is 30;
i
3
I
I, _ • .J
i
I . "I
l
j 1. 3
I
4
5
' '
~-.J
98
- Scc.e:::.1es
I
I
;.. ~ N'~,!'i
!
I
13. A-e you
I
e'lC:ll:~ag€d
by your
~
to ac:iv'!l~ ~ .::,. I
33.3%
1 '- • ·"' I
participate in ti1e budget i ~g
I
process? If no, hC,ot are you
I
i
disc:u:-agec?
I
:i.
acminis~nthe ~ana;er
'12'/E:t. s5~
·:
<.;:<~
~"I~.
I
I
~N!fS
Is
JF
S~RV!C£ Ft~CAS7
I
, ..... "4
t;.Jcg.;;: a :neanir.gf:Jl
ti':
JSef-.. : i :.::Jc i to vc!J a:; 1
I
~anacer?
I
~o y~u ~ncerstand :ne uni: of
sa~;ice fo~ ycur d~:~rt~e~t?
.;., Do ycu ac::vely :artjcipate in
I
l
~
:
i
I • I
I
~e!:lan:~t:nt?
~ •..l,r'!
i
1
~ .3 • 4 ~ ~
thEl47.~:;;
u:1it :f service hrecasting for
;cur
!
i
4
5
..
!
I
4.
5
• o I
I ~ '
4
:::
l.J
-
I .(;:) ":.is=. 22.'~
(i.e., ! - i ~·'.
=· . 3~~~
3
I
I
.
I
I'
!
1
•
:
i5 . 2~ I
Z
'l'l
11,
:_--31
1_
1
ycu1·
:::emt)e!"s .:"'are of
tneir ce~ar:~ent':; 'IOlume ;;rojec- ·"1· ·I'. -~·~z'
tions?
1
:he de::enni nation of oro_ duc-!3 s.
tion :.:nits ~!Hille you tc c=rnoare
l
ac:: a1 ;:erfor:na~ce o~~i ::-~ a ::~1 annea
:e,..-r:r1'tar.ce stJr,c?..r-a'?
5. Jo yo1.1 ,.ec:r~ mon:hly •Jn:ts of
9'~! 4 4 . .;~;
i
I
!
!
1·
Se!'"li ce so that yctJ ;,ave :h; s aata
lvailaole f~r ~se in ~Jan:1ing tne
1 0' I •
"'·"'!=>.
!
!I.
1
S
2
'
3"'
~
2
I,
v~ar
~~en
fOU rece 4 ve tne orell~inary
unit of
sciv~c~ f~re-:.!st f;:~
~ea~t~~est, d~d you nave !~~e to
~1:~ 1~ur ac~inis~~ati~e
~anacer ta rev~ew or asK oues-
I
12-:'.5;;
11'
.
4
-
~.5
4
w
:...1
4
-
1
..,
-·'
~ .j
I .:. · "'1
I
I
3
I
bucce:?
~~x:
1";"1
!
:
Jg~
..,
--~,~~~,---~---:---
>1.2?;
I
w. Dces
J..~
13- :. ?, !
1·- .:,1 '"' ,,
:;tJ~f
~e~n
.. ,I
I
!
'
3C.~,,~
mee:
J. • .:.
t i-~n~:
5
·?.
~dS
::-:e 3udcet oorainat:.:'"' G~fac- 31.:-:,
~;,~in res5cnd r.; t~ ~rcJ1~~s
1
~~icM
arose in
::.s-:' no
:r~ces;
~e ·;a;J~e for~--
:.::
so.:::;
2
:.2
l . . l~ayJ Scmet ':..;".::e:.:s;.....;'<~e.:.''"::.-":..:.·. ..::::.:·J:;;.r.:...·..:::....:.'.:.::::;.r,·:..:.<J_':.:.''..:.·"'.:....:..i..;''<.:~'1
I
·~--~-----·--:-~--
~
p Yt;OLL 8!.! QGE'!'
\..
"'d.,,..
.. n· 41~
.... , S"fr·,·c;~n•
1 '-t
1. Ul
:~~
~
•= ~ ..~'',,.,
~58.8".1
(i.e., 1 week) revise your depart
:ent's emo1_oy~e ~isting.provided_i
~= ycu by Hea.thwest? (l,e., pos1
tior. cJnt?""ol)
2.
~as
I
I
2~.4%
ll.q·1·
li
1
tne final ::~~Y of t:1e pcsitio1 9.1?:
control returr'!ed to ycu from
l
:-!;!:ilthliest witnin 5 ~o 7 ,o~orking 1
1
2
I
45.5%
2
I
5
3
1-= =,J
·3-]i
, .. -
4
:.3
5
deys?
-+.
pre~ l '.!mS, did you
a;:;pc 1 nt;nent ,.;i th e ~ ther
3udget :~orainat~r or :~e
iF there we!"e
ma.'<e
Ml
::1~
?~rsonne1
J~d
Ce:a!"'~~er.:
~t
you meet.,.,;;;.!: your
v~i--tC?
ao:ni'!ist:-a~-:'1.4:; 1j
tive manager ~o discuss eitner
!
ad.:ling or s~btrac:ir.g ~f er.Jp1"Jyo;.e I'
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lias there enougn tir.ie to 'lleat Wlt:-"~ 33 • 3 "'
fOJr aam111is-crr:ive manager a
~;;cone :~me :a nag.Jt i ate ~ne
l
~d
. .:ing or ;.:..otracting of empioyesS~
!'"""-:m ·tour a~oar-:;;ent?
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;;1a you ut11ne .roe rorma1
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for r-:Q!Jesting ana j:.~s:ifyir:g
=!1·J~ti.~~ai
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3. ~ 3 the r-:quest i :"ig ~rocess ~ff~c- ~ 1 -: ~"
:~ve?
If net. why?_______ ,:- • l~-·
J.
~re
ycu aware of :ne percenta~e
of :ne t.:na 1 ooerat: ng costs
regresantea in salaries and wages
~~~
yo·..:r de:Ftrt:ne!'lt?
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:J. Ga you c~r:.oara your Ceoar:~ent'~
l.:t;..Jai sa"a-:ry ex;:e!'!Se (from cne
~~~r,:; ~e~or~)
~ ~.·
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3
~tJ~cec~~?
-~~~~~-~~~~~--~----~------:......--~----~----------
Jo
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cr
,n your sa!ary
y~u lna1i:~ t~~ ~osi:ive
~e;at~l! vari~~css
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--p-;ways Sore: 1::;es
D.
EQUIPMENT~
j.
72 •.
1. Are you certain of what constit~tes a caoital exoer.jiture, both
in te~s of dollars and ecuicment.
1
2. If not, did you contact the SudgeJ
l
CA?iT.A.L
0
ROCECTS
Cocrainat,.,r fer the aefinition?
3. Did your capital eouipment
requests paraliel tne ~cspital's
lana :ep~ aoals and objectives?
4. Oio your capitai expenditur!!
req::est parallel t!':e goals ana
;:1.
22 _.,%
~.ev':!n
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_____c~c~;~e~c~t~iv~e~s~o~f~·tc~u~r~a~e~o~ar~·~~"~·e~n~"~?---~-------+;------------'
Jo you feel capitai
pro~ects
:Jar a~ 1e 1 ..,; til 'J!iMC' s and
i
Healthwest's 1cng-ter;n ccrr:mi::::entsi
:a ~aintaining ccmpet~:iveness
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1n :he hedltr.care fi!!1d?
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166. c';l
5. iJa you i•wolve your depar:::ten:al
staff in :he capital budget:ng
!!
;recess?
7. Did ;au explore alte:-:"'ative
<~ays
I'1.4~;1I
of repiacing the old equicment
1
.,.,ith comparable equi::mant in orde~
:o cut cac i :a 1 <;'J'.J i ~~ent out 1a:'? !
9.
D~d
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173. ~~~
equ::mer.~?
rf so,
JCU snare ~.,:s Jac.a ..,l:n
~our lam~nis:~!~~~~~ ~an1c~r?
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2
c~s:omar11~
~uiom~nt?
~nich you
·..;~re
ycu
piannea ~a use as a 1
:~ai?
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~r~Jt~1fu
r.1arki~1gs re~arc1
:iai ~r ~esir~:o
·:!o ~:a i .-:·::::!Ji :-:1er.
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!io.o~l
r:tJ~ests .,.,hie!:: w.:re not ne-:essar~t~
ta~~~ininc
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9. Cid you S(Jbmit c1oitai aqui;:ment
but
I·
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,?~ .
ao ~rica comparisons :~rc~gnou~
:he ,,~ar?
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'"· J1: :ne ..,n::~n <!S::mat<:s a 1c '..;7 .l ~ 1
you ;, tne negotiation :~recess I
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for :ne pu:-cnasa cf the cJpitaij
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10.
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Q-:;1
;:r?cess, or did you
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~t :ne t1me or t!1e cuaget1!lg
t-~ ..... .,:
a. Jio
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you obtain written as:~mates
:nan Jne manufacturer !
re~ardina the ccst for :ne :api:ail
fr:~ more
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~rger:-r:, :sse~- I
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:~rt1on
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:lid you anticipate capita1 eq:.:ip-1·
1 ,.
:r.er.t needs thrcuchcut the year?
31. S:;
~~re :;our req;:ests for caoi~a1
"'-8
equipment submitted to your
i
administrative manager reviewed c
a timely ~as is? i.e .. 1 t:l 4 daysl
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15.
·.f~!"e
and its
:ne
c:Js~?
15. Has your
or~j~c:;
haa capita1
for~clst21 ~r~v~ous~v?
so.,
a. Are
:~e caci:ai pro~ects
cc~o1etea on a time1y basis?
i.e., •,o~i:hin 1 to 5 rnontns of
t~e budoe~ad c:T-o1~t1on data?
II
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4
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da~ar~"ent
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the final
capitai pro~ect
•,cu notified of
aecisicn of
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35.5%
~~e oro.j~ct?
0f
.,
21.:~
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have input into its
decision for the ac:eptance or
y~u
rsiecti~n
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Did Adminis'=:-ation ghe you noti- 129. 4,, 1
ficat:cn at this Sta,Je ci the
I 1
1
buoget of any :~r~oosed caoi";a1
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,
or~~-=cts fJr ·,c•Jr deoar'::::ent?
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14. Cia
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~ere JOU c:ns~ltea
aoout
for~castinc
by rlealthWes~
the revenue
5
2.5
~r~auc:~~n ~~ 1cUr ~e~ar~~e~t?
r!ve~ue crojac~re~ar:o oy Healtn~est are
2. Do you feel thg
tions
,..~a1
{s-:i-:?
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3. Are you fami 1 ~ ar o~~ith t~~ ·1a.rious \52. '5~~
sect~ons of l r~venue ~uaget, i.e~
4
1
31.:: :l;
2
;r':)SS rever.•..:e, :he various Jecuc- 1
tions and t~e ~et ~~v~nu~?
I
4. ~::::o YC'J use the Trena ie::;or-: to
'"' rtct, why?_ _ _ _ _ _ _ _ _ _
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l
.ncn".:niy r:v~r.ue f~t;t;r~s?
:f. !1C"t.,
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0:!'1llJZe ·,arianc:s in ·:~ur
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com;. are a: ::la 1 monl;h 1y r-evenue t.:l ! 3 7. ? '<
~~~;eted monthly revenue?
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102
a.
Do you adjust the variance ana
try to account for tne different
financial requirements, patient
mix and vol~me ~han~e?
l.9
I
9. Do ycu .':leet with .f'OUr acmi n i stra-~
61.7~{
manacer to discuss ene
vlriances-unic~ ycu founG?
:o.
27.
If ycu are ~nder bud;et in ~ne
month, do you try to :naki! •Jo fcJr
't in the ~ollawin~ montn?
;!:re you fami1iar enough :,t~ith
vr.i·!C Is Char: <Jf Accounts to
uncers:3nd now Healthwest
a1~ccat:s ycur non-salary
~xo~nses7
2.
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22. 2 ,,,i s 5. 6 ~~ ,''"'"' -:L.I
i "4. "'''
Coordinator or the ~ealtnwest
3ucg~ti~g T~arn wnen you ~aa
cruest:on$? If so, were they
:-sliabie in ans~ertng your
cuesticn; •ithin l to 3 days?
~.
g;~
2
I
ll. Jid you notify the audget
5
2
t~ve
1
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ycu •ere ~nsure of hew ~n
expense ~te~ ~as to be a,;;ocated,
ai a you ca J 1 YCOn t;,e 3uaget
Cccrainator for ass1stanca ana
~hen
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3.
:;-:~
''CIJ
~~view
the hr'!cast;d
-:xpense~ _witn your acm'i11s:rati·te
_11e ;a? ; r ;o,
a • ..tw'*::. tners ~r·J.St:ic c::-r"ec:~ciiS
necessa:-v? !~ so.
;:-:;ia JCu cont"'ac: :n~ 3·J...:get
Ccc .. C:inatcr for t~e ne.;;c f::r
s.: ~an·; c~ar:~s?
~.
Jo f'J.'J make ;nonc.r.1y ::r.1oa:--~sor.s
of y.::;•Jr a.:::<El ;!~pe'1ses wi:l':
·~JJ~d? _L_?~-
a.
]o ./OU fi1~
.o.
-.i~so~
Ja .:;ou
so tr.at
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.:oc~.i~~nt
ne~"{t y~=r
buO:ge>:
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yc!.:r
11 be
'llOl"
e~art- 1
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·-----------~~".!.;-i,.,-::;;-.,;...,~"""cr-..t::-c-':""-,;o-;;'...,...,i!-.V-e-!1-=:-cr'""':•-:·-<.-~Q. ~-.·,:-A-!-,Y-:E-~~-,
;;,.
?ERFCrt~NC:::
1 -~-l·
REPORTING
"'2 •
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:. Are you !Skec by your adm1r.istra- i
I
tive manager for a ~cnthiy surnmarJ 1 I1
reoort sh~wing variances in your
1
department's ~erfcrmance!
If net
a. Do you ana 1yze ar.o ~ocument
F 3. 9% 1
your depart:nent' s perfor:nance 1 1 1
on vour own?
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2
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one wnic:t is used as ~ iJar-: of
ai location process ~t.:l:horizing
1
l
expenoi~ures to restrict s~endlnc :·
to !n aut~1or~zea ~~ve1?
.. i
3. Coes the budge;: ne 1p
JCU
contra i
C:JStS?
Oces Aaministrati:Jn provide
f~edbacx to you ~egaraing th~
hosoi:ai's
ov~ra11
:r~a~c:ivi~y?
2
fr~e
to aad
any
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Pleasa feel
3
2
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5. IJoes AC:minist:-aticn ccmrnunicate r.-'3.3;;
to you 'ne reasons for any
1
significant variances in oudgetad.
~ata ~ersus ac:~al aata?
.I
~. Are your expec:ations clearly
th 3 · 6''~
pir.ooir.t~d by your aominist:-ativej
1
manaaer?
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2. Do you ·dew the budget i'rocess as
5
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7~~
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3 1
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ccmment3 regarding vur cuoget sys:am:
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