Free «The Budgeting Process» Essay
The process of creating an ideal budget in managed care depends on its ability to provide for the needs of patients and the support of the hospital staff. According to Dunn (2007), it should also conform to legal restrictions and the primary sources of funding. Furthermore, the budgeting process should be an integrated function within an organization and all departments (Dunham-Taylor & Pinczuk, 2006, p. 428). This essay critically examines the primary steps in creating a budget in managed care.
The process starts by creating a strategic plan that highlights programs and services to be executed and delivered in the following year. It should also take into account medical advancements that need a staff mix and the aspect of third-party reimbursements, including Medicaid and Medicare. An ideal strategic plan should be in line with the objectives of the organization.
After developing a strategic plan, the next process is estimating costs of various units in the organization. According to Dunham-Taylor and Pinczuk (2006), this step should take place at least six months before the beginning of the fiscal year. The finance department should generate a budget by examining the actual spending in the current period. For instance, the main differences between the budget and actual expenditures are calculated. The anticipated cost is also factored in such aspect as an increase in staff wages and the general inflation rate. Dunham-Taylor and Pinczuk (2006) discuss that the value of nurse managers should not be underestimated to ensure efficiency.
The next step entails preparing a statistical budget for each department in the healthcare setting. Its objective is to prospect activities expected in each department for the fiscal year. For instance, the diagnostic unit can estimate procedures that should be executed in the incoming financial period. Comparison is also paramount to enhance the accuracy of the statistical budget.
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After creating a statistical budget for various departments, the next step is preparing an expense one. According to Finkler and McHugh (2008), the latter is the amount of money that each unit requires to pay out. Various expenses can involve supplies, salaries and equipment. It is also advisable for each department to have a manager in charge of salaries and to audit reports from time to time to enhance transparency.
The next step entails preparing a revenue budget. Finkler and McHugh (2008) describe it as money that the management forecasts to receive in the incoming financial year. The revenue collected after delivering services is multiplied by the expected volume per unit. The management can also project a percentage increase in the rate of services and print results. Investigating revenues generated from various departments is the key to determining an appropriate cash flow in managed care. It is important to enhance maximum productivity in the process of allocating resources.
The component that can improve efficiency in the budgeting process entails promoting a feedback loop between the executive board and the management through reporting. The latter should also develop key performance indicators that will be required as a measure of the success of the budgetary process. This aspect entails investigating whether various projects have been completed within the estimated budget and timeframe. The budgeting process can also be enhanced by creating a budget that can incorporate changes (Finkler & McHugh, 2008). This strategy can be achieved by engaging financial plan experts and consultancy firms in forecasting precarious threats.
In conclusion, the process of formulating a realistic budget is important in enhancing the efficient operation of managed care. Collaboration among various departments in the budgetary process is also vital for financial success. Therefore, it is an obligation of the budgetary committee to ensure that recognition and reinforcements are given to these units to enhance accuracy. The management should also minimize liabilities that can be detrimental to financial objectives of the facility.