Hospital Budgeting Principles

The main objective of any organization would be to break even at the very least, however, more than likely making revenue to carry the organization into the next fiscal year and through the times when breaking even or profit loss does happen would be the goal. There are several types of budgeting principles that guide the healthcare organization; fixed costs, variable costs and revenue (Dunham-Taylor & Pinzcuk, 2010). When an organization is minimally functioning there are still costs associated to keep the lights running, the building safe from theft or damage, or minimum staffing requirements these are referred to as fixed costs. These fixed costs are those expenses that will not increase despite a raise or reductions in activity level

In the healthcare organization variable costs may account for over 50 to 60 percent of the operating budget, and supply costs may be another 10 to 15 percent (Rauth, Wadsworth & Weeks, 2010). Healthcare organizations must track and assess the trends of revenue and expenses that can occur within a hospital based on activity levels within the organization. Patient stay days have a direct result to the healthcare organization profits or revenues as well as variable costs. Knowing averages of costs and revenues in relation to patient census assists management in making decisions regarding how the organization can operate to have revenue (Rauth, Wadsworth & Weeks, 2010). There are two types of revenue actual and expected (Dunham-Taylor & Leger, 2018). Costs charged to the patient for services provided and paid for immediately are actual costs, whereas expected is just any payment expected after the service has been provided to the patient (p.112). In the United States of America there are three potential sources of revenue for a healthcare organization they are; Medicare, Medicaid, and insurance third party or self-pay (Dunham-Taylor & Leger,

An example may be a Nephrologist calling in the on call nurse when the patient could be medically managed until regular hours, or being called in for non urgent cases. In the unit this writer currently works the patient census is growing as is the staff compliment to care for the patients. Therefore, orientation dollars are being spent above the prediction from previous year’s budget and the expectation will be once staffing is increased the orientation budget will not need to be as big, however, education dollars may be spent for staff to gain knowledge for a specialty are by attending conferences or in-services and the unit may experience a growth in this area of the