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8/1/2020 Vila Health: Developing an Operating Budget Transcript

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Vila Health: Developing an Operating Budget

Introduction Locations Medical Unit Office SAMC Budget Conference Room Pediatrics Department Operating Budget Adjustments – Proposed Adjusted Budget Conclusion Credits

Introduction Vila Health: Developing an Operating Budget Budgeting may seem dry and boring, but it is crucial, since it is the process by which an organization determines what it is going to do and what specific actions it is going to take to pursue its goals. Half of this process is the operating budget, which allocates funds for day–to–day functioning.

You are in charge of the budget for St. Anthony Medical Center’s Med- Surg department. These are difficult times at the hospital; while the overall hospital budgeting process is ongoing, there have been some unexpected revenue shortfalls, and hard choices are in order.

SAMC Office Visits. Another day of work at St. Anthony Medical Center. First, you should stop by the Medical Unit Office and check in. Afterwards, you should head to the conference room.

 

 

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FY 2017 YTD (Jul – Dec)

FY 2017 Budget FY 2017 Variance YTD

OPERATING REVENUE

 

Inpatient Revenue $345,040,349 $700,000,000 $(4,959,651)

Outpatient Revenue $232,498,397 $525,000,000 $(30,001,603)

TOTAL PATIENT SERVICES REVENUE

$577,538,746 $1,225,000,000 $(34,961,254)

SAMC Medical Unit Office It looks like you have an email!

From: Owen Welch, CFO

Subject: Budget Forecast

Hi, this is Owen. I’m sending you this email to give you a heads–up. I know you’ve been working on the Med–Surg budget for the next fiscal year, and that you have have a pretty solid draft. Well, I just got out of a forecast meeting, and I hate to say it, but it looks like the rumors are true. I think we’re going to have to be ready to trim up to 6 percent from next year’s operating budget to address these revenue shortfalls. I’d like you to take a look at your draft so far, and then think about how you might handle this.

I know that Anna Jiang over in Pediatrics is in the same boat you’re in, but she saw the writing on the wall a little sooner and worked up a plan for cuts to their operating budget. She’ll be giving a brief presentation to senior leadership this afternoon about her plan – it might be worth your time to go sit in on that and see what she has in mind.

Thanks! I know this is a tough time. -Owen

SAMC Budget

Income Statement

 

 

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DEDUCTIONS FROM REVENUE

 

Contractual Adjustments

$476,543,215 $950,000,000 $1.543,215

Charity and Uncompensated Care

$6,725,412 $14,000,000 $(274,588)

TOTAL DEDUCTIONS FROM REVENUE

$483,268,627 $964,000,000 $1,268,627

NET PATIENT SERVICES REVENUE

$94,270,119 $261,000,000 $(36,229,881)

OTHER OPERATING REVENUE

 

Other Operating Revenue

$3,500,000 $10,000,000 $(1,500,000)

TOTAL OPERATING REVENUE

$97,770,119 $271,000,000 $(37,729,881)

OPERATING EXPENSES

 

Salaries and Wages $42,932,230 $88,000,000 $(1,067,770)

EMPLOYEE BENEFITS $12,624,012 $25,000,000 $124,012

PROFESSIONAL FEES $4,082,215 $9,000,000 $(417,785)

SUPPLIES $23,883,407 $46,000,000 $883,407

PURCHASED SERVICES – UTILITIES

$1,632,191 $3,000,000 $132,191

PURCHASED SERVICES – OTHER

$11,536,320 $22,000,000 $536,320

DEPRECIATION $8,455,254 $17,000,000 $(44,746)

RENTALS AND LEASES

$2,252,670 $4,000,000 $252,670

 

 

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INSURANCE $2,715,378 $5,000,000 $215,378

LICENSE AND TAXES $7,992,144 $18,000,000 $(1,007,856)

INTEREST $8,393,790 $18,000,000 $(606,210)

PROVISION FOR BAD DEBTS

– – –

OTHER DIRECT EXPENSES

$4,744,642 $8,000,000 $744,642

TOTAL OPERATING EXPENSES

$131,244,253 $263,000,000 $(255,747)

NET OPERATING REVENUE

$(33,474,134) $8,000,000 $(37,474,134)

NET REVENUE BEFORE ITEMS LISTED BELOW

$(33,474,134) $8,000,000 $(37,474,134)

EXTRAORDINARY ITEM

– – –

NET REVENUE OR (EXPENSE)

$(33,474,134) $8,000,000 $(37,474,134)

FY 2017 YTD (Jul – Dec)

FY 2017 Budget FY 2017 Variance YTD

OPERATING REVENUE

 

Inpatient Revenue $21,123,516 $50,000,000 $(3,876,484)

TOTAL PATIENT SERVICES REVENUE

$21,123,516 $50,000,000 $(3,876,484)

OPERATING EXPENSES

 

Salaries and Wages $12,157,632 $23,000,000 $657,632

Med/Surg Department Budget

 

 

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Employee Benefits $3,040,408 $5,750,000 $165,408

Professional Fees $250,160 $400,000 $50,160

Supplies $5,883,497 $10,000,000 $883,497

Purchased Services – Utilities

$27,456 $50,000 $2,456

Purchased Services – Other

$23,484 $50,000 $(1,516)

Insurance $57,315 $105,000 $4,815

License and Taxes $21,456 $40,000 $1,456

Other Direct Expenses

$972,157 $1,500,000 $222,157

TOTAL OPERATING EXPENSES

$22,433,565 $40,895,000 $(1,986,065)

NET REVENUE OR (EXPENSE)

$(1,310,049) $9,105,000 $(5,862,549)

After hearing Owen’s message and looking at the draft budget, what are your initial thoughts?

SAMC Conference Room

Budget Meeting in Progress Your counterpart in Pediatrics, Anna Jiang, is briefing management on how her department will address the budget shortfall.

Presentation by Anna Jiang

Hi everybody, thanks for coming.

 

 

8/1/2020 Vila Health: Developing an Operating Budget Transcript

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I want to jump right into this, don’t want to take up too much time. This… has not been an easy process. When I got the word that I needed to trim 6 percent from next year’s Pediatrics budget, I gulped. Six percent is a big bite, and it’s even harder when we’re dealing with it on such short notice. It’s like trying to fix a car as it’s rolling down the highway.

Anyway. My first reaction – like everybody’s, I think – was to try to distribute the cuts equally throughout all of my line items. But of course, that’s not possible. Some of them are fixed in ways that I just can’t budge. It’s not like I can just unilaterally say we’re going to pay less for licenses and taxes, for instance.

So I’ve tried to look at places where cuts are even possible, regardless of how hard they are. My first hope was that I could make up some room in the Supplies line item. But I can’t. Not enough. We can live with maybe a 3 percent trim there, but even that is pushing dangerously close to not having the right materials to do our jobs safely. Again, it’s not like we can just unilaterally decide not to wear rubber gloves one day a week.

You know where this is going. It breaks my heart to do this, but in the end, staffing is the one place where, if I push hard enough, I can create some wiggle room. We’re pretty sure that we have a couple of retirements happening in the department in the next six months. If we don’t replace them, and if we have at least one other departure – which would be expected, given normal turnover rates – I believe we can absorb the shortfall by cutting staff through attrition. We just won’t backfill the positions.

This isn’t an approach that I love – I’m well aware that this is going to increase the burden on our remaining staff, and is going to lead to inefficiency in the short term and burnout and higher turnover in the longer term. To be frank, this is an action that’s going to cost us money in a couple of years, when we’ll have to clean up the mess that this will create. But it gets us through the immediate crisis, and that’s what we need to do if we’re going to survive to deal with those other crises down the road.

Thank you.

Pediatrics Department Operating Budget Adjustments – Proposed

 

 

8/1/2020 Vila Health: Developing an Operating Budget Transcript

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Decrease to Salaries/Wages and Employee Benefits line items through attrition to achieve requested 6% reduction. Salaries and Wages

FY 2017 Budget: $21,000,000 FY 2017 Adjusted Line Items: $19,250,000

Employee Benefits

FY 2017 Budget: $5,150,000 FY 2017 Adjusted Line Items: $4,935,000

Professional Fees

FY 2017 Budget: $400,000 FY 2017 Adjusted Line Items: $400,000

Supplies

FY 2017 Budget: $9,000,000 FY 2017 Adjusted Line Items: $8,730,000

Purchased Services – Utilities

FY 2017 Budget: $50,000 FY 2017 Adjusted Line Items: $50,000

Purchased Services – Other

FY 2017 Budget: $50,000 FY 2017 Adjusted Line Items: $50,000

Insurance

FY 2017 Budget: $105,000 FY 2017 Adjusted Line Items: $105,000

License and Taxes

FY 2017 Budget: $40,000 FY 2017 Adjusted Line Items: $40,000

Other Direct Expenses

FY 2017 Budget: $1,500,000 FY 2017 Adjusted Line Items: $1,500,000

Total Operating Expenses

FY 2017 Budget: $37,295,000

 

 

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FY 2017 YTD (Jul – Dec)

FY 2017 Budget

FY 2017 Variance

YTD

FY 2017 Adjusted Line Items

OPERATING REVENUE

 

Inpatient Revenue

$19,203,517 $50,000,000 $(5,796,483)

TOTAL PATIENT SERVICES REVENUE

$19,203,517 $50,000,000 $(5,796,483)

OPERATING EXPENSES

 

Salaries and Wages

$10,204,669 $21,000,000 $(295,331) $19,250,000

Employee Benefits

$2,136,201 $5,150,000 $(438,799) $4,935,000

Professional Fees $248,175 $400,000 $48,175 $400,000

Supplies $4,662,491 $9,000,000 $162,491 $8,730,000

Purchased Services – Utilities

$26,221 $50,000 $1,221 $50,000

Purchased Services – Other

$24,303 $50,000 $(697) $50,000

Insurance $52,178 $105,000 $(322) $105,000

License and Taxes

$22,903 $40,000 $2,903 $40,000

Other Direct Expenses

$926,388 $1,500,000 $176,388 $1,500,000

FY 2017 Adjusted Line Items: $35,060,000

Adjusted Budget

Pediatric Department Budget

 

 

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TOTAL OPERATING EXPENSES

$18,303,529 $37,295,000 $(343,971) $35,060,000

NET REVENUE OR (EXPENSE)

$899,988 $(5,452,512) $3,347,034

Conclusion You have completed the Developing an Operating Budget activity. In this activity, you learned about some budget realities at St. Anthony Medical Center, and some trends to keep in mind as you develop your budget for the Medical-Surgical Unit.

Credits Subject Matter Expert: Georgann Weissman Interactive Design: Lori Olson Instructional Design: Stephen Sorenson Media Instructional Design: Keith Pille, Felicity Pearson Project Management: Nakeela Hall

Licensed under a Creative Commons Attribution 3.0 License (https://allaplusessays.com/order)

 

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