Building a Nursing Budget

Fixed and Flexible Operating Budget

Different types of budgets can be used in healthcare organizations which are tools used by nursing to ensure the patients are getting quality services. The operating budget is a plan used to analyze the day-to-day activities, personnel, supplies, needs of the patients in case of care and services for a typically fiscal or one-year period. The operating budget also describes the volume and amount of the patients, services, visiting of the patients, cost related to the production of such services, amount and sources of revenue or expenses.

The budget that remains constant means it does not decrease or increase throughout the period. In this, the volume of statistics changed over time in delivering services but the budget for such services is not changed. It can be explained that one nurse manager is working in the operating room with a capacity of 50 procedures per day and such a manager will be budgeted on this basis but the range of procedures can be different each day. It can also be explained through considering the non-personnel items such as equipment and maintenance cost will be fixed according to the capacity but in reality, it can reflect due to patient’s availability (Webb, 2016).

They are generally reported for expenses and not for revenue because revenue based on the unit of services (Unit of Services) which are variable or flexible. This is such a budget plan which can’t change through the budget period even occurring of any change in the activities that result in variations and most of the accurate results can’t be achieved. the most effective ways where a fixed budget doesn’t fluctuate from the actual results include the monopoly situation of a company where customers must have to accept the price and expenses are not cabbage due to large cost to be fixed.

The fixed budget is made by meeting with all managers of different departments to find the exact needs and staffing and according to their capacities and responsibilities, it is made. Then it is implemented and evaluated but here variations come between actual and targeted budget daily. Therefore, this effect can be mitigated through planning the fixed budget for a short period which will results in less variation form the actual results. It is not good for the evaluating the performance of cost center because one can make the expenditures below the fixed budget that a cause of low revenue and this problem can also come when revenue is high as compared to fixed budget so there is the reverse of the fixed budget called flexible or variable budget which is made in response to variations of the activities and the more actual results are formed.

On the other hand, a flexible budget is made for several levels of activities, expenses, and revenues and these can be modified according to the needs of the services or amount of the services along with changes in cost. Here the need for the staffing can be increased or decreased according to the amount of the services. The cost control is also better under the flexible budgeting and revenues or expenses are adjusted according to the current operations.

For the flexible operating budget, the nurse’s leaders will have to evaluate the expenses and revenues or amount or volume of services after each month because the variance may come due to different levels of activities and services. They are based on the Unit of the Services (UOS) and reimbursement occurs on the provision of each service and it is effective in making the budget for inpatients when the services are variable (Gómez, Insua, & Alfaro, 2016). 

Comparison of Fixed and Flexible Budget under different categories

  • Advantages and disadvantages to the nurse leader in monitoring compliance
Fixed Budget

The monitoring of compliance in fixed budget can be occurred through assessing, planning, implementing and then evaluating the budget. But it will difficult to analyze such budget due to variations between actual and current situations because of the increase in the amount of the services or cost of the services. Disadvantage for nurse leaders in fixed budget will be maintaining the expected or fixed results results and the coming results. The nurse leader will be effective in measuring performance, measuring profit, keeping the costs down, and changes within the limit of budget.

Flexible Budget

In flexible budget, nurse leaders have more chances to reduce the variance between actual and current results because here the monthly review is best process to overview the amount of the services and the expenditures. The services are provided and revenue is made on the provision of each service to the patients. The disadvantage of this budget is that healthcare organization is not sure about the overall finance of the setting and the staffing levels also effected.

 

  • Operation best suited to each type of budget
Fixed Budget

In a fixed budget, nurse leaders should meet the mangers and staff nurses of different departments and with the financial manger so that a suitable budget can be planned and implemented after improving. The expenditures, cost of salaries, equipment, supplies, new developments, bills, etc; all should be mentioned in the budget plan so that overall variations can be reduced and targeted results can be achieved.

Flexible Budget

In a flexible budget, the nurse leaders should focus on the Unit of services (UOS) and the demand for the services. The review of the budget after a month is the best solution to keep the expenditures or expenses under the budget amount and if exceeds then corrective measures should be sued to overcome this issue. Because of this reviewing and corrective measures, it is best to use but it is hard to made and implement.

 

  • Impact on the correlation to patient care
Fixed Budget

The management of the quality services to the patients bis essential and foremost goal of the organization so the staff have to be responsible for the quality services. The fixed budgeting is good when there are specific nurses for the care of the patients but when the demand of the services will be increased then the demand of the staffing level also increased that will ultimately increase the cost of the budget and it will go beyond the limits (Sofronijevska, Ramova, Stoilova, & Skaleroski).

Flexible Budget

The flexible budget is good in such sense that when the demand of the services increases due to increase in number of the patients then staffing level will be increased and there will be no difference in actual and current results due to not fixing expenditures. In Intensive care units, more nurses are required and here the nurse-patient ration is also different. Therefore, it is effective in delivering more quality services to the patients as compared to the fixed budgeting (Kortbeek, Braaksma, Burger, Bakker, & Boucherie, 2015).

 

  • Ability to take variances into account
Fixed Budget

In the fixed budget, patients and nurses’ resources are difficult to manage because the resources of nurses are fixed for a year and when the patients demand more services or when patients increase then the shortage of staffing, services, supplies, and equipment have occurred. So, it is difficult to manage the variance in fixed budgeting.

Flexible Budget

This variance analysis is expended to the patient acuity so that the number of FTE can be identified. The ability to take flexible budget variance into account is easy by the managers or leaders that help inpatients are charge more accurately according to the resources of the nurses and the positive outcomes achieve (Luh & Guo, 2016).

 

Use of Flexible budget in healthcare hospitals (Intensive and Non-intensive care Units)

Both the fixed budget and flexible budget can be used in the healthcare hospitals for nursing unit but I will choose a flexible budget as a master prepared nurse leader. It is because the flexible budget is more dynamic, it can be changed along with the activities, more realistic and practical as compared to a fixed budget and from this actual performance can be achieved. For this purpose, first of all, I will assess the different departments in the hospitals and then will meet the managers of these departments to find the needs that should be cover in the budget so that organizational goals can be achieved.

The involvement of the nurse’s managers and staff members in the budgeting process will be more beneficial because they will recognize the cost of the things and will get fiscal awareness which will ultimately cause cost-consciousness and potential savings. The identification of standard hours will be identified or validated because they will describe the nursing hours of the patient day (NHPPD) and will help to know that each patient will require how much care hours (Kirby, 2015). The other thing that is important to assess is the nurse to patient ratio, mostly one nurse available for six patients. It will help to identify the staffing level of the nurses for the expected patients so that quality services can be delivered.

Further, I will develop a plan to proceed with the flexible budget process that will be the fiscal year. I will calculate the cost of supplies and required personnel against the projected patients’ days that will occur through reviewing the past budget. I will identify any change in supplies, diagnosing procedure, new technology, number of patients per day and other suitable changes then will consider these changes in the future or proposing the budget. For the flexible budget, the volume of services is delivered and for which this budget is adjusted. It will describe that when services will be increased then demand for expenses will be increased and when the number of services will be decreased due to a lower number of patients per day then demand for expenses will be reduced.

The main important thing is to analyze the monthly expenditures and the Unit of the services (UOS) that will help me to identify that which areas or parameters are getting above or below the budget amount and will use correction measures in timely manners so that the actual results or performance can be achieved. The monthly review will be encouraging for me to increase my knowledge and comfort level about that expenditures of the services are under the budget amount and the provision of the services is appropriately measured (DOKU, 2018).

I will also engage the other nurse managers and staff nurses in the evaluation process and so that they can understand the level of expenditures and services. The staffing level, supplies, and equipment, cost of salaries, planning new activities are the factors that can bring change in the Unit of the services and the budget amount then I will focus on these factors so that actual results can be evaluated and achieved (Dunham-Taylor & Pinczuk, 2014).

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