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Web site spotlight: Learning and mastering the operating budget

Nurse Leader Weekly, June 23, 2008

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Healthcare organizations use various types of budgets to monitor the financial status of their organization, such as operating, program, product line, cash, or capital. Whichever the budget, its purpose is the same-to serve as a plan, roadmap, or tool to ensure that quality and cost-effective services are provided to patients.

The operating budget is one in particular that nurse managers need to know inside and out. It monitors anticipated day-to-day activities, resources, personnel, and supplies, typically over a one-year period. Each nursing unit is considered a cost center and has an operating budget. It is important to familiarize yourself with the major components of the operating budget:

Revenue is based on charges and is the money the organization will receive for a patient visit, procedure, or inpatient hospitalization from Medicare, Medicaid, managed care, private insurers, and self-pay patients. Of course not all charges are paid in the full amount, depending if the charges were discounted or if the payer is Medicaid or Medicare. For a nursing unit, the revenues will be projected from patient days, average daily census, or procedures.

Expenses include the cost of staff, activities, supplies, and so forth in running the nursing unit. There are two main categories found in an operating budget: employment costs and non-salary expenses. Employment costs include salaries and wages, including overtime, shift differentials, holidays, orientation, education, in-service, and benefits. Salaries and wages consist of productive and non-productive time.

Editor's Note: This excerpt was adapted from the article, "Learning and mastering the operating budget" featured in The Reading Room on HCPro's new online resource center, www.StrategiesForNurseManagers.com. Get a free trial membership that will give you 30 days to test drive all the exciting features on the Web site.

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