Health Care Business Analysis (2 parts)

Resources: Budgets under Chief Financial Officer in the Patton-Fuller Community Hospital Virtual Organization and the Health Care Budget assignment from Week FivePart 1 – 2010 Operating BudgetReview the “2009 Budget Issues – Nurses” file in the Patton-Fuller Community Hospital Virtual Organization (accessed via the University Library). This document can be found on the Chief Financial Officer’s web page under Special Projects.Decide which of the two highlighted options you will implement from the Nursing Statistics memo of the “2009 Budget Issues – Nurses” document.Discuss decision-making processes in creating a budget.Create a new 2010 Operating Budget based on the labor decision you select from the Nursing Statistics memo.Use your Week Five Health Care Budget assignment as the foundation to develop your new projected budget. ( i have attached the budget projections) Part 2 – Analysis Paper Write a 1,050- to 1,400-word paper in which you address the following:Discuss decision-making processes in creating a budget.Explain the role of variance analysis in maintaining an operating budget.Differentiate between managerial accounting and financial management.Explain generally accepted accounting principles applied to the health care industry and how they are applied to your Operating Budget Projection.Discuss the decision between the two labor alternatives facing the management of PFCH and the annual cost increase of each.Make a recommendation about which labor alternative should be chosen.Justify and analyze the labor decision that you recommend. Your justification should present numbers related to fiscal management including how each decision affects the 2010 Budget Projection. Analyze the effect of your decision on the operating budget, including:The opportunity cost of your recommendationHow your recommendation affects employee satisfactionHow your recommendation affects patient care and patient satisfactionCite a minimum of 4 sources.Format your sources according to APA guidelines.
_operating_budget_projection.doc

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Patton-Fuller Community Hospital
Statement of Revenue and Expense
2009 to 2010 Operating Budget
Complete the Operating Budget. Assume the 2009 projections were realized. Use the 2009 budget and the 2010 budget assumptions to calculate expenses
and income for 2010. The revenues have been completed for you.
2009
(Proj)
2010
Budgeted
% Change
From
2009
Projection
2010
Budget
2010 Operating Budget Assumptions
Based on these 2009 assumptions: a 3% overall deflation rate for prices in
2009—due to the weak economy—will continue into 2010.
Revenue
Net patient revenue
459,900
3%
473,697
Patient revenue will continue to increase, but at a decreased rate, with little or no
increase in patient volume, due to new managed care contracts.
Other revenue
3,082
15%
3,544
Marketing’s plan to increase donations by 15%
462,982
3%
477,241
Total revenue
2009
(Proj)
2010
Budgeted
% Change
From
2009
Projection
2010
Budget
2010 Operating Budget Assumptions
Expenses
Salaries and benefits
220,752
1%
222,960
Salaries will hold to a 1% overall increase in cost due to price deflation
nationwide, with no increase in labor hours, due to no increase in patient volume.
This assumption could be affected by a board decision either to raise nursing
wages by $1 per hour or to increase the nursing hour ratio.
Supplies
74,584
-3%
72,346
Supplies cost will decrease 3% due to the price deflation and our current overstock purchased last year.
Physician and
professional fees
110,376
3%
113,694
Contracts for fees have a built-in 3% increase.
Utilities
1,200
5%
1,260
Utilities cost will increase to the rising cost of oil partially offset by the efficiency of
the hospital’s new heating and cooling systems.
Other
1,840
0%
1,840
No net change in the cost or volume of these items.
Depreciation &
amortization (noncash
expenses)
36,036
0%
36,036
Some high-cost equipment—air conditioning, telephone system, all patient beds,
and headwalls—were replaced in 2009, and depreciation rose sharply.
Depreciation will remain at this level in 2010.
Interest
3,708
30%
4,005
The repayment plan for any monies borrowed in 2009 will come due in 2010, with
a sharp increase in interest cost.
Provision for doubtful
accounts
13,797
10%
15,177
The renegotiation of managed care plans has delayed collection and made
collections less certain.
462,293
1%
467,318
Total expenses will rise 1%.
Total expenses
2010
Budgeted
% Change
From
2009
Projection
2010
Budget
689
10%
7,715
(62)
0%
627
11%
2009
(Proj)
s
2010 Operating Budget Assumptions
Income
Operating income
Operating Income will improve, with the hospital’s loss reduced by 2/3.
Loss (nonoperating income)
Investment income
Net income
(62)
7,653
The market is down, expected to hold steady; a zero-return is expected, with
neither losses nor gains.
The hospital will continue its dramatic turnaround, taking advantage of the
stagnation in patient volume, price deflation, the efficiency of new equipment, and
the improved arrangements with the managed care companies.

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