Excel Exercise
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An operating budget combines forecasts for revenues and expenses. Projections for the next fiscal year are made on the basis of some reasonable assumptions.
Budgeting Revenues
First, forecast anticipated census volume by pay type. Next, forecast the anticipated reimbursement.
Basic equation: R = Q Ã P, Q (quantity: patient days) Ã P (price: charges, reimbursement)
Note: Budgeting software is programmed to calculate patient days as average daily census figures are entered.
Software programs calculate revenues automatically as the census and per diem rates are entered.
Ancillary and other revenues are added to arrive at the total revenue figure
Excel Exercise: Exhibit17_9.exercise.xlsx
The Excel file for Exhibit 17-9 has been provided. The charges and reimbursement rates for October 2018 are given. Assume that private-pay and private insurance rates will be increased by 4% on January 1, 2019, and that all third-party reimbursement rates will increase by 3%. The same increases will take place in October 2019. Existing Veterans rates will continue till the contract expires. Use the census projections in Exhibit 179 to calculate the total revenue that will be budgeted for January 2019. Calculate the budgeted revenue for each of the 12 months and for the entire year 2019.
Note that the revenue projections do not include ancillary and other revenues.
Budgeted Expenses
Departmental managers should give their inputs
Projecting labor costs is the most challenging aspect, but labor hours for some departments are fixed
Allowances for overtime, training, and orientation should be determined
When funds are allocated for reducing absenteeism and turnover, the budget should anticipate future cost savings
After projecting labor hours, average hourly wages need to be projected, taking into account wage increases and labor market conditions
Labor cost (C) = Hours of labor (H) Ã Average hourly wage rate (W)
Finally, all other anticipated expenses should be included
Variable expenses are generally projected on the basis of PPD costs
Costs should also be included for marketing and public relations
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