Dr. Stephanie White, the Chief Administrator of Uptown Clinic, a community mental health agency, is concerned about the dilemma of coping with reduced budgets next year and into the near future, but increasing demand for services. In order to plan for reduced budgets, she must first identify where costs can be cut or reduced and still keep the agency functioning. Below are some data from the past year.
You need to cut $94,000 in cost. Prioritize those cuts that can be made without affecting the operation or quality care of the organization.
Program Area Current Costs Proposed Cuts New Budget
Administration
Salaries:
Administrator $ 60,000.00 $ (20,000.00) $ 40,000.00
Assistant $ 35,000.00 $ (35,000.00) $ -
Two Secretaries $ 42,000.00 $ - $ 42,000.00
Supplies $ 35,000.00 $ (12,000.00) $ 23,000.00
Advertising and promotion $ 9,000.00 $ - $ 9,000.00
Professional meetings/dues $ 14,000.00 $ (14,000.00) $ -
Purchased Services: $ -
Accounting and billing $ 15,000.00 $ - $ 15,000.00
Custodial $ 13,000.
The ability of a unit to survive is largely dependent upon the hospitals internal financial budgetary performance and the external needs within the community. Developing a financial budget is a process that should use teamwork to plan and implement in order to be effective. The budget sets perimeters for administrators to follow throughout the year, allowing the director to report variances while providing guidance to maintain a minimum variance and adjust when possible (Finkler & McHugh, 2008). By using all department managers in the planning process of the new budget, the nurse executive is able to develop effective strategies for all departments while investing in the goals. This eliminates many problems associated with budget and identifies areas that need improvement or expansion. Because of the competition, declining margins, and other economic pressures, nurse executives need to take steps to control costs and increase revenues for this unit. The overall goal of the financial performance within the organization is to meet the total budgetary needs of the unit to produce favorable outcomes. My focus will be to propose the expansion of a new Joint Replacement Unit (JRU) within the hospital, while identifying the major operating components of the budget for this organization. The importance of reviewing the budget for a newly developed unit is to allow the nurse executive and administrative team to manage the existing organizational programs within in the facility, plan for goal accomplishments for the new unit, while controlling costs.
With the federal sequester that added a 2% cut to Medicare reimbursement and the healthcare reform leading to a decrease in hospital admissions for some organizations, the bottom line has become ever more important. Some organizations have used layoffs as one means of cost-cutting but even more are streamlining by outsourcing those services that can be better done by organizations devoted to that one activity (Punke, 2013) The driver of this is the cut to reimbursement.
Overall, the increase within health care costs is effecting our nation significantly. Not only does it affect consumers but also organization. As it continues to increase everyone is finding themselves unable to pay for such changes. Reducing such growth within the health care costs requires a collaborative, inclusive, and dual-party approach. Strategies for reducing the costs include but not limited to: promoting prevention and healthy living, improving patient safety, and promoting transparency on medical costs and quality. If the nation works on such improvements, hopefully we will be able to turn the health care system into something we can all afford once again.
Because of the cuts in Medicare and Medicaid that have resulted in lower reimbursement rates to hospitals and other healthcare organizations. It is essential that nonprofits continue to streamline servicers and provide good quality patient care, while cutting costs to remain a valuable asset in the community.
Jojic, Dr. Mirjana. "Will Budget Cuts Threaten Mental Health in Your State?" ABC News. ABC News
Budgeting Assignment A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of a manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496)
Healthcare is under scrutiny to find cost reductions or cost containment. Available healthcare dollars are diminishing with an increased aging population and costs continually on the rise there is a need for healthcare institutions to become more accountable in how the dollars are spent. Canadian healthcare is 11.2% of gross domestic product in 2013 (Information, 2013)Pressure exists to maintain current service levels with decreasing budget dollars year after year. Healthcare institutions (administration and sometimes physicians) spend a substantial amount of time and energy yearly cutting dollars from existing budgets in order to provide a balanced budget. Savings come in the form of salaries (jobs), supply savings, and amount of services available to those in need. The need exists in the surgical environment to provide more thoughtful and meaningful savings by engaging physicians and nursing staff to assist in cost containment. The heart of the matter is the need to determine how to knowledge share cost information and engage clinical individuals in cost reduction or cost containment.
There are a couple of problems affecting the surgical services department. One of them is that the unit /hospital pays a lot of money for surgical supplies and equipment. The second problem is labor and productivity. The two problems are included in the operational and personnel budget. These types of budgets are the highest cost to the department; personnel budget being the highest then the operational budget (Marquis & Huston, 2012).
Barton, P.L. (2010). Understanding the U.S. health services system. (4th ed). Chicago, IL: Health Administration Press.
Project managers must take cost estimates seriously if they want to complete software projects within budget constraints. After developing a good resource requirements list, project managers and their software development teams must develop several estimates of the costs for these resources. There are several different tools and techniques available for accomplishing good cost estimation.
The overall purpose of cost accounting is to advise top administration and the management team on the most suitable and cost effective methods and actions to employ based on cost, capability and efficiencies of a given product or service. It can be defined as the method where all the expenditures used during execution of business activities are gathered, categorized, examined and noted down (Horngren & Srikant, 2000). Once these numbers are gathered and recorded the information is used to determine a selling price and/or to identify possible investment opportunities. Although the principal aim or function of cost accounting is to help the business administration with their decision making and business planning process, the cost accounting data
Cost allocation is the process of identifying, aggregating, and assigning of cost to various separate activities. There is no overly precise method of charging cost to objects, hence resulting to approximate methods being used to do so. Amongst the approximation basis used includes square footage, headcount, cost of assets employed, and electricity usage amongst others. The main aim of cost allocation is to spread cost in the fairest possible method and also to impact the behavior pattern of the cost.
From the A12 redesign proposal, it shows that the current standard cost system is unable to link the reduction in the number of parts to activity reductions and cost savings. The labor-direct-based standard cost system reflects the cost of A12 is distorted. Using the ABC system, according to the activities of A12 allocate the overhead cost to A12 that could find that the current overhead cost of A12 was overstated by the standard cost system. At last, A12 Junction Box could be identified it is an attractive and profitable product, at the same time, it demonstrates the value of ABC.
Cost accounting system has two types, job order costing, and process cost system. These two cost systems are very different, almost every company uses order costing or process costing. Starbucks, is a coffee shop where citizens congregate to drink there morning coffee, study, and or socialize. Starbucks is one of the oldest and largest privately held specialty coffee retailer in the United States. (Starbucks) Their passion is to discover the flavors you love and always bring it home, delivering the look, taste and aroma of the world’s best coffee and teas. Job order costing is a very easy way in order to help Starbucks managers to know how much profit their company (Starbucks) made.
Activity-based costing (ABC) is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore “fixed” as well as variable costs. Activity-based costing is mostly used for internal decision making and managing activities while traditional costing method is used to provide data for external financial reports. Most organization uses activity-based costing as an addition system for using traditional absorption costing as sometimes the traditional cost system misleads the product’s profitability. In a company, there are many products on sale, if one product is sold at a high price with low product margin and a product with high product margin at a low price, it may result in a loss. In addition, due to the reason that cost drivers and enterprises business may change, activity-based costing analysis also needs to be revised periodically. This amendment should be prompted to change pricing, product, customer focus and market share strategy to improve corporate profitability.