As a member of the finance team, you have been asked to forecast the upcoming year’s operational budget for Krona Community Hospital. Click here for last year’s budget. After reviewing specific data, internal input, and external input from various sources, you find that the executive management team would like the budget to reflect the following:
- 10% increase in inpatient revenue
- 15% increase in outpatient revenue
- 5% increase in pharmacy revenue
- 15% increase in home health and hospital revenue
- 10% increase in payroll and benefits
Additionally, provide discussion on the following:
- How do you think that revenue would increase in each of the areas? Think outside of the box, and perform research to determine current trends in those areas.
- Why would there be a forecasted need to increase payroll and benefits?
- Explain the role of key leadership in the budgeting process, from the chief executive officer down through to the staff level of a financial analyst.
Expert Solution Preview
As a medical professor tasked with designing and conducting lectures, evaluating student performance and providing feedback through examinations and assignments, my expertise is rooted in healthcare studies with a focus on patient care, healthcare management, and finance. In response to the questions presented, I shall provide my perspective based on my knowledge and research on healthcare finance.
It is essential to note that revenue is critical in forecasting a budget for any healthcare organization, including Krona Community Hospital. Therefore, to forecast an accurate budget, we need to consider each area’s revenue and other factors that influence it. For inpatient and outpatient revenue, the hospital can increase revenue by reducing waits and increasing service quality, which would lead to more patient satisfaction, more referrals, and revenue increases. Similarly, in pharmacy revenue, increasing the hospital pharmacy’s drug formulary and collaborating with pharmacy benefit managers to negotiate drug prices can boost revenue. For home health and hospital revenue, Krona Community Hospital can increase its market share by expanding its services to new geographical areas and increasing outreach to physicians and other referral sources.
The forecasted need to increase payroll and benefits can be explained by several factors. One of the primary factors is the increase in healthcare personnel salaries and wages, which is in line with current market trends. Additionally, the hospital may need to hire more nurses, physicians, and other healthcare personnel to cater to the patients’ growing needs, leading to an increase in payroll and benefits. The hospital may also need to invest in training and development initiatives to improve the quality of patient care and meet the evolving healthcare standards.
The role of key leadership in the budgeting process is critical, and it encompasses various levels of management. The chief executive officer (CEO) plays a significant role in setting the budgeting process’s strategic direction and overall budgetary targets. The chief financial officer (CFO) is responsible for ensuring that the budget reflects the hospital’s financial goals and is aligned with the strategic plan. Additionally, the CFO ensures that the budget is in compliance with regulatory requirements and financial regulations. Finally, the financial analyst staff provides data-driven inputs to the budgeting process, such as revenue projections, expense trends, and capital investment requirements. Overall, key leadership ensures that the budgeting process is collaborative, data-driven, and aligned with the hospital’s strategic goals.