Bring to mind a wide range of healthcare organizations, such as a long-term care facility, large for-profit hospital, a physicians’ practice, Veterans Affairs hospital, or a state-run clinic. Consider how budgeting would be influenced depending on an organization’s sources of funding. How do you think the purposes or uses of a budget vary according to the kind of healthcare organization it is?
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CLASSMATE’S POST
Several different layers must be looked at when discussing the types of budgets that an organization can have. As there is a vast array of forms a healthcare organization can take, so too can the budgets vary. The one way that they can be the most related is being a conventional based budget rather than a zero-based budget. While a zero-based budget starts from scratch, a conventional budget uses the previous year as a starting point. Particularly for healthcare organizations, this is a good start as unless there are significant changes, volume estimates should remain similar. Where organizations start to differ is in their approach to forming a budget. In an organization such as a long-term care facility, a not-for-profit, or a for-profit hospital, a bottom-up approach is used to look to the different departments to guide their money spending. These organizations tend to have more flexible budgets that can change with the needs of the organization. In facilities such as the VA or a state-run hospital, the amount of money to be spent for the year is set and cannot change, therefore more of a top-down approach is utilized.
All these organizations have a master budget that consists of several different budgets, all the budgets are used and assessed, but depending on the type of organization the focus varies. There is the statistics budget which looks at the patient volume and the resources needed to support that volume, the revenue volume which focuses on the revenue of the organization, the expense budget which looks at the costs associated with providing service, and the operating budget which combines the revenues and expenses to obtain an overall picture of the organization. For-profit hospitals and physician practices may focus more on the revenue coming in first and expenses second. Conversely, the state-run and VA hospitals will be more focused on their expenses. Not-for-profit hospitals on the other hand, while concerned with revenue and expenses, look at statistics to ensure that they can provide the resources to their patients and expected volume.