Summary Of Hospital Budgeting

758 Words2 Pages

Budgeting represents the process by which the leadership of an organization express the strategic goals for the future. Through budgeting those goals are made manifest in writing by controlling the resources of the organization and predicting, often through review and analysis of historic trends and information, the expected revenues. The administrator’s role in this process is to work with the board to ensure the vision and goals of the organization care be realized and controlled through the budgeting process. This role begins with a need to understand both the general workings of the health care environment, regulatory structure in which the organization operates and an understanding of accounting, planning and budgeting principles.
The …show more content…

Departmental budgeting is a concern in this scenario, the administrator must ensure that all departments are operating effectively and review their operational efficiencies when planning the wider budget. In reviewing the statement of operations data over the last 3 years it appears that operating expenses have risen approximately 11.45% (Hospital Scenario, n.d.). In designing the administrator should review this increase in the cost of operations and attempt to determine why these are …show more content…

Review of historic budget variances within department can allow the administrator to determine if variances are based in inefficacy, unforeseen rises in input costs, or in declines in departmental volumes. It is important to note that there is a limit to the effectiveness of variance analysis, specifically it is important to ensure that the cost of reviewing the variance is not more than the cost of the variance itself.
Vraciu (1979) would consider variance analysis the third phase of budget. This phase is not a single event, but a continual monthly process to ensure that cost controls are followed. This tool should only be used when there is an expected return on the investment of human capital taken to analysis the issue. This control process is not absolutely agreed upon, Tarantino (2007) believes that utilizing budgets for measures of performance leads to fraudulent behavior by managers at worst and incremental improvements at

Open Document