Lecture 12 Fiscal planning

Question 1

Incremental overtime

Answer 1

Overtime that occurs in small amounts (minutes at a time) when an employee stays past the assigned end of their shift.

Question 2

Supplies typically account for about _ of an inpatient unit’s budget.

Answer 2

7%

Question 3

Gross domestic product (GDP)

Answer 3

1. Monetary aggregate of all goods and services (i.e., production) by a country.
2. Provides a broad indication of a country’s economic health.
3. “Real GDP” - takes into account inflation and is thus a better measure of output than nominal GDP.

Question 4

U.S. spending on health care

Answer 4

1. In 2010, health care spending in the U.S. was about $2.5 trillion; this figure is expected to reach $4.35 trillion by 2018.
2. Hospital care represents the single largest category of spending (37%).
3. About 17¢ of every dollar in the U.S. is spent on health care (17.9% of GDP).
4. Health care spending per capita in the U.S. is approximately $8,200 (2012).

Question 5

Causes of rising health care costs

Answer 5

1. Unnecessary care - inappropriate or ineffective procedures; practice variability.
2. Consumer attitudes - “fix” rather than prevent; use of the most expensive modality and/or clinician.
3. Health care financing - third-party payor system.
4. Pharmaceutical use - copays encourage expensive drug selection; consumer marketing; polypharmacy.
5. Changing population demographics; disease conditions - baby boomers, older groups fastest growing; some chronic conditions are treatable - HIV.

Question 6

Pay-for-performance programs

Answer 6

Form of compensation in which incentives are paid to providers to achieve a targeted threshold of clinical performance, typically a process or outcome measure associated with a specified patient population.

Question 7

Budget

Answer 7

1. A financial plan that includes estimated expenses as well as income for a period of time.
2. Goals: To predict an organization’s activities, to maximize the use of resources, and to help with planning and control.

Question 8

Cost containment

Answer 8

1. Effective and efficient delivery of services while generating needed revenues for continued organizational productivity.
2. This is the responsibility of all members of the health care team, not just leaders.

Question 9

Cost effectiveness

Answer 9

Producing good results for the amount of money spent (in other words, “the product is worth the price”).

Question 10

Responsibility accounting

Answer 10

1. Each of an organization’s revenues, expenses, assets, and liabilities is someone’s responsibility.
2. At the unit level, the unit manager is usually the person most responsible for these financial elements.

Question 11

Forecasting

Answer 11

Making an educated budget estimate by using historical data.

Question 12

Fixed expenses

Answer 12

1. Expenses that do not vary.

2. Examples: A building’s mortgage payment; manager’s salary.

Question 13

Variable expenses

Answer 13

1. Expenses that vary with volume.

2. Examples: Payroll of hourly wage employees; cost of supplies.

Question 14

Controllable expenses

Answer 14

1. Expenses that can be controlled or varied.

2. Examples: The number of personnel working on a certain shift; staffing mix.

Question 15

Noncontrollable expenses

Answer 15

1. Expenses that cannot be controlled or varied.
2. Examples: Equipment depreciation; the number and type of supplies needed by patients; overtime that occurs in response to an emergency.

Question 16

Steps in the budgetary process

Answer 16

1. Assess what needs to be included in the budget, based on input from all personnel.
2. Develop the fiscal plan.
3. Implement the plan.
4. Evaluate the plan.
5. Make adjustments and explain variances.

Question 17

Personnel budget

Answer 17

Budgeted expenses to cover the cost of personnel; includes actual worked time and time the organization pays the employee for not working, such as cost of benefits, new employee orientation, employee turnover, sick and holiday time, and education time.

Question 18

Operating budget

Answer 18

Those expenses that change in response to the volume of service, such as the cost of electricity, repairs and maintenance, and supplies.

Question 19

Capital expenditure budget

Answer 19

1. Expenses to cover major purchases (e.g., real estate) and acquisitions (e.g., MRI equipment).
2. This type of budget usually covers a time period of more than 5 years.

Question 20

The single largest budget expenditure is _

Answer 20

Personnel (and nursing is the largest component of personnel).

Question 21

Personnel is commonly included as a component of the _ budget.

Answer 21

Operating.

Question 22

Zero-based budgeting

Answer 22

1. Form of budgeting that requires a re-justification of needs every budgeting cycle (i.e., “starting with zero” every year).
2. The use of a decision package to set funding priorities is a key feature of this type of budgeting.

Question 23

Incremental budgeting

Answer 23

Budgetary approach in which a new budget is projected by multiplying current-year expenses by a certain figure, usually the inflation rate or consumer price index.

Question 24

Flexible budget

Answer 24

Form of budgeting that adjusts over time depending on volume, labor costs, capital expenses, etc.

Question 25

New performance budgeting

Answer 25

Budgeting for specific outcomes and results.

Question 26

Workload units

Answer 26

In nursing, workloads are usually the same as patient-days. For some areas, however, workload units might refer to the number of procedures, tests, patient visits, injections, and so forth.

Question 27

Case mix

Answer 27

Type of patients served by an institution. A hospital's case mix is usually defined in such patient-related variables as acuity levels, diagnosis, personal characteristics, and patterns of treatment.

Question 28

An average case mix index (CMI) is _

Answer 28

1.0

Question 29

Full-time equivalent (FTE)

Answer 29

Number of hours of work for which a full-time employee is scheduled for a weekly period. For example, 1.0 FTE = five 8-hour days of staffing, which equals 40 hours of staffing per week.

Question 30

1 FTE is the equivalent of working _ hours per year.

Answer 30

2,080

Question 31

A nurse working three 12-hour shifts per week is said to be working _ FTEs.

Answer 31

0.9

Question 32

Diagnosis-related groups (DRGs)

Answer 32

Rate-setting PPS used by Medicare to determine payment rates for an inpatient hospital stay based on admission diagnosis. Each DRG represents a particular case type for which Medicare provides a flat dollar amount of reimbursement.

Question 33

Cost center

Answer 33

Smallest functional unit for which cost control and accountability can be assigned. A *nursing unit* is usually considered a cost center, but there may be other cost centers within a unit (orthopedics is a cost center, but often the cast room is considered a separate cost center within orthopedics).

Question 34

Managed care

Answer 34

Term used to describe a variety of health care plans designed to contain the cost of health care services delivered to members while maintaining the quality of care.

Question 35

Capitation

Answer 35

A prospective payment system (PPS) that pays health plans or providers a fixed amount per enrollee per month for a defined set of health services, regardless of how many (if any) services are used.

Question 36

Cash flow

Answer 36

Rate at which dollars are received and dispersed.

Question 37

Revenue

Answer 37

Source of income or the reward for providing a service to a patient.

Question 38

Medicare

Answer 38

1. *Nationwide* health insurance program authorized under Title 18 of the Social Security Act that provides benefits to people aged 65 years or older. 2. Coverage is also available to certain groups with catastrophic or chronic illness, such as patients with renal failure requiring hemodialysis, regardless of age.

Question 39

Medicaid

Answer 39

1. Federally *assisted* and state *administered* program to pay for medical services on behalf of certain groups of low-income individuals. 2. Certain groups of people (e.g., the elderly, blind, disabled, members of families with dependent children, and certain other children and pregnant women) also qualify for coverage if their incomes and resources are sufficiently low.

Question 40

Most payment for health care services comes from _

Answer 40

Private contributions.

Question 41

Medicaid vs. Medicare

Answer 41

1. Medicaid is for children, single mothers, disabled, etc. 2. Medicare is for persons 65 or older. 3. A person *can* have both Medicare and Medicaid (e.g., if they are older than 65 and they have a disability).

Question 42

Medicare Part A

Answer 42

Insurance for hospitalization (acute, skilled, hospice and home health).

Question 43

Medicare Part B

Answer 43

1. Medical insurance for office visits, etc. 2. Also applies to preventative services such as screenings, immunizations, annual wellness visits, and tobacco cessation counseling.

Question 44

Medicare Part D

Answer 44

Prescription drug coverage - based on parish/county of residence.