Lecture 12 Fiscal planning Flashcards
Incremental overtime
Overtime that occurs in small amounts (minutes at a time) when an employee stays past the assigned end of their shift.
Supplies typically account for about _ of an inpatient unit’s budget.
7%
Gross domestic product (GDP)
- Monetary aggregate of all goods and services (i.e., production) by a country.
- Provides a broad indication of a country’s economic health.
- “Real GDP” - takes into account inflation and is thus a better measure of output than nominal GDP.
U.S. spending on health care
- 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.
- Hospital care represents the single largest category of spending (37%).
- About 17¢ of every dollar in the U.S. is spent on health care (17.9% of GDP).
- Health care spending per capita in the U.S. is approximately $8,200 (2012).
Causes of rising health care costs
- Unnecessary care - inappropriate or ineffective procedures; practice variability.
- Consumer attitudes - “fix” rather than prevent; use of the most expensive modality and/or clinician.
- Health care financing - third-party payor system.
- Pharmaceutical use - copays encourage expensive drug selection; consumer marketing; polypharmacy.
- Changing population demographics; disease conditions - baby boomers, older groups fastest growing; some chronic conditions are treatable - HIV.
Pay-for-performance programs
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.
Budget
- A financial plan that includes estimated expenses as well as income for a period of time.
- Goals: To predict an organization’s activities, to maximize the use of resources, and to help with planning and control.
Cost containment
- Effective and efficient delivery of services while generating needed revenues for continued organizational productivity.
- This is the responsibility of all members of the health care team, not just leaders.
Cost effectiveness
Producing good results for the amount of money spent (in other words, “the product is worth the price”).
Responsibility accounting
- Each of an organization’s revenues, expenses, assets, and liabilities is someone’s responsibility.
- At the unit level, the unit manager is usually the person most responsible for these financial elements.
Forecasting
Making an educated budget estimate by using historical data.
Fixed expenses
- Expenses that do not vary.
2. Examples: A building’s mortgage payment; manager’s salary.
Variable expenses
- Expenses that vary with volume.
2. Examples: Payroll of hourly wage employees; cost of supplies.
Controllable expenses
- Expenses that can be controlled or varied.
2. Examples: The number of personnel working on a certain shift; staffing mix.
Noncontrollable expenses
- Expenses that cannot be controlled or varied.
- Examples: Equipment depreciation; the number and type of supplies needed by patients; overtime that occurs in response to an emergency.
Steps in the budgetary process
- Assess what needs to be included in the budget, based on input from all personnel.
- Develop the fiscal plan.
- Implement the plan.
- Evaluate the plan.
- Make adjustments and explain variances.
Personnel budget
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.
Operating budget
Those expenses that change in response to the volume of service, such as the cost of electricity, repairs and maintenance, and supplies.
Capital expenditure budget
- Expenses to cover major purchases (e.g., real estate) and acquisitions (e.g., MRI equipment).
- This type of budget usually covers a time period of more than 5 years.
The single largest budget expenditure is _
Personnel (and nursing is the largest component of personnel).
Personnel is commonly included as a component of the _ budget.
Operating.
Zero-based budgeting
- Form of budgeting that requires a re-justification of needs every budgeting cycle (i.e., “starting with zero” every year).
- The use of a decision package to set funding priorities is a key feature of this type of budgeting.
Incremental budgeting
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.
Flexible budget
Form of budgeting that adjusts over time depending on volume, labor costs, capital expenses, etc.
New performance budgeting
Budgeting for specific outcomes and results.
Workload units
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.
Case mix
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.
An average case mix index (CMI) is _
1.0
Full-time equivalent (FTE)
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.
1 FTE is the equivalent of working _ hours per year.
2,080
A nurse working three 12-hour shifts per week is said to be working _ FTEs.
0.9
Diagnosis-related groups (DRGs)
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.
Cost center
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).
Managed care
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.
Capitation
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.
Cash flow
Rate at which dollars are received and dispersed.
Revenue
Source of income or the reward for providing a service to a patient.
Medicare
- Nationwide health insurance program authorized under Title 18 of the Social Security Act that provides benefits to people aged 65 years or older.
- Coverage is also available to certain groups with catastrophic or chronic illness, such as patients with renal failure requiring hemodialysis, regardless of age.
Medicaid
- Federally assisted and state administered program to pay for medical services on behalf of certain groups of low-income individuals.
- 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.
Most payment for health care services comes from _
Private contributions.
Medicaid vs. Medicare
- Medicaid is for children, single mothers, disabled, etc.
- Medicare is for persons 65 or older.
- A person can have both Medicare and Medicaid (e.g., if they are older than 65 and they have a disability).
Medicare Part A
Insurance for hospitalization (acute, skilled, hospice and home health).
Medicare Part B
- Medical insurance for office visits, etc.
- Also applies to preventative services such as screenings, immunizations, annual wellness visits, and tobacco cessation counseling.
Medicare Part D
Prescription drug coverage - based on parish/county of residence.
