Start of Final: Week 9: Budget Flashcards
___ is responsible for cost
Everyone
Patient Protection and Affordable Care Act
Act that reduces the uninsured, increases access to care, and gives help for preexisting conditions
Ongoing Topic Politically
Accountable Care Organizations
Groups working together to take care of high risk patients
Goals of seamless quality care and coordination of care
Medical Home
Team like process for improved access to services, quality, and outcomes of patient care
Pandemic Strain
High surge of patients with longer hospital stays
Also add on state and federal mandates, loss of nursing personnel, worker burnout, and financial issues
What are some ways to manage cost while maintaining quality of care
Effective and quality services
Efficient services
Equals out in revenue
Culture where everyone is responsible
Responsibility is on the unit manager - manage budgets and QI Projects which are then reported to directors
Budget
a financial plan
must be as accurate as possible
Fixed Expenses
Things in the budget at a set cost
Mortgages, Salaries, etc
Variable Expenses
Things that vary in cost over time
Payroll of hourly employees, cost of supplies
Controlled Expenses
Expenses the company has fully control over
ex: how many people work during a shift
Uncontrollable Expensives
Emergency Spending, things that cannot be fully controlled
Ex: Emergencies needing more staff/time, supplies needed to care for patients
The steps of budgeting are similar to
the nursing process
Steps to Budgeting
- Assess - what are the needs
- Diagnosis - goal/what needs to be accomplished
- Plan - set time
- Implementation - continue to assess for change
- Evaluation - review, add, remove
3 Important Types of Budgets
Personnel Budget
Operating Budget
Capital Budget
What type of budget is the largest expenditure for the hospital
Personnel Budget
Operating Budget
Expenses that change - ex: Electricity, repairs, maintenance, supplies
Capital Budget
Expenses on buildings and major equipment that increase agency capital
For major improvement spending
Insurance Reimbursement Options for Services
Medicare
Medicaid
Prospective Payment System
Managed Care Organization
Private Insurance Companies
Medicare (MC)
Federally funded program for seniors over age 65 of disabled
Recipients pay into the insurance plan, several parts of MC that cover a variety of services
Medicaid (MA)
Federal/State Plan to assist indigent population, disabled, and long term care
Prospective Payment Systems (PPS)
What providers can charge - ICD codes, DRGs which connect to payout for specific dx group
Medicare is paying based on a predetermined fixed amount based on dx and then the provider should keep below that to make money
Managed Care Organization (MCO)
Health programs that look at efficiency, access, and cost, PCP as gatekeepers
Partly employee and partly employer pays
There is a network of providers that the patient can see in which they are covered
Private Insurance Companies
Employer sponsors or recipient private pays for insurance coverages, employees pay into the system for coverage
What are some opportunities for the RN to work in budgeting specifically
Staff nursing
Managers and Leaders
Quality Control
Technology
Fiscal Budgeting
Supply Allocation / Distribution Buyer / Manager
Vendor Representative
Volume v Value
Volume - Considers how much of a product is purchased
Value - Considers quality, efficiency, safety and cost
Fiscal planning is not ____, it is…
intuitive; it is a learned skill that improves with practice
Forecasting
Making an educated budget estimate using historical data
Cost Containment
refers to the effective and efficient delivery of services while generating needed revenues for operations
It is the responsibility of every health care provider and the viability of most health care organizations today depend on their ability to use financial resources wisely
Cost Effective
Not the same as being inexpensive
Means producing good results for the money spent
the product is worth the price
What is more cost effective - expensive or inexpensive items
It depends because expensive items can be cost effective while inexpensive items could not be and vice versa
Spending does not always equate to…
better quality health outcomes
Responsibility Accounting
Each of an organizations revenues, expenses, assets and liabilities is some ones responsibility
Budget
financial plan that includes estimated expenses as well as income for a set period of time
The more accurate the budget blueprint…
the better the institution can plan the most efficient use of resources
A budgets value is directly related to its ____
accuracy
A budget at best is a ___ or ___ not a ____
plan/prediction not a rule
Fixed Expenses
Expenses not varying in volume
ex: mortgage payment, salary
Variable Expenses
Vary with volume
Payroll for hourly wage and cost of supplies
Controllable Expenses
can eb controlled or varied by the manager
ex: number of personnel working a certain shift
Noncontrollable Expenses
cannot be controlled or varied by the manager
ex: equipment depreciation, the number and type fo supplies needed by patients, or overtime that occurs in response to an emergency
Accountable Care Organizations
groups of providers and suppliers of service who work together to better coordinate care for Medicare patients (does not include Medicare Advantage) across care settings
Acuity Index
weighted statistical measurement that refers to severity of illness of patients for a given time. Patients are classified according to acuity of illness, usually in one of four categories. The acuity index is determined by taking a total of acuities and then dividing by the number of patients.
Affordable Care Act
officially known as the Patient Protection and Affordable Care Act, this act passed in March 2010 to provide more Americans access to affordable health insurance
Assets
financial resources that a health-care organization receives, such as accounts receivable
Baseline Data
historical information on dollars spent, acuity level, patient census, resources needed, hours of care, and so forth. This information is used as basis on which future needs can be projected.
Break Even Point
point at which revenue covers costs. Most health-care facilities have high fixed costs. Because per-unit fixed costs in a noncapitated model decrease with volume, health-care facilities under this model need to maintain a high volume to decrease unit costs.
Bundled Payment
a payment structure in which different health-care providers who are treating a patient for the same or related conditions are paid an overall sum for taking care of that condition rather than being paid for each individual treatment, test, or procedure. In doing so, providers are rewarded for coordinating care, preventing complications and errors, and reducing unnecessary or duplicative tests and treatments
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
Case Mix
type of patients served by an institution. A hospital’s case mix is usually defined in such patient-related variables as type of insurance, acuity levels, diagnosis, personal characteristics, and patterns of treatment.
Cash Flow
rate at which dollars are received and dispersed
Controllable Costs
costs that can be controlled or that vary. An example would be the number of personnel employed, the level of skill required, wage levels, and quality of materials.
Cost Benefit Ratio
numerical relationship between the value of an activity or procedure in terms of benefits and the value of the activity’s or procedure’s cost. The cost–benefit ratio is expressed as a fraction.
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).
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 case type for which Medicare provides a flat dollar amount of reimbursement. This set rate may be higher or lower than the cost of treating the patient in a particular hospital.
Direct Costs
costs that can be attributed to a specific source, such as medications and treatments; costs that are clearly identifiable with goods or service
Fee for Service (FSS) system
a reimbursement system whereby insurance companies reimburse health-care providers a billed amount for services after the services are delivered
Fixed Budget
style of budgeting that is based on a fixed, annual level of volume, such as number of patient-days or tests performed, to arrive at an annual budget total. These totals are then divided by 12 to arrive at the monthly average. The fixed budget does not make provisions for monthly or seasonal variations.
Fixed Costs
costs that do not vary according to volume. Examples of fixed costs are mortgage or loan payments.
Full Costs
total of all direct and indirect costs
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. One FTE can be divided in different ways. For example, two part-time employees, each working 20 hours per week, would equal 1 FTE. If a position requires coverage for more than 5 days or 40 hours per week, the FTE will be greater than 1.0 for that position. Assume a position requires 7-day coverage, or 56 hours, then the position requires 1.4 FTE coverage (56 / 40 = 1.4). This means that more than one person is needed to fill the FTE positions for a 7-day period.
Health Maintenance Organization
historically, a prepaid organization that provided health care to voluntarily enrolled members in return for a preset amount of money on a per-person, per-month basis; often referred to as a managed care organization
Hours Per Patient Day (HPPD)
hours of nursing care provided per patient per day by various levels of nursing personnel. HPPD are determined by dividing total production hours by the number of patients.
Indirect Costs
costs that cannot be directly attributed to a specific area. These are hidden costs and are usually spread among different departments. Housekeeping services are considered indirect costs.
International Classification of Disease (ICD) Codes
coding used to report the severity and treatment of patient diseases, illnesses, and injuries to determine appropriate reimbursement; currently in its 10th revision (ICD-10)
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
Medicaid
federally assisted and state-administered program to pay for medical services on behalf of certain groups of low-income individuals. Generally, these individuals are not covered by Social Security. Certain groups of people (e.g., older adults, 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.
Medicare
nationwide health insurance program authorized under Title 18 of the Social Security Act that provides benefits to people aged 65 years or older. Medicare coverage also is available to certain groups of people with catastrophic or chronic illness, such as patients with renal failure requiring hemodialysis, regardless of age.
Noncontrollable Costs
indirect expenses that cannot usually be controlled or varied. Examples might be rent, lighting, and depreciation of equipment.
Not for Profit Organization
this type of organization is financed by funds that come from several sources, but the providers of these funds do not have an ownership interest. Profits generated in the not-for-profit organization are frequently funneled back into the organization for expansion or capital acquisition.
Operating Expenses
daily costs required to maintain a hospital or health-care institution
Patient Classification System
method of classifying patients. Different criteria are used for different systems. In nursing, patients are usually classified according to acuity of illness.
Pay for Performance (P4P) Programs
incentives are paid to providers to achieve a targeted threshold (typically a process or outcome measure) of clinical performance, typically a process or outcome measure associated with a specified patient population
Pay for Value Programs
incentive payments that are linked to both quality and efficiency improvements
Preferred Provider Organization (PPO)
health-care financing and delivery program with a group of providers, such as physicians and hospitals, who contract to give services on an FFS basis. This provides financial incentives to consumers to use a select group of preferred providers and pay less for services. Insurance companies usually promise the PPO a certain volume of patients and prompt payment in exchange for fee discounts.
Production Hours
total amount of regular time, overtime, and temporary time. This also may be referred to as actual hours.
Prospective Payment System
a hospital payment system with predetermined reimbursement ratio for services given
Staffing Mix
ratio of registered nurses (RNs), licensed vocational nurses (LVNs)/licensed practical nurses (LPNs), and unlicensed workers (e.g., a shift on one unit might have 40% RNs, 40% LPNs/LVNs, and 20% others). Hospitals vary on their staffing mix policies.
Third Party Payment System
a system of health-care financing in which providers deliver services to patients, and a third party, or intermediary, usually an insurance company or a government agency, pays the bill
Turnover Ratio
rate at which employees leave their jobs for reasons other than death or retirement. The rate is calculated by dividing the number of employees leaving by the number of workers employed in the unit during the year and then by multiplying by 100.
Value Based Purchasing
a payment methodology that rewards quality of care through payment incentives
Variable Costs
costs that vary with the volume. Payroll costs are an example.
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.
Fiscal Year Budget v Perpetual Budget
Fiscal year - Plan (3rd Step) for the 12 month period
Perpetual - makes it so 12 months are always available as time goes on not just a year block
A budget that is predicted too far in advance has…
greater probability for error
Personnel Budget (Workforce Budget)
Largest of the budget expenditures because healthcare is labor intensive
Most Staffing is based on a predetermined ___
standard (like HPPD)
Standard Formula for Calculating Nursing Care Hours Per Patient Day (NCH/PPD)
NCH/PPD = Nursing Hours worked in 24 hours / Patient Census
(A unit manager in an acute care facility might use this formula to calculate daily staffing needs)
What makes up the personnel budget
Worked Time (Productive Time/Salary Expense)
Time the organization pays the employee for not working (nonproductive or benefit time)
Operating Budget
Second area of expenditure reflecting expenses that change in response to the volume of services, such as electricity, repairs, maintenance and supplies
Next to personnel costs, ____ are typically the second most significant component in the hospital budget
supplies
Capital Budget
Planning for the purchase of buildings or major equipment that has a long life (5-7 years) or is not used in daily operations and is typically more expensive than operating supplies
4 Most common Budgeting Methods
Incremental Budgeting (flat percentage increase budgeting)
zero based budgeting
flexible budgeting
performance budgeting
Incremental Budgeting (Flat Percentage increase Method)
Simplest budgeting method
multiply current year expenses by a certain figure to know next years budget
usually inefficient fiscally since no motivation to contain costs and no need to prioritize programs and services occur
Zero Based Budgeting
Method where managers must re-justify their programs or needs every budgeting cycle
Does not automatically assume that because a project was funded in the past it should continue to be funded
More labor intensive for managers
Decision package to set funding priorities is a key feature
Key Components of Decision Packages in Zero Based Budgeting
- Listing of all current and proposed objectives or activities in the dept
- Alternative plans for carrying out these activities
- Costs for each alternative
- Advantages and disadvantages of continuing or discontinuing an activity
Flexible Budgets
budgets that flex up or down over the year depending on volume
automatically calculates expenses on volume occurring
Performance Budgeting
emphasizes outcomes and results instead of activities or outputs
Critical Pathways (Clinical Pathways/Care Pathways)
a strategy for assessing, implementing, and evaluating the cost effectiveness of patient care
predetermined courses of progress that patients should make after admission for a specific diagnosis or after a specific surgery
Patient progress that differs from the critical pathway prompts …
a variance analysis
Medicare Part A, B, C, D
A - hospital insurance program
B - supplementary medical insurance program that pays for outpatient care and physician services
C - Medicare Advantage - allows pt more choices for participating in managed care plans
D - allows medicare patients to purchase at least limited prescription drug coverage, either through stand alone prescription drug plans or medicare advantage prescription drug plans
Because of PPS (Prospective Payment System) and the need to contain costs…
the length of stay for most hospital admissions has decreased greatly
Balanced Budget Act (BBA)
act containing numerous cost containment measures, including reductions in provider payments for traditional FFS medicare program participants
the bulk of the savings results from limiting the growth rates for hospital and physician payments
Managed Care
system attempting to integrate efficiency of care, access, and cost of care
Primary care providers act as gatekeepers, a focus on prevention occurs, a decreased emphasis on inpatient hospital care occurs, the use of clinical practice guidelines for providers is used, and selective contracting occurs
Selective Contracting
whereby providers agree to lower reimbursement levels in exchange for patient population contracts
Utilization Review
common component of managed care
process used by insurance companies to assess the need for medical care and to assure that payment will be provided for the care
Capitation
whereby providers receive a fixed monthly payment regardless of services used by that patient during the month
MCO (Managed Care Organizations)
Network of providers funded by insurance premiums
includes point of service (POS) and exclusive provider organization (EPO)
Point of Service (POS)
type of MCO
the patient has the option, at the time of service, to select a provider outside the network but will pay a higher premium and copayment for the flexibility to do so
Exclusive Provider Organization (EPO)
type of MCO
enrollees must seek care from the designated HMO provider or pay all of the cost out of pocket
Preferred Provider Organization (PPO)
Type of MCO
render services on an FFS basis but provide financial incentives to consumers (paying less) when the preferred provider is used
The ___ is now the largest purchaser of managed care in the USA
CMS
Moral hazard
the risk that the insured will overuse services just because the insurance will pay the cost
refers to the propensity of insured patients to use more medical services than necessary because their insurance covers so much of the cost
Provision of service no longer…
guarantees reimbusement
4 Models of Bundled Care
3 are retrospective payment and one is prospective
