Order 4581764-APA- 4-1 Discussion Capital Budgets
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RUNNING HEAD: BUDGETING IN HEALTHCARE
1
Budgeting in Healthcare
Name:
Institution Affiliation:
Date:
BUDGETING
2
2. Assuming Dr. Delgado and Mr. Cohn are unhappy with the “bottom line” of this
budget, what options are available to change it? Which options seem the most feasible to
implement?
Since Dr. Delgado and Mr. Cohn are unhappy with the “bottom line” of the budget,
they have two options to change it. These options include:
a.)
Increase revenue: This is the simplest option the two can incorporate
into the budget, although actualizing it will prove difficult. Dr. Delgado could
approach it by raising prices if they use this option. Price increase might be a viable
approach, but one that may be had to tell if it impacts the volume of work at the
hospital (Strata, n.d.). Regulators and hospital boards generally determine prices;
hence the hospital will charge whatever is presented to them. Another approach would
be to increase volume. Dr. Delgado is actualizing this approach, although she only has
a set of numbers she can use to project the expected increase.
b.)
Reduce costs: using this option entails reducing fixed costs. Reducing
fixed costs is a sound approach, although it is difficult to determine its viability. Fixed
costs increase as a business experiences growth and don’t reduce with a decline.
Another approach under this option is reducing the variable cost per unit (Rajan et al.,
2016). Such can be achieved through lowering factor prices like nursing wages,
supply costs per unit, and technician’s pay. It can also be achieved through efficiency
improvement through a reduction in the number of nurses per bed day, or supplies per
X-ray or laboratory test.
From the above options, the best option Dr. Delgado can adopt is the second option as
it is more viable and would not heavily impact the institution’s revenue by reducing the
number of patients making visits.
BUDGETING
3
3. What approach should be taken to include the department’s fixed costs in the
budget? If, after attaching the appropriate amount of fixed costs to each DRG, one
DRGs is losing money, what action should Dr. Delgado take?
The Department of Medicine is categorized under the second stage of the cost
accounting effort. The stage encompasses attaching overhead costs to the commodities or
services offered (Rajan et al., 2016). To identify the product’s full expense, the department
must determine several cost drivers for different overhead pools. For example, one pool
includes the facility costs that encompass depreciation allocation for the hospital and the
department. Such a scheme would aid Dr. Delgado in increasing her understanding of her
perspective of who wins and who losses. If one DRG is still losing money after this
undertaking, Dr. Delgado can strive to minimize costs by utilizing the least resources per
case. She can also decide to keep off cases with the loss-making DRG; such should be
cautiously approached. She can also try negotiating for a price enhancement.
4. What problems do you think Mr. Cohn will encounter in expanding this effort to the
rest of the department of Medicine? The rest of the hospital? What should be done
about those problems?
The actualization of the fronted budget through a reduction in wages of nurses and
technicians may compromise the quality of services offered as many of the individuals
affected may end up not giving their best. A reduction in salaries and wages is demoralizing
to employees; hence such can affect their productivity. Such could comprise quality services,
thus affecting the hospital’s image. In implementing the approach, Mr. Cohn will experience
resistance from the nurses and technicians in the department of Medicine. Such can cause
friction between the management and the staff. To solve such problems, Mr. Cohn must
comprise the budget information’s substance that he utilized. He will have to work with
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BUDGETING
4
whatever budget totals he has for the department of Medicine and keep the budget for other
departments steady.
BUDGETING
5
References
Rajan, D., Barroy, H., & Stenberg, K. (2016). Budgeting for health.
Strategizing National
Health in the 21st Century: A Handbook. Geneva: WHO
, 393-444.
https://www.researchgate.net/publication/318961618_Chapter_8_Budgeting_for_healt
h
Strata. (n.d.).
Healthcare & Hospital Capital Analysis and Budgeting
. Strata Decision
Technology. https://www.stratadecision.com/healthcare-and-hospital-capital-budget/
1.