Nursing Operating Budgets

Essay Nursing Operating Budgets

Synopsis

The capital budget will be defined. The non-labor operating budget will be explored. The labor budget for a thirty bed telemetry unit with a nurse to patient ratio of 1.6: 1 will be examined. Line items on a capital budget, non-labor operating budget and labor budget will be examined. The elements which compose a staffing mix will be examined. The ramifications of operating with a marginal staff will be examined.

Labor Budget

Research has demonstrated that increased levels of patient staffing are directly related to improved teamwork in health care facilities.  Increased levels of staffing are a causal attribution of the quality of care and lower staff turnover. Lower vacancy rates and staff turnover have been linked to increased levels of patient staffing. Nursing teamwork is directly related to the physical characteristics of the health care facility such as number of beds, case mix index and nurse staffing. The type and level of nurse staffing is related to patient outcomes .The relationships which will be demonstrated in this research paper are the relationship to nurse staffing, nurse teamwork, staff confidence, team orientation, back up, a collective mental model and effective team orientation (Kalisch et al., 2011).

In budgets, the labor costs for a thirty bed telemetry unit, 1.15 FTEs are allocated per nurse staffing personnel. A thirty bed telemetry unit and a 1.6:1 nurse to patient ratio would require thirty RNs, eighteen nursing assistants, one director of nursing and unit secretary. The salary staffing mix is 70% RN, 25% nursing assistants. The shifts would be 60% with rotating shifts (Kalisch et al., 2011).

The approximate salary for a director of nursing is $140,000 per year. The director of nursing is required to have five years of experience in nursing administration, a BSN and critical nursing experience (ihirenursing.com, 2013). The total salary for a registered nurse is between $40, 157 and $79, 759 per year. The duties of RN care are the following: teacher, healer, administrator and counselor. A nimble mind is required in addition to an associate’s degree, a diploma or a bachelor’s degree. Registered nurses with BSN degrees are offered the opportunity to move into management and augment their salary (payscale.com). The annual salary of a nursing assistant is $18,995- $31, 719. The nursing assistant composes approximately 25% of the labor budget for a thirty bed telemetry unit (payscale.com). Unit secretaries and directors of nursing compose approximately 5% of the staffing mix. The unit secretary salary is between $20, 164- $36,362.

Calculating the Labor Budget

In calculating the nursing budget, we must analyze the average daily census (ADC). The ADC is calculated by totaling the number of patients in a year and dividing by the number of days in a year. The ADC is multiplied by the Average Nursing hours per patient day (NHPPD).  This gives us the average NHPPD per year. The average total nursing staff direct care FTEs divided per 2080 hours gives the number of nursing staff direct care FTEs. 2080 divided by the number of productive hours of each FTE gives the percentage of productive hours per FTE. 2080 divided by the number of productive hours gives the actual number of FTEs. Two week  vacation which total eighty hours, ten sick days which total eighty hours, eight holidays which total forty eight hours and two education days must be included. The total staffing budget for a thirty bed telemetry unit, including director of nursing, unit secretary is $2,446,000 (see attached spreadsheet line 8). An example of a line item in the thirty bed telemetry unit nursing budget is benefits for the nursing staff is $611, 500. This is another example of a labor budget line item (hrsonline.org).

Nurse staffing is very important because of the influence that it has upon patient safety and patient perceptions of quality care. Urinary tract infections, shock, upper gastro intestinal hemorrhage and pneumonia are very sensitive to nursing care. The majority of the negative patient outcomes have been documented due to the premise that a negative patient outcome is more likely to be recorded. Lower nurse to patient ratios have been linked to higher incidences of non-fatal adverse patient outcomes. This research has not d3emonstrated that lower nurse staffing levels are associated with increased mortality. Higher nurse staffing is related to a 2% decrease in adverse patient outcomes. Research has demonstrated that a 21% increase in hospital patient acuity between 1991 and 1996. A decline of 14.2% in the ratio of licensed nursing staff to acuity related patient day of care has been realized within the five years from 1991 to 1996. Research has also demonstrated that;

  • 40 % of nursing professionals are unhappy with their working conditions.
  • 35.7 % of nursing professionals classified the quality of care in their health care facility as outstanding.
  • 44.8% of nursing professionals have noticed a decrease in the quality of care at their health care facility.
  • 83 % of nursing professionals reported an increase in the average daily census (ADC).
  • 34.4% of nursing professionals perceive that there is enough RN to supply high quality care.
  • 33.4% believed that their health care facility has enough staff to accomplish the assigned tasks (Stanton, 2012)

A Markov cohort simulation is applied in determining the cost effectiveness of suggested staffing versus median staffing in patients requiring acuity based treatments. The cost effectiveness of suggested staffing versus median staffing is $321,000 per discounted quality of life year gained. This aspect is especially important in patients who require acuity based treatments from the health care facility (Ganz et al., 2005).

Various budgets are applied by health care organizations. These budgets are implemented in order to coordinate the situation of a program or initiative. The operating budget is implemented in order to coordinate to the daily transactions over an accounting period (Danna, 2011). An example of a line item in an operating budget is revenue. A salary operating budget would contain benefits as a line item. Capital budgeting is the method by which the finance team decides whether or not to invest capital resources in particular projects or assets.  An example of a capital budget line item is clinical furnishings (hrs.online.org)

The elements of a capital budget decide which capital equipment will be purchased and which facilities will be renovated, constructed, or rented. These components enable the finance management team to ascertain the depreciation costs which will need to be included in the following accounting period. Depreciation costs compose part of the operating budget. Capital budgeting decisions will be realized before the operating budget finalization. Items which are included in the capital budget are major pieces of clinical and office furnishing. These items include but are not limited to office equipment, X-ray machines, magnetic resonance imaging (MRI), computerized topographical devices (CT scanners) and positron emission tomography scanners (PET scanners). The facility and fixed improvements (i.e., plumbing and wiring) are also elements of the capital budget (gehealthcare.com).

The operating budget includes the expenses related to equipment (i.e., capital equipment maintenance and financing). Labor and staffing expenditures are also part of the operating budget; In addition, education supplies, medications and printing supplies are elements of the operating budget.

Nursing Operating Budgets
Nursing Operating Budgets

In the strategic planning process, the quantity of capital equipment will be decided. Details which must be considered are the depreciation expense which remains on existing equipment and the objective of the health care facility in its development. The primary purpose of the capital budget is to classify the capital items to be procured in the following accounting period. These items require a capital proposal which must be received six to twelve months prior to acquisition. The department administrator will usually compose the initial draft of the request. This draft will be refined and submitted to the finance managers for viability. The elements of the capital budget are the following;

  • Specifications of the item which requires capital funding.
  • Conditions which require the acquisition and implementation of the capital item.
  • The financial influence of the acquisition on the target market, unit, patients and nursing personnel.
  • Initial price estimates.
  • Decision making standards which approach the strategic mission and objective of the health care organization (gehealthcare.com)

The annual capital and operating budget required by a thirty bed telemetry unit with a nurse to patient ratio of 1.6: 1 can be classified into the capital budget which considers equipment, building and other initiating expenses and the operational budget which will provide for continuing expenses. These continuing expenses may include medical supplies, salary and benefit expense. The establishment of a twenty four hour, seven day a week should include the following line items as capital expenditures.  This is an example of a justification of a line item in the nursing capital budget:  The cost of thirty beds is $212,000. In order to justify the expense of the beds, the following must be considered;

  • Increase in nursing efficiency.
  • Decrease the application of specialty beds.
  • Decrease the number of accidents.

The beds which are to be incorporated in the thirty bed telemetry unit must have the following:

  • Exit notification system.
  • Scale.
  • Inflatable and deflate mattresses.
  • Ability to be adjusted to a ninety degree sitting position.
  • Ability to be raised and lowered from the floor.
  • Ability to automatically disengage the headboard in order to facilitate the administration of CPR.

In a thirty bed telemetry unit, the savings of acquiring thirty beds is $12,645.00. The benefits of this acquisition result in the elimination of two specialty beds which cost $23,400.00. The acquisition of the thirty beds will also result in the reduction of injury to staff and patients (Hardy, 2004).

The expense of new hospital construction programs vary from $900,000.00 to $1,300,000.00 per bed. This strategy must be well considered in order not to bring the health care organization to bankruptcy. If these changes are well implemented, the project is designed to improve the facility’s ability to attract patients, increase long term operational performance and to realize a return on the capital expense (Rich & Hosking, 2013).

Research has demonstrated that increased levels of patient staffing are related to improved teamwork in health care facilities. Increased levels of patient staffing are also related to the quality of care and staff turnover. Lower staff turnover and a lower vacancy rate have been linked to increased levels of patient staffing. Nursing physical teamwork is related to the characteristics of the health care facility. These physical characteristics are: the number of beds, case mix index and nurse staffing. The level and type of patient staffing is directly related to the following;

  • Patient results.
  • Patient safety.
  • Diminishing the patient fall rates.
  • Clinical mistakes
  • Better nursing staff performance (Kalisch et al., 2011)

Hospital

Bed Size

Units In Study

Age > 35   Years

Gender Female %

BSN> Educational   Level

Experience >   2 Years

Occupation  (%RN)

Full Time (%)

Rotating Shift   (%)

1

760

15

51

90

51

72

65

88

60

2

317

12

69

87

31

75

61

82

55

3

304

7

78

92

37

89

59

83

55

4

913

18

54

90

55

69

84

80

59

Total

52

60

89

46

74

70

83

58

The HPPD rates for which the units participated in the survey varied from 6.27 to 21.30. The average was 11.02. The average RN rate was 8.91 with values varying from 3.75 to 20.89. The average skill mix is 0.79 with values varying from 0.53 to 1.00. The average case mix index (CMI) was 2.28 with values varying from 0.83 to 6.93. A positive relationship between the number of hospital beds and the nursing teamwork ratings was established. The higher the level of HPPD, RN HPPD and skill mix, the higher the level of nursing teamwork (Kalisch et al., 2011)

The concept of assisted living is defined as a philosophy which is different from other types of residential care. This system supports autonomy, privacy and respect. Many health care facilities divide their beds into wars or designated areas. The Nursing Home Reform Act is also known as the Omnibus Budget Reconciliation Act of 1987 (OBRA, 1987). This legislative act requires that a health care facility supply a level of care which facilitates the patient “to attain and maintain the highest practicable physical, mental and social wellbeing”. As defined by these legislative acts, the number of square feet required per bed is sixty square feet.

The number of direct care FTEs multiplied by the actual FTEs;

  1. Ascertain the ratio of nursing staff classification to the nursing staff mix. Multiply the percentage of each nursing staff classification.
  2. Ascertain the cost of the nursing staff by entering the salary and benefits for each nursing classification.
  3. Ascertain the ratio of the staff that would be appropriate by shift. Divide this ratio of the staff required by each shift to ascertain the FTEs in each nursing classification.
  4. Ascertain the percentage of full time staff compared to the part time staff. Divide this ratio by the number of FTEs by the full time or part time percentage.

The elements of a capital budget determine which capital equipment will be purchased, which facilities will be renovated, rented or constructed. These components will enable the finance management team to ascertain which capital budget decisions will be made before the operating budget finalization. Items which are included in the capital budget as line items are major clinical furnishings, including office equipment. The facility and fixed improvements are elements of the capital budget (gehealthcare.com). The non-labor operating budget includes the expenses related to equipment, labor and staffing expenditure. Educational supplies, medications, medical supplies and printing supplies compose the operating budget (see lines 10 – 19 on spreadsheet). The annual operating budget includes RNs (70%), technicians (25%) and support staff (5%). In calculating the budget 1.15 FTEs is allocated to each registered nurse (hrsonline.org). Research has demonstrated that increased staffing levels are related to improved teamwork in health care facilities. Increased staffing levels are directly related to the quality of patient care and lower staff turnover. Nursing teamwork is related to the physical characteristics of the health care facility. These characteristics include the number of beds, case mix index and nurse staffing (Kalisch et al., 2011). A Markov- cohort simulation is applied in determining the cost effectiveness of suggested staffing versus median staffing in patients requiring acuity based care. The cost effectiveness of suggested staffing versus median staffing is $321,000.00 per discounted quality of life years gained. This aspect is especially important in patients who require acuity based treatments from the health care facility (Ganz et al., 2005).

Bibliography

Assisted Living Facilities. Encyclopedia of Everyday Law (2013)

Danna, D. (2011) Learning and Mastering the Operating Budget  Strategies for Nurse Managers.com.

Dunham- Taylor, J. (2009) Financial Management for Nurse Managers. Merging the Heart with the   Dollar. Jones and Bartlett Publishers

Ganz, D. (2005) Cost effectiveness of recommended nurse staffing levels for short stay skilled nursing facility patients  BMC Health Serv Res 5:35

GE Health Care Financial Service (n.d.) Capital Analysis Self Tutorial Module 1. How Decisions are Made

Hardy, P. (2004) The impact of nursing care and other health care attributes on hospitalized patient Satisfaction and behavioral intentions Journal of Health Care Management May, 2004

Heart Rhythm Society (2012) Education Women’s Leadership

I Hire Nursing (2013) Director of Nursing Oakland, CA

Kalisch, B. (2011) Nurse Staffing Levels and Teamwork: A cross Sectional Study of Patient Care Units in Acute Care Hospitals Journal of Nursing Scholarship, Vol. 43(1)

Rich, D & Hosking A (2013) First the strategy, then the bricks, 3rd Edition

Stanton, M. (2012) Hospital Nurse Staffing and Quality of Care Research in Action 14 March 2012

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Steve Jones

My name is Steve Jones and I’m the creator and administrator of the dissertation topics blog. I’m a senior writer at study-aids.co.uk and hold a BA (hons) Business degree and MBA, I live in Birmingham (just moved here from London), I’m a keen writer, always glued to a book and have an interest in economics theory.

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