Budget

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FISCAL MANAGEMENT IN NURSING SERVICE ADMINISTRATION
TOPIC OUTLINE
 BASIC CONCEPTS ON NURSING LEADERSHIP AND

MANAGEMENT
 OVERVIEW OF FISCAL MANAGEMENT
 DEFINITION OF FISCAL PLANNING
 FISCAL MANAGEMENT GOALS
 PRIORITY OBJECTIVES IN FISCAL MANAGEMENT
 ROLES OF FISCAL MANAGEMENT
 LEADERSHIP ROLES IN FISCAL PLANNING
 DEFINITION OF BUDGET AND OTHER TERMS RELATED TO
BUDGETING
 TYPES OF BUDGETING
 TYPES OF BUDGET
 TYPES OF INSTITUTIONAL BUDGET DEPENDING ON
MANAGEMENT PHILOSOPHY
 CONCEPTS ON BUDGETARY PROCESS
 STEPS IN BUDGETARY PROCESS
 BENEFITS OF THE BUDGETING PROCESS
 FACTORS AFFECTING BUDGET PLANNING
 FACTORS AFFECTING NURSING BUDGET

 CONCEPTS ON COSTS
 COMPENSATION METHODS FOR SERVICES
 REPORTS AND VARIANCE ON BUDGET ANALYSIS
 STAFFING AND SCHEDULING
HENRY PAUL M. SANTOS, RN, MAN, DMS
University Of Makati-College of Nursing
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 CRITICAL THINKING
OVERVIEW OF FISCAL MANAGEMENT
Resources, such as personnel, supplies, and equipment, are critical to accomplishing
the goals and objectives in a health care delivery organization. The two major
functions that are important are budgeting and resource allocation (particularly staff).
Nursing managers are involved in all aspects of resource management. Successful
resource management is supportive of a fiscally strong organization and quality care.
FISCAL PLANNING
Fiscal planning is the formal plan for managing the financial resources. The balance
of expenditures and revenues are projected during a specific period of time, usually
annually. Allocation of projected expenses is also part of the budget. Goals and
objectives are critical to the development of a realistic budget, as well as the
monitoring of the budgetary expenses through control procedure.
FISCAL MANAGEMENT GOALS
The goal of fiscal management is to maintain fiscal records and procedures of the
agency that provides protection for the resources of the agency as well as records and
procedures which generate economy, effectiveness and efficiency of the operation.
PRIORITY OBJECTIVES IN FISCAL MANAGEMENT
1. Record keeping which protects the agency and its clients from misuses and/or
abuse of its resources.
2. Fiscal management that establishes economy in purchase and operations of the

agency and its programs.
3. Fiscal management that readily accesses information for purpose of decision

making.
4. Fiscal record keeping that provides the agency’s constituents and the general
public with accountability for its operations in an easily understandable format.

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5. Detailed budgeting of all activities to ensure that each program is satisfactorily

funded and that costs are substantiated and equitable.
ROLES OF FISCAL MANAGEMENT
TRADITIONAL APPROACHES
The purpose of fiscal management is to handle and be responsible for all money
matters (financial records, accounting, collections, controls, investments
expenditures conformed to laws and administrative directives, property
inventories, debt services and other items and value. (Hjelte and Shivers, 1973)
CREATIVE APPROACHES
This includes the responsibility of aggressively seeking out resources for the
agency and exploiting them for the benefit of the agency, staff and consumers. A
Nursing Budget allocates resources for nursing programs and activities to deliver
patient care during a fiscal year. (Hjelte and Shivers, 1973)
FISCAL YEAR
Is the accounting period covering twelve (12) consecutive months over
which a company determines earnings and profits. The fiscal year serves as a
period of reference for the company and does not necessarily correspond to the
calendar year.
BUDGET FOR THE FISCAL YEAR WILL INCLUDE:
1. PERSONNEL - salaries and wages, benefits, insurance premiums,

retirement, allowances, consultancy (honorarium).
2. OPERATIONS – supplies such as drugs, central supply, office supplies ,

equipment according to clients confined and treated, house-keeping
engineering, if supplied by contractor or not.

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3. TRAINING AND RESEARCH – supplies, equipment, honoraria
LEADERSHIP ROLES IN FISCAL PLANNING
1. Is visionary in identifying or forecasting short and long term unit needs,
proactive rather reactive fiscal planning.
2. Knowledgeable about political, social, and economic factors that shape
fiscal planning in healthcare today.
3. Demonstrates flexibility in fiscal goal setting in a rapidly changing system.
4. Anticipates, recognizes, and creatively problem –solves budgetary

constraints.
5. Influences and inspires group members to become active in short and long
range fiscal planning.
6. Recognizes when fiscal constraints have resulted in an ability to meet
organizational or unit goals and communicates this insight effectively,

following the chain of command.
7. Ensures that client safety is not jeopardized by cost containment.

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DEFINITIONS OF A BUDGET
Budgets and budgeting can be defined depending on the individual or organization.

To budget is generally to determine how much cash is available to an individual /
organization.
A Budget is a dynamic management tool. It should have flexibility to allow for

new unforeseen needs or opportunities. A budget will:
• Reflect the financial needs, resources (revenues and expenses) and

allocations for specific programs/department.
• Document how funds are spent and where revenues are realized.
• Form a standardized format for ease of comprehension by employees,
managers and investors.
• Provide a means for evaluation of programs and services on goals and
objectives of the agency.
A Budget is the annual operating plan, a financial “road map” and a plan which
serves as an estimate of future costs and a plan for utilization of manpower,
material and other resources to cover capital projects in the operating programs.
A Hospital Budget is designed to meet future service expectations, to provide

quality patient care at minimum cost.
A Nursing Budget is a plan for allocation of resources based on preconceived

needs for a proposed series of programs to deliver patient care during one fiscal
year.
A Budget Plan for health care institutions, which is simply a plan for future
activities, generally consists of Four Components:
1. A Revenue Budget is summarizing the income the management expects

to generate during the planning period.

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2. An Expense Budget is describing expected activity in operational

financial terms for a given period of time.
3. A Capital Budget outlines the programmed acquisitions, disposals and

improvements in the institution's physical capacity.
4. A Cash Budget consists of money received, cash receipts and

disbursement expected during the planning period.
Budgetary planning is important for:

• Analyzing activities for appropriateness
• Focusing on the future rather than just the present
• Anticipating problem or opportunities in time to deal with them
• Reinforcing motivation to work toward organization goals
Budget functions are to plan, manage ongoing activities, and control spending.
The organization must consider the following questions during all phases of budget
planning.
• Do the benefits justify the costs?
• Is the budget consistent with the organization’s goals and objectives?
• Is the budget reasonable and realistic?
• Will the organization revenues be able to support the budget?
BUDGET APPROACHES
Managing Resources: How to Manage your Existing Budget?
1. Review health facilities vision, mission, objectives and its relation to the
importance of budgeting.
2. Identify / discuss steps in preparation of budget showing:

a. Monthly goals
b. Outline specific actions that will be taken
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c. Target date or time frame

d. Return of investments
e. Price Index
3. Manage intra – organizational network. To complete an effective Budget

statement, it is essential to have a working link with different departments / cost
centers / key people within the organization.
E.g. 1.Review of stock levels of hospital supplies to ensure that they are not wasted
and misused.
2. Develop a model to display why require an X amount of staff, to defend

staffing levels and requirements.
3. Determine patient dependency to determine the patient need, planned

nursing hours, available nursing hours and the cost of nursing for each patient.
4. Manage and Control Spending
a. Identify Controllable and Non controllable Costs as well fixed and

variable costs.
e.g. A controllable cost is an increase in price by a supplier, use less expensive
supplier could control this.
A non controllable cost would be a general increase in the cost of utilities such
as electricity, water etc.
b. Monitor Spending
Keep a file of all budget statements received; expenditures trends can be
highlighted and examined.
TYPES OF BUDGETING
The two most basic types of budgeting are the CENTRALIZED and
DECENTRALIZED approaches to budgets.

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Centralized Budget – centralized budgeting is developed and imposed by the

comptroller, administrator and/or director of nursing with little to no consultation
with lower level managers.
Decentralized Budget – Decentralized budgeting, has the middle level manager

involved in the planning and budgeting process.
COMPONENTS OF TOTAL INSTITUTIONAL BUDGET
The components of total institutional budget are:
1. Manpower Budget – this consists of the wages and salaries of the regular
employees and the fees paid to outside registries through which the
institution contracts short-term employees.
2. Capital Expenditure Budget – this involves the large expense of
purchasing of lands, buildings, and major equipment meant for long-term

use.
3. Operating Budget – this indicates the cost of supplies, minor equipment
repair and maintenance as well as other overheard expenses.
TYPES OF BUDGET
• Capital Expenditure: Long-range budgets (usually three years) that

involve physical changes (e.g., space renovation, major equipment,
inventories, and furniture) and the purchase of major capital item.

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Priorities need to be established for this item. Assets will depreciate

over time.
• Operating: Short-term budgets (per fiscal year or annually) that

allocate funds for day-to-day activities of the organization.
Expenses/costs that are included are utilities, small equipment,
medical and non-medical supplies, and personnel expenses. Cost
center are used to track these types of expenses. Projected revenues
are also identified in the operating budget. Revenues come from
payment sources (insurance/MCOs, government/Medicare/Medicaid,
private pay); contribution; and other income, such as interest, rent,
and the sale of property or equipment.
• Cash: Budget that accounts for the monthly expenditures and

receipts to the department and/or organization. Cash flow is an
important element. Operations are based on a complexity of fiscal
considerations.
• Personnel: Budget that allocates expenses related to personnel.

Types of
expenses are salary, social security, vacation and holidays. Education,
unemployment, workman’s compensation, and other benefits. The critical aspect of
personnel budget planning is the forecasting of staffing needs for the specified time
period of care provided (e.g., 24 hours a day, 365 days of hospital, but the
forecasting/time period varies for home care and other types of settings).
TYPES OF INSTITUTIONAL BUDGET DEPENDING ON

MANAGEMENT PHILOSOPHY

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There are many different types of institutional budgeting, the

appropriateness of which to a given milieu may depend on such things as the
philosophy of the incumbent management or the exigencies of a given situation.
1. Open-Ended Budget – An open-ended budget is characterized by a

single cost estimate for each program in the proposed unit.
2. Fixed Ceiling Budget – A fixed ceiling budget is one in which the

uppermost spending limit is set by the top executive who then asks
managers to develop budget proposals for individual units.
3. Flexible Budget – A flexible budget, in contrast, contains several

financial plans for each level of activity or for different operating
conditions. Top management can select the budget or shift the spending
level upwards or downwards, whichever is best for optimum
productivity.
4. Performance Budget – A performance budget is based on the functions

and activities of personnel involved in the operation budgeted.
In a nursing care management setting this may refer to direct nursing care
activities, supervision of nursing staff, and quality control, among other
things.
5. Program Budget – On the other hand, in a program budget costs are

computed for a program as a whole or the entire program itself (e.g. a
home care program, an outreach program, etc.), rather than for individual
activities or functions.
6. Zero-Based Budget – A zero-based budget justifies in detail the cost of

all programs, both old and new, in every annual budget preparation.
7. Sunset Budget – A sunset budget is designed to "self-destruct" within a

prescribed period to ensure cessation of the funded program at a
predetermined date.
BUDGETARY PROCESS
The budgetary process involves determining and developing a plan for the area of
responsibility and reviewing, analyzing, and controlling the operation and plans of
the Department. This can be done by:
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1. Review of pertinent provisions in the current General Appropriation Act.
2. Identify sources of funds (general, national, city, municipal, provincial,

special, revolving trust).
3. Review current appropriations and actual expenditures for the current year.
4. Study proposed changes in other departments which might affect the nursing
service budget.
5. Estimate required expenditures for the coming year for supplies, materials,
equipment, repairs and replacement.
6. Estimate personnel salaries and benefits, as well as, savings derived from
unusual leaves.
7. Estimate cost of Human Resource Development and Research Programs.
8. Translate information into pesos and submit official forms to the Chief of
Hospital for approval and inclusion in the general hospital budget.
The budgetary process is an ongoing one. It begins with the identification of who is
responsible for developing and monitoring the budget. Ultimately, the
organization’s governing board is responsible, but many of the administrative staff
members participate and have responsibilities, including the chief executive
officer, chief fiscal officer, nurse executive, and managers. Operational goals and
objectives are set that correspond with the organization’s mission, goals and
objectives, as well as the organization’s strategic and operational plans. It is easy to
view the budget as another paper report or plan, but it must be a live document,
one that changes as needed, and it must be monitored. A cost center is a unit or
department within an organization that has specified expenses.

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Examples of this would be the cardiac care unit, the pharmacy department, nursing
services, or admissions. Each one would have a budget that would then be used to
develop the overall budget for the organization.
There are four major phases in the process:
Planning: Gathering information related to goals and objectives, setting

priorities, conducting an environmental assessment, and identifying
financial objectives.
Development of the budget: Collecting and analyzing data from past
budget, allocating amounts based on priority, and approving the operational
and capital budgets.
Implementation and monitoring: Analyzing variances and adjustments
during the fiscal period, negotiating and revising the budget as necessary,
allocating departmental and cash budgets.
Evaluation: Obtaining performance reports and analyzing efficiency
STEPS IN BUDGETRAY PROCESS
1. Assess what needs to be covered in the budget.
Budgeting today generally reflects all inputs from all levels of the
organization.
2. Develop a plan.
Fiscal Year – a budgeting cycle set for 12 months

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Fiscal year may not coincide with the calendar is then broken down into
quarters or subdivided into monthly, quarterly, or semi-annual periods.
Select optimal time frame for budgeting.
3. Implementation and Monitoring
Ongoing monitoring and analysis occur to avoid inadequate or excess funds at

the end of the fiscal year.
4. Evaluation
Reviewed periodically and modified as needed throughout the fiscal year.
Managers develop a more historical approach to budgeting as they grow more

adept at predicting the unit’s budgetary requirements.
Developing Plan for the Area of Responsibility
Each senior nurse / supervising nurse develops a budget plan for the area of
responsibility every quarter of the ensuing year with the first quarter broken down
into months.
Example: Allotment for the 1st Quarter P 90,000
1ST Month – P 30,000

2nd Month – P30,000
3rd Month – P30,000
The budget plan should include the number and the kind of personnel, their
salaries, fringe benefits, the number of patients to be served, the activities within
the area, and the kind of care the patients are supposed to receive.
Operating expenses shall include among other things, the number and the kind of
supplies, repairs maintenance, books, and in service education
Table 1.
Income : P900,000
Expenditure:
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Salaries P350,000
Purchases P50,000
Rent P 50,000
Total: P450,000
Analyzing and Controlling the Prepared Budget
A reporting system is devised such that monthly reports show how much has been
spent on what and whether it exceeded the budget or not. Over expenditure must be
controlled.
Review the Budget Plan
Review the plan for maximum efficiency and cost saving or corrective actions.
BENEFITS OF THE BUDGETING PROCESS
There are several advantages derived from the budgeting process. Budgeting
affords planning, coordination and comprehensive control of resources.
1. Planning – Budgeting stimulates thinking in advance. It leads to specific
planning such as the volume and type of services, the number and type of
personnel as well as the volume and the type of equipment and supplies
required as well as the corresponding cost. The process likewise stimulates
action and interaction with all concerned parties. From the process of
budgeting one can learn a good deal about planning.
2. Coordination – Budgeting also encourages coordination among the
different persons involved in the process, from the top to bottom. It has a
balancing effect on the total and the expected venue. The continuous
exchange of information up and down the organizational ladder is
encouraged, and in many instances the team approach is stimulated or
developed.

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3. Comprehensive Control – A budget fosters comprehensive control for
those responsible for managing it. This is because in assessing whether a

budget is realistic or not, an administrator is able to evaluate quality and
initiative in performance. He is able to set standards and compare these
standards with actual expenditures and revenue. Through budgeting the
manager is able to define fixed and predetermined goals through the budget,
and is also able to initiate cost consciousness.
FACTORS AFFECTING BUDGET PLANNING
Budget planning is determined by the specific type of activity for which it is

implemented. Nursing service has very specific parameters, activities and
needs which from the basis of budget planning.
The basic factors to be considered in budget planning are the type of patient/s,
the kind or class of the hospital, the policies on personnel and equipment,
standards of nursing care and nursing supervision.
1. PATIENT
The nature of the patient's needs is primary consideration in budget

planning. These needs are determined by the condition of the patient, the
length of stay in the hospital and the acuteness of the illness.
Categorizing the patient is made through the type of care given by the
physician such as medical, surgical, maternity, pediatric, and geriatric
among others. The method of patient assignment can be functional, case,
team, or primary. The severity of the illness serves as the basis for length of
stay in the hospital.
2. HOSPITAL OR HEALTH CARE FACILITY

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The available facilities and resources with which to address the needs of the
patient are also factors in budget planning. In nursing management, these
concerns include the size of the hospital, specifically its bed occupancy and
capacity. Bed capacity must be enough to accommodate the possible
number of patients. Other aspects of a hospital to be considered include its
physical layout, the size of the wards or units, the Nurse's Station, the
treatment rooms, and other relevant facilities and resources available such as
equipment and supplies.
3. PERSONNEL
These facilities would be useless without the personnel to utilize them, and
so it is important to be well-acquainted with personnel policies in place,
such as the salaries paid to nursing personnel, leave benefits enjoyed by the
personnel, i.e. whether these leaves are confined to those required by law or
include others, and provisions for staff development programs including
instructional staff and training structures available, e.g. periodic seminars for
staff.
4. STANDARD OF NURSING CARE AND SUPERVISION
This consists of the cost of training and maintaining personnel and acquiring
equipment that will be needed by the health care facility, based on the
volume of patients and the nature of their needs.
It begins with documentation of the nursing care method employed which
refers to reports. The manager determines whether the method of patient

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assignment shall be functional, on a case basis, on a team basis or to a

primary nursing method.
She identifies what labor-saving devices and equipment are necessary.
There must be a determination of the amount of centralized service provided
such as sterile equipment, centralized oxygen service and line supply.
The manager determines the affiliation of nursing students or medial
students to the system, considering that as a rule, inexperienced students
need more supervision, equipment and supplies.
TOOLS IN BUDGETING AND MANAGEMENT OF RESOURCES
1. The budgeting process of the organization.
2. Determine the number of full-time equivalent of nurses necessary to staff the

unit.
3. Compute the salary and non-salary budget including salary increases and
other various factors.
4. Monitor the variance over the budget period and identify negative variances
responding promptly and appropriately.
5. Understand the extraneous factors such as changes in technology or direct or

indirect cost that may be assigned to their budget.
6. Encourage the staff to monitor resources used including time and supplies.
FACTORS THE AFFECT NURSING SERVICE BUDGET
1. Types of patient admitted.
2. Personnel policies such as hours/day on duty per week, vacation, sick leaves,
Medicare/Philhealth.

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3. Size of hospital, number of patient services given.
4. Kind and amount of care.
5. Proportion of nursing care provided by the professional nurse and nursing

aides.
6. Amount and quality of supervision available and provided, job description

and job classification.
7. Methods of assignment whether functional, care, team, primary.
8. Methods of performing nursing procedures, charting, record keeping.
9. Standards of nursing care.
10.Physical layout of hospital and labor saving devices.
11.Responsibility of nursing service for non-nursing functions such as dietary

or housekeeping.
12.Method of reporting required by the administration whether simple or

complex.
13.Method of appointment of medical staff size and activities, frequency of

treatment and orders.
14.Affiliation with medical, nursing and midwifery school.
CLASSIFICATION OF COSTS
Fixed: A cost that does not change with volume, which is typically the number of
clients. Examples of fixed costs are installment payments for equipment and
overhead expenses.

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Variable: A cost that changes based on volume. Examples of variable cost are
those items used in the operating room, which would change based on the type
and number of cases, medication, and, in some cases, staff costs.
Direct: Costs that can be identified for a specific service or product.
Indirect: Costs that cannot be linked or associated with any specific service or
product. Office supplies are a good example. For example, it is difficult to say
that the use of office supplies is associated with the revenue or income associated
with treating 10 cardiac clients.
COMPENSATION FOR SERVICES
Fee-for-service: The provider charges for services given and is paid by the
insurer (or in some cases, the client may pay, but that is less common). The
method was the traditional payment method, but is not used as much today.
Per Diem rates: payment that is fixed and based on each day of service, such
as $600 per day in the hospital.
Case rates: Payment that is based on the type of case, such as a flat fee for an
appendectomy or vaginal delivery.
Diagnostic Related Groups (DRGs): Classification system implemented by

the federal Medicare system. DRG categories are used to assign predetermined
reimbursement based on the client’s medical diagnosis, age, complication,
procedures, and other factors.

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Capitation: Prepayment per enrollee/member of the plan to a provider who will

then provide specific services, when required, to the enrollee/member. This is
usually a monthly payment. If the enrollee/member does not require any
services, the provider still keeps the payment. The incentive is to provide less
care, rather than more care. This payment method is very common with
managed care organizations.
Resource-based relative value scale (RBRVS): Method used by Medicare, in

addition to DRGs. It is used to determine payment for primary care provider
services both for procedures and cognitive services (e.g., office visits)
REPORTS AND VARIANCES ON BUDGET ANALYSIS
Various types of reports that are important in the budgetary for health care
organization include:
Budget variance report: Describes the status of the budget, what has been
spent, and the revenues. A monthly review of the budget is critical in the ability
of an organization to stay on the target with the budget. Is the unit spending too
much money or below what is expected? These are the variances, the difference
between the projected and the actual expenditures in the budget. Managers need
to analyze them and determined the causes for the variances. Adjustments may
need to be made in the budget, or in the implementation of the budget. Are
revenues below what was expected? For example, are there fewer admissions?
This can be a major problem for management.

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Productivity report: Provide data about the number of staff hours worked per
unit of service (such as client days or client visits) in terms of allocation of
human resources.
Payroll report: Cites employee earning and hours worked per day period and
consider in such factors as vacation and sick time.
Supply variance report: Lists the utilization of supplies and compares it with
the budgeted amount.
RESOURCE ALLOCATION
Productivity
Productivity is the ratio of output (product and services) to input (resources

consumed). It is important to maximize productivity of resources to preserve the
quality of products and services. Factors affecting input are the characteristics of the
staff (e.g., experience, stability, interpersonal communication, time management,
variable or fixed staffing), and client factors (e.g., age, acuity level). Other factors
include the extent of the treatment setting, unit layout, equipment, supplies, and
management. Factors that affect outputs are acuity, client satisfaction, medical
records, and client education. Examples of output are the number of emergency room
visits, primary care provider office or clinic visits, deliveries, inpatient admission,
meal served to client, home visits, and days spent in the hospital. Assessment of

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productivity requires reviews of budget, client acuity system, personnel and level of
staffing, client satisfaction, and quality improvement monitoring.
Effectiveness and efficiency are important elements of productivity.
Effectiveness is taking the necessary steps to achieve objectives. It is a managerial
goal. Critical sources of data about effectiveness include quality improvement data,
performance appraisal, evaluation of nursing care provided, and the data from external
reviews, such as the Joint Commission on Accreditation of Health Care
Organizations. Efficiency is doing the right things correctly. It integrates effectiveness
and economy, meeting the outcomes with the minimum resources to reach goal.
STAFFING AND SCHEDULING
Staffing and scheduling are important functions that directly impact the
quality of patient care. Staff member are concerned about their schedules,
workload, and the amount of time and staff that are available for the client.
Scheduling is done in many different ways. Scheduling may be centralized,
done by a nursing service or a specific office for the entire health care
organization; or decentralized, which means the divisions or units of the
organization do it. A third type of scheduling is self-scheduling, whereby
staffing criteria are developed and mutually agreed upon by the staff. Staff
members appoint the schedule themselves, which often requires negotiation
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and cooperation of the person involved. Self scheduling has been very
successful in many setting due to the autonomy and self-determination
involved. Additionally, self-scheduling facilitates work attendance.
Scheduling Advantages Disadvantages

Method
Permanent Fewer health problems, less Day shift most desired,
evening
Absenteeism, greater job and night shift staffed
mostly
Satisfaction, can plan social life with new graduates
Flextime Improves weekend coverage and 12-hour shifts correlated

with
reduces turnover, more time to relax greater fatigue
Alternating/ This type of scheduling could be Increased stress and

physical
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Rotating advantageous if entire work group complaint, reduced work

or teams that are compatible are quality, higher turnover,
rotated rotation of personnel is
disruptive to work groups
Block/ Reduced fatigue, sick time reduced, Somewhat inflexible
Cyclic schedule is known in advance, staff rigid scheduled
treated fairly, decreases floating,
improves continuity of care
Variable Census determines staffing, less Dependent on a valid
reliable
need to call in unscheduled staff client-classification
system
Standards of Productivity and Staffing
Staffing requirements are based on a standard unit of measurement for

productivity. One of the most commonly adopted standards in many
hospitals is a client classification system. This method of quantitatively
estimating client care needs and staffing requirements to provide necessary
care is based on census and acuity level. Once an appropriate system is
develop and adopted by the institution, the number of nurse care hours can
be assigned for each classification. The standard formula for calculating
nursing care hours (NCH) per patient day (PPD) is the number of nursing
care hours in 24 hours divided by the client census.
NCH = Nursing hours worked in 24 hours

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PPD Client Census
For example, the client census is 20; the number of nursing care hours
needed for each acuity level and the number of client at each level is as
follows:
Category I = 2.3 hours (8 clients)

Category II = 3.0 hours (4 clients)
Category III = 4.2 hours (4 clients)
Category IV = 5.1 hours (4 clients).
Now we can calculate the number of nursing care hours per client: The total
number of nursing care hours equals 67.5 hours. This was determined by
multiplying each category ( acuity level ) by the number of clients falling
into that category ( Step 1 ), and adding all of the hours from the four
categories together ( Step 2 ). Then, the total number of nursing care hours is
divided by the number of clients (Step 3).
Step 1
Multiply each category (acuity level) by the number of clients falling into
that category.
Do the math:
Category I = 2.3 hrs. x 8 clients = 18.4 hrs.
Category II = 3.0 hrs. x 4 clients = 12 hrs.
Category III = 4.2 hrs. x 4 clients = 16.8 hrs.
Category IV = 5.1 hrs. x 4 clients = 20.4 hrs.
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Step 2
Then add all of the hours from the four categories together.
18.4 + 12 + 16.8 + 20.4 = 65.3 hours
Step 3
Divide the total number of nursing care hours by the number of clients
receiving care. The total hours are 67.5 divided by 20 clients equals, 3.38
hours per client for that day.
67.5 (Nursing Care Hours)
_____________________ = 3.38
20(Client census)
Nursing units are generally budgeted at so many hours per client per day.
Calculating the number of nursing care hours required for any given day can
assist the manager in determining if the unit is understaffed or overstaffed.

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FISCAL MANAGEMENT IN NURSING SERVICE ADMINISTRATOR
FINAL EXAMINATION
Answer the following comprehensively:
1. Why is it essential to consider goals and objectives when developing a
unit budget?
2. What does the nurse manager need to do during each phase of the
budgetary process?
3. Discuss the importance of the following management functions in the

delivery of a quality health care service:
a. Planning
b. Organizing and staffing
c. Directing
d. Controlling
4. As a director of nursing, you are reviewing your home health agency’s

budget reports. What reports would you review and why?

2008
28
5. What is the difference between effectiveness and efficiency?
6. As you consider productivity for a hospital unit, what are three examples
of outputs that would be important to review?
7. If you have (a) some staff members who work 8-hour shifts based on 5-
day workweeks, (b) some who work evenings and nights in the same pay
period, and (c) others who work the 12-hour shifts based on 3-day
workweeks, what types of scheduling do these staff members have?
8. Explain how each of the various tools of financial management operates

to attain efficiency, effectives, and economy in strengthening the fiscal
position in your nursing service department.
9. Why is the study of Fiscal Management important? Select any theory

and discuss comprehensibly its practical application to your chosen field
of specialization?

2008

Budget

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FISCAL MANAGEMENT IN NURSING SERVICE ADMINISTRATION

 BASIC CONCEPTS ON NURSING LEADERSHIP AND

 FACTORS AFFECTING NURSING BUDGET

FISCAL MANAGEMENT GOALS

PRIORITY OBJECTIVES IN FISCAL MANAGEMENT

2. Fiscal management that establishes economy in purchase and operations of the

3. Fiscal management that readily accesses information for purpose of decision

HENRY PAUL M. SANTOS, RN, MAN, DMS

5. Detailed budgeting of all activities to ensure that each program is satisfactorily

ROLES OF FISCAL MANAGEMENT

BUDGET FOR THE FISCAL YEAR WILL INCLUDE:

1. PERSONNEL - salaries and wages, benefits, insurance premiums,

2. OPERATIONS – supplies such as drugs, central supply, office supplies ,

HENRY PAUL M. SANTOS, RN, MAN, DMS

3. TRAINING AND RESEARCH – supplies, equipment, honoraria

LEADERSHIP ROLES IN FISCAL PLANNING

1. Is visionary in identifying or forecasting short and long term unit needs,

proactive rather reactive fiscal planning.

2. Knowledgeable about political, social, and economic factors that shape

fiscal planning in healthcare today.

3. Demonstrates flexibility in fiscal goal setting in a rapidly changing system.

4. Anticipates, recognizes, and creatively problem –solves budgetary

6. Recognizes when fiscal constraints have resulted in an ability to meet

organizational or unit goals and communicates this insight effectively,

7. Ensures that client safety is not jeopardized by cost containment.

HENRY PAUL M. SANTOS, RN, MAN, DMS

Budgets and budgeting can be defined depending on the individual or organization.

A Budget is a dynamic management tool. It should have flexibility to allow for

• Reflect the financial needs, resources (revenues and expenses) and

A Hospital Budget is designed to meet future service expectations, to provide

A Nursing Budget is a plan for allocation of resources based on preconceived

1. A Revenue Budget is summarizing the income the management expects

HENRY PAUL M. SANTOS, RN, MAN, DMS

2. An Expense Budget is describing expected activity in operational

3. A Capital Budget outlines the programmed acquisitions, disposals and

4. A Cash Budget consists of money received, cash receipts and

Budgetary planning is important for:

Managing Resources: How to Manage your Existing Budget?

2. Identify / discuss steps in preparation of budget showing:

c. Target date or time frame

3. Manage intra – organizational network. To complete an effective Budget

2. Develop a model to display why require an X amount of staff, to defend

3. Determine patient dependency to determine the patient need, planned

4. Manage and Control Spending

a. Identify Controllable and Non controllable Costs as well fixed and

HENRY PAUL M. SANTOS, RN, MAN, DMS

Centralized Budget – centralized budgeting is developed and imposed by the

Decentralized Budget – Decentralized budgeting, has the middle level manager

COMPONENTS OF TOTAL INSTITUTIONAL BUDGET

The components of total institutional budget are:

2. Capital Expenditure Budget – this involves the large expense of

purchasing of lands, buildings, and major equipment meant for long-term

3. Operating Budget – this indicates the cost of supplies, minor equipment

repair and maintenance as well as other overheard expenses.

• Capital Expenditure: Long-range budgets (usually three years) that

HENRY PAUL M. SANTOS, RN, MAN, DMS

Priorities need to be established for this item. Assets will depreciate

• Operating: Short-term budgets (per fiscal year or annually) that

• Cash: Budget that accounts for the monthly expenditures and

• Personnel: Budget that allocates expenses related to personnel.

TYPES OF INSTITUTIONAL BUDGET DEPENDING ON

HENRY PAUL M. SANTOS, RN, MAN, DMS