Objectives
1.
Provide financial resources for all
essential services and then for other desirable activities
2.
Maintain the service charges within the
reach of the people served by the hospital including free and concessional care
for the poor and needy.
3.
Improve employee satisfaction by
increasing benefits such as salaries, PF, gratuity, pension, housing, training
loans etc.
4.
Reduce dependence on grants, donation or
contributions,
5.
Provide for community health development
work in the neighborhood if that is an institutional objectives.
Financial Planning
Hospital need both-short term and long term
planning. Majority of the hospital do not have long-term (5years or more )
plan. Financial planning must be based on analysis of the hospital objectives,both
in term of quality and quantity of services.
The policies influencing financial plan are :-
·
Service mix and decisions regarding
specialization.
·
Pricing
·
Free and concessional care
·
Community health and involvement in
social development activities
·
Training and research
·
Growth ,expansion and modernization
Budget
Budget is an important financial procedure, which
must receive full attention by the administrator . Budget brings about
guidance,stability, balance and direction. A budget is a financial planand it
is usually a short-term(annual)plan.
Hospital budget is the process of expenditure and
the means of financing this expenditure. A budget ia an operational plan
expressed in monetary terms. The budgetary plan incorporates the operating
budget.
·
Operating Budget
·
Capital Budget
Budgeting is an opportunity to consider better
performance by the hospital. While planning a budget,we must apply our minds to
think in terms of improved quality and quantity of care.
Different Kind of budget :
1.
Appropriation
2.
Forecast
3.
Flexible
Operating Budget
Operating Revenue Budget
Operating Expenditure Budget
Operating Revenue Budget
In order to have a proper operating revenue
budget,we musy have full statistics dat.The prediction revenue is some what
speculative even with good quality data. Any change in workload will effect
revenues. It depends upon the rate or schedule of charges. The revenues come
from the following activities of the hospital
1.
Patients service
2.
Activities incidental to patients
services
3.
Income from investment
4.
Other income-donation,grant etc
Operating expenditure budget
Operating expenditure budget is required for
the operation or maintenance of
facilitiesand services. The most important costs are for salaries and wages
,supply like drugs,dressing,reagent,fuel etc and wtilities including
electricity,water,telecome etc and equipment maintenance and purchase of spare
parts.
Capital Budget
Funds should be available for expenditure on capital
(non-recurring) iteams. These are required for:
a)
Growth (new facilities being provided)
b)
Replacement of obsolete & worn-out
equipmental,furniture and machinery
(new facilities may be of building,plant and
machinery or equipment)
Capital b is the estimated fund requirements
forcapital iteam needed for growth,for providing new facilities and replacement
of worn-out equipment,machinery,and furniture.
Cash
Budget
Cash budget is the budget that record the forecasted
cash inflow from various sources and also records the forecasted demand of cash.
The cash budget is usually broken down by monthly or quarterly period.
Categories
of expenditure
The Hospital expenditures classified in three
categories
Capital
Vs Recurring (Revenue)
Capital
Cost
Capital cost are
initial one time expenses to make available a particular service.Example
expense on building,equipment,instrument,fixture and furniture
Recurring
Cost
Recurring cost are
incurred on a continuing/periodical annual basis. Example salaries, consumables
and supplies, water, electricity, maintenance and contingent(emergency)
expenses .
Fixed vs Variable
Fixed costs are those costs which
do not vary with volume of output and hence fixed are defined in terms of time
like per day, or per month, or per year.
Variable cost
Variable costs are those costs that
changes directly with the production and hence they are defined in terms of
units.
The following
are examples of fixed costs and variable costs:
- Indirect
labor- fixed costs could be variable under certain circumstances
- Indirect
materials- variable costs
- Insurance
on building- fixed costs
- Depreciation
on building (straight-line)- fixed costs
- Overtime
premium pay- variable costs
- Property
taxes- fixed costs
- Polishing
compounds- variable costs
- Depreciation
on machinary (based on machine hours used)- variable costs
- Employer's
payroll taxes- variable costs
- Machine
lubricants- variable costs
- Employees'
hospital insurance (paid by employer)- fixed costs
- Labor for
machine repairs- variable costs
- Vacation
pay- variable costs
- Patent
amortization- fixed costs
- Janitor's
wages- fixed costs
- Rent-
fixed costs
- Factory
electricity- fixed costs
- Plant
manager's salary- fixed costs
Note :
It is important to note that total fixed costs remain same but per unit fixed
cost keeps changing while in case of variable costs total variable costs keeps
changing depending on the level of output but per unit variable cost remains
constant.
Direct vs Indirect
Direct Cost
Direct
Cost are costs incurred in running a department or service for fulfilling the
primary purpose of that department or service. They can be apportioned direct to the particular activity or procedure.
Usually, these are expenditures incurred by the concerned department covering
salaries and labour costs, and costs of supplies and stores in rendering the
service.
Indirect Cost
Indirect
cost are the costs incurred by the other department or service in support of the
primary function of direct patient care. The same cost may be direct for one
department but indirect for another . Ex maintenance supplies are direct costs
to maintenance department, but indirect cost to CSSD or mechanized laundry .
