Hcs 577 - Health Care Budget

Health Care Budget

Miriam Timera

HCS/577

January 9,2014

Professor: Joseph N Atkins

Health Care Budget

According to University of Phoenix/ Read Me First Health care financing is one the most complicated accounting processes because of the forms and kind of payment arrangements that exist in it. Whether through private funds called private insurers, public funds called consumers directly, or government funds like Medicare and Medicaid, health care financing can become a confusing, slow, and labor-intensive process. Some of the payers use third party agencies to complete the payment process, which intensify the complicated revenue cycle. Health care organizations depend on successful accounting to perform business transactions accurately. In health care organizations now have to assess health care costs, the pricing index, the supply inventory, and many other features of the financial business. Health care businesses must understand the basics of financing to negotiate pricing of services with insurance companies. Financing may affect who receives health care services, such as an uninsured person, and how much they can pay for treatment (University of Phoenix). Patton Fuller community hospital (PFCH) 2008 and 2009 operating budget was review to develop a budget for the hospital based on the two previous years operating Budget and to make a plan for 2010 operating budget assumptions.

Assumptions were made for the 2010 operating budget while reviewing Patton Fuller community hospital (PFCH) 2009 financial data and its operating budgets reports when included a detailed analysis of durable and temporary financial conditions for the hospital. PFCH experienced a 3% devaluation rate for the 2009 prices which is predicted to continue into 2010 because of the weak economy. Net patient revenue will continue to increase at a reduce rate of (3%) with little or no increase in patient volume, because of new managed care contracts. Other revenue is anticipated to rise by 15% based on marketing's strategy which will increase donations by 15%. Expenses such as benefits and salaries will maintain a 1% improvement in cost with no increase in work hours and patients volume because of nationwide price depreciation. This supposition might be influenced by a board decision whether to increase nurses’ salary by $1 per hour or to raise nurses working hour per ratios. The cost of Supplies will reduce 3% because of the price depreciation and the recent over-stock of supplies bought the past year. Fees for physician and professional contracts also have a built-in 3% increase (University of phoenix/ Patton Fuller Community hospital).

PFCH need a financial management practices which will be most or least successful in creating and monitoring an operating budget in 2010. According to Andersen (2000) “a budget is a methodical approach of delivering financial, physical, and human resources to accomplish strategic goals.” He also stated that “companies develop budgets in order to monitor progress toward their goals, help control spending, and predict cash flow and profit” (Andersen, 2000, para. 1).  The hospital may have provided more credit to clients hoping to increase their profits, assets and inventories that will improve the revenues. PFCH seems to have a successful future, but not completely. The organization deflated in many financial aspects because their profits only increase by 10%. The increase in fixed and current assets was financed by debts, which is obvious in an increase in the debts owed and expenses accumulated by 120%. In 2008, 39% of total assets were financed from debt financing; while in 2009, the assets rose to 79% showing a large increase of 102%. In 2008, the debt to equity ratio has also shown the same pattern, of a rather worse situation than debt to total assets. In 2008, the debt was 64% but rose to 368%, showing a drastic increase of 478%, which is the main cause of net interest expense in 2009, which was net interest income 2008. PFCH 2010 operating budget assumptions supplies cost will decrease 3% due to the price deflation and their current over-stock purchased last year. Physician and professional fees and contracts for fees have a built-in 3% increase. Utilities cost will increase 5% due to the rising cost of oil partially offset by the efficiency of the hospital's new heating and cooling systems; no other net change is expected to occur in the cost or volume of these items (University of Phoenix/ Patton - Fuller community hospital).

Depreciation and amortization “non-cash” expenses some high-cost equipment (air conditioning, telephone system, all patient beds and headwalls) were replaced in 2009 and “depreciation” rose sharply. Depreciation will remain at this level in 2010, so no projected increase is anticipated. Interest and the repayment plan for any monies borrowed in 2009 will come due in 2010, with a sharp increase (30%) in interest cost. Provision for doubtful accounts and the renegotiation of managed care has put the debt collections behind scheduled making it less certain that these debts will be collected. PFCH will take on a 10% raise in doubtful accounts. PFCH does not expect to have any non-operating income or loss. With investment income (loss), the market is down, expected to hold steady, so a "zero" return is anticipated, with neither loses nor gains. The net loss of the Patton-Fuller Hospital organization went down by 98% in 2009 as compared to the 2008 reports. This loss was caused because of an increase in revenues by 10%. All expenses had an increase of 3% to 5%, except for depreciation and bad debt expenses. These expenses have increased by 44% and 11% respectively, in 2009 as compared to 2008 (University of Phoenix/ Patton - Fuller community hospital).