Question

Consider the factors that are part of a typical healthcare facility’s operating budget. Which factor do you think financial managers should be mindful of when it comes to possible fluctuations and why? Explain your answer in detail and cite evidence that supports your opinion.

Answer 1

The health care like any other business has revenue and expense as its operating model to run them effectively. While we are conscious that health care facility deals with human life looking at margin to operate them is not the sole objective. The number of patients and services provided are key factors that a financial managers should be mindful of while preparing a operating budget to layout the overall cost and revenue plan.

Health care facility being a labor intensive industry, one of the big ticket of budget item would be labor costs that determines largest proportion of expense budget. Looking at other major cost that a financial manager should be mindful of is cost of supplies that affects profitability of business. The procurement of supplies and funding related are key to run them effectively.

Financial Manager should be mindful of the revenue driver ie the source of income that determines funding for operating the overall cost of operation. The volume of services , length of patient stay and quality of services offered are key factors that drives hospital performance.

The use of capital to areas that are critical to care facility cannot be ignored. Lets say a population that has largely patient suffering from pollution would need latest technology to detect the symptoms and diagnose accordingly.

Financial Manager would thus need to be mindful of the capital need of organization and allocate budget accordingly. To sustain in this volatile environment, like any other organization health care facility would also have to focus on increased revenue budget than cost to determine overall profitability. The overall focus on billing through test and technology and volume of operation and operating them at lower cost incurred on labor and supplies would be key to run health care facility effectively. The possible fluctuation could be increased cost on supplies or capital expenditure on facility , financial manager in such case need to be mindful of how the same can be sourced through funding or donations putting less strain on overall performance.