Metropolis Health System Budget Revision

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Metropolis Health System
EXPENSE REDUCTION PROPOSAL
FISCAL YEAR END MARCH 31, 2011
JAMIE LOFTON
BELLEVUE UNIVERSITY
Outline
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Title page
Outline
Abstract
Introduction
Objectives
Budget Assumptions
Variance example
Reasons to maintain funding for certain departments
Reasons to decrease funding for certain departments
Schedule of Property, Plant, and Equipment
Schedule of Revenue and Expense
Schedule of Operating Expenses
Summary
References
Abstract
The purpose of this budget reduction proposal is to
reduce the Operating Expense Budget by 15%
without compromising quality patient care.
Introduction
Metropolis Health System is a cost centered medical
facility where department managers are responsible
for controlling costs. In the following targeted areas,
General Services and General Support Services,
managers have not controlled costs due to inefficient
management of services. Both areas have seen wildly
fluctuating variable costs beyond explanation.
Budget cuts in these two areas would not effect
patient care and would actually produce a more
stable environment in each area of concern.
Objectives
 To reduce General Services budget by 15%.
 To reduce General Support Services by 15%.
 To maintain Nursing Services and Other Professional
Services budgets at their current levels.
Budget Assumptions
 Metropolis Health System is a cost centered medical facility
where department managers are responsible for controlling
costs.
 Areas targeted for fiscal reduction have lower efficiency rates.
 Creation and implementation of job sharing part-time
positions, elimination of two FTEs, and the subsequent
reduced workload will result in minimal impact on
effectiveness. Workload did not warrant the current level of
staffing.
 The requested decrease in funding for land improvements is
expected to be made up by increased tax rate (1%) in taxing
district and rezoned property at a lower rate per acre.
Variance Example (General Services)
 Overview of workload in General Services Area:
Two-Variance Analysis
1# Actual Cost Incurred ($3,200,000) –*Budget
Costs ($3,000,000)
2# Applied Cost ($3,050,000)-*Budget Costs
($3,000,000).
*computed as standard hours for actual production
Proof Total=Actual Cost Incurred-Applied Cost=Total
Variance
Reasons to Keep Nursing and Other Professional
Services Funding Intact:
 Metropolis Health System is a thriving medical center
that delivers excellent patient care in a patient-centered
environment.
 Nurse Staffing is currently at the appropriate ratio of 5.2
patients per nurse-any further cuts would lead to poor
patient care levels.
 Physical therapy is currently operating with 4 FTEs
although 6 are needed-resulting in long waiting lists for
initial evaluations.
 The incidence of substance abuse increased by 1% in
Metropolis the previous year. Therefore, this department
has the potential to generate more revenue.
Reasons For Intact Funding
-Continued Outpatient visits have increased by 50,000 annually
(Baker & Baker, 2011) since 1998.
 Inpatient visits have maintained the initial increase
from 1998 of a steady growth of 1000 patients
annually (Baker & Baker, 2011).
Reasons to Decrease Funding to Assigned Areas
 Accountability task force has targeted specified areas
for fiscal reduction.
 Targeted areas are functioning below JCAHO
standards and risk losing accreditation.
 Studer Group Coaching Process Task Committee has
recommended Nurse and Other Professional staffing
remain at current levels.
 Surgical , Cardiac, and Laboratory were sited for
performance excellence by Baldrige/NIST
w/Revisions*
Metropolis Health System
Schedule of Property, Plant, and Equipment
For the Year Ended March 31, 2011
Buildings
Land
Improvements
$14,700,000
$1,100,000
Equipment
$28,900,000
Total
$44,700,000
Less
Accumulated
Depreciation
Net
Depreciable
Assets
($26,100,000)
$18,600,000
Land
$480,000
Construction in
Progress
$220,000
Net Property,
Plant, and
Equipment
*($165,000)
$19,300,000
*$19,135,000
Metropolis Health System
Metropolis Health System
Statement of Revenue and Expense
for the Year End March 31, 2011
Revenue
Revisions
Net patient
$34,000,000
service revenue
Other revenue
$1,100,000
Total Operating
$35,100,000
Revenue
Expenses
Nursing services
$5,025,000
Other professional
$13,100,000services
General services
$3,200,000
Support services
$8,300,000
Depreciation
$1,900,000
Amortization
$50,000
Interest
$325,000
Provision $1,500,000
for doubtful accounts
Total Expenses
$33,400,000
($6,829,250)
Income from
$1,700,000
Operations
Nonoperating Gains(Losses)
Unrestricted
$20,000
gifts and memorials
Interest Income
$80,000
Nonoperating
$100,000
Gains, Net
Revenue and
$1,800,000
Gains in Excess of Expenses and
Metropolis Health System
Schedule of Operating Expenses
for the Year Ended March 31, 2011
Nursing Services
Routine Medical-Surgical
General Services
$3,880,000 Dietary
$1,055,000
($896,750)
$1,000,000
($850,000)
Operating Room
$300,000 Maintenance
Intensive Care Units
$395,000 Laundry
$295,000
($250,750)
OB-Nursery
$150,000 Housekeeping
$470,000
($399,500)
Other
$300,000 Security
$50,000
($47,750)
$330,000
($280,500)
$3,200,000
($2,725,250)
$4,600,000
($3,910,000)
$240,000
($194,000)
Total
$5,025,000 Medical Records
Other Professional Services
Total
Laboratory
$2,375,000 Support Services
Radiology and CT Scanner
$1,700,000 General Services
Pharmacy
$1,375,000 Insurance
Emergency Service
$950,000 Payroll Taxes
Medical and Surgical Supply
$1,800,000 Employee Welfare
Operating Rooms and Anesthesia
$1,525,000 Other
$1,130,000
$1,900,000
$430,000
Respiratory Therapy
$525,000 Total
$8,300,000
Physical Therapy
$700,000 Depreciation
$1,900,000
EKG and EEG
$185,000 Amortization
$50,000
Ambulance Service
Substance Abuse
Home Health and Hospice
Other
Total
$80,000 Interest Expense
$460,000 Provision for Doubtful Accounts
$1,295,000 Total Operating Expenses
$130,000
$13,100,000
$325,000
$1,500,000
$33,400,000
$26,570,750
Summary
 MHS will continue to provide excellent patient care
while striving to increase efficiency and eliminate
duplicity and waste. The two targeted areas will be
subject to reorganization with the budget
committee’s approval.
References
Baker, J.J. & Baker, R.W. (2011). Health care finances
: Basic for nonfinancial managers (3rd ed.). Sudbury,
MA: Jones and Bartlett Publishers.
Http://baldrige21.com
Http://quality.nist.gov/
Http://www.jointcommision.org/standards
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