Nurse Leadership/Management Role in Financial Management and Budgeting Kimberly Lizard Holy Names University NURSE 151 IFS December 6, 2010 Abstract The following paper discusses the nurse manager’s/leader role in healthcare financial management and budgeting. The definition of a budget is a detailed financial plan. The nurse manager/leader is responsible in knowing and understanding the different types and budgets within the healthcare organization: operating, capital expenditure, and cash.
The operating budget is the main budget the nurse manager/leader maintains an active role in for the latherer organization by controlling personnel and supply costs. Collaboration with the nursing staff on the unit as well as other parties involved with the budget process helps create a powerful tool in controlling the day-to-day operations of the unit and providing quality care to the patients. Preparation is the key to a successful budget and to the success of the organization.
Introduction Budgeting refers to a detailed financial plan for carrying out the activities an organization wants to accomplish between a certain amount of time to ensure that quality and cost-effective services are provided to their patients (Stafford, 007). Many nurse managers/leaders cringe at the word “budget” due to the lack of training and support for that position and in many cases they are left on their own to get up to speed on all the business aspects for their department within the organization (Clarke, 2006).
With the various types of budgets healthcare organizations use to monitor their financial status, it is essential for the nurse manager/leader to take initiative to understand these budget types since they are the closest to the patients and know exactly what is needed to provide quality of care for their unit. Types of Budgets The operating budget is a financial plan for the day-to-day activities of the organization and departments over a one-year period (Stafford, 2007). The expected revenues and expenses generated from these daily operations, given a specified volume of patients, are stated here.
Each nursing unit is considered a cost center within the organization, with its own specific budget for personnel and supplies. The personnel budget, being the largest part of the operating budget, consists of multiple factors such as the average daily census, patient acuity, personnel required relating to full-time equivalents (Fetes), as well as reductive and non-productive hours. The supplies include medical and office supplies, minor equipment, orientation and training, and travel expenses.
Although budgets are based on assumptions, using the previous year’s expenses for personnel and supplies, helps the nurse manager/leader to accurately predict the next year’s budget. Lastly, the revenue budget is the final component of the operating budget which projects the income the organization will receive for providing care. Although nurse managers/leaders may not be involved in developing the revenue budget, having knowledge about it is essential for retreat decision-making. Another type of budget is the capital expenditure budget, which reflects expenses related to the purchase of major capital items (Stafford, 2007).
Capital items are those that have a useful life of more than one year and must exceed a cost level specified by the organization such as $1000. If the item is below this cost, it is considered a routine operating cost. Capital items have a depreciated value, meaning that each year a portion of its’ cost is allocated to the operating budget as an expense and therefore is subtracted from the revenue. Healthcare organizations usually set aside a fixed amount of money for capital expenditures each year for items such as safety requirements, building renovations, and large equipment purchases such as monitors or x-ray machines.
Nurse managers/leaders may not have the authorization to purchase capital items within their budget but it is their responsibility to notify upper management within the organization the need for specific capital items and the reasoning behind it. Lastly, the cash budget, is the operating plan for monthly cash receipts and disbursements (Stafford, 2007). Organizational arrival depends on paying bills on time to keep good standings amongst vendors. Although the nurse manager/leader may not be fully involved in preparing cash budgets either, it is helpful to know and understand when constraints on spending are necessary.
Leadership/Management Role Nurse managers/leaders are challenged daily to be as cost-effective as possible and to do this, preparation is the key (Foley, 2005). The operating budget is the budget most nurse managers/leaders are responsible for and spend most of their time in managing their personnel and supplies (Stafford, 2007). Gathering information and planning for the average daily census, Fetes, patient acuity, etc… Is essential for developing their budgets and understanding the variances, the difference between the projected and the actual budget.
Although a nurse manager/leader cannot control all variances, some can be controlled which is where the nurse manager/leader must step in to prevent these variances in the future. Another important role the nurse manager/ leader plays is in collaborating with the nursing staff the budget for the unit as well as involving staff with budget monitoring activities to help foster the allegations between cost and the mission to deliver quality patient care for the organization (Stafford, 2007). Appropriate communication is the key, according to Brenna et al. (2008) to understand the financial aspect of the organization.
Looking beyond numbers cannot be accomplished while sitting in the office and looking at spreadsheets. Regular, frequent, and focused conversations between staff and nursing executives are important for nurse managers to collaborate with to fully understand the budget (Clarke, 2006). If nurse managers/leaders do to learn to defend and negotiate their budgets, the finance departments within the organization will continue to drive the budget process and the quality of care for patients may be affected since they do not have the insight of the unit and patient’s needs as nurse managers/leaders do.
Nurse managers/leaders tackle countless responsibilities on a daily basis. Mastering the budget for their unit and for the organization is still one responsibility that needs work. Taking initiative and collaborating with all key personnel the budget plan for the unit is essentialist nurse managers/leaders in reading an understanding amongst the unit as it relates to cost and patient care.