Operating Budget

The purpose of this discussion is to explore the role DNP-prepared nurse in creating a budget, effective financial planning, and determining the allocation of resources.
Reflect upon your readings and professional experience and examine the role of the DNP-prepared department or organizational leader in navigating the following:

  1. Planning and executing the operating budget
  2. Controlling cost overruns and overtime
  3. Explaining variances: i.e., Defending overtime hours associated with patient census or acuity fluctuations
  4. Securing funds for staff’s ongoing competency training and professional development

Resources from class- In case if you want to look , otherwise disregard.
Statement of Revenue and Expenses
The formula for the statement of revenue and expenses:
Operating revenue – Operating expense = Operating Income
Revenue is the money the organization receives (for patient visits, procedures, or hospitalizations, etc.). Knowing how revenue is generated and spent is vital for the DNP-prepared nurse. Money is received from Medicare, Medicaid, private insurance companies, managed care, and patients who self-pay for services (Rundio, 2022).
Having sound knowledge about the billing practices of the organization is important for the DNP-prepared nurse. Ensuring that providers are accurately documenting care, including history and physicals, for example, will help ensure that billing will occur at a higher rate (Waxman & Knighten, 2023). With reimbursement shifting to pay for performance, it is imperative that healthcare organizations focus their efforts on providing quality, patient-centered care that meets the highest standards in order to receive the maximum possible reimbursement.
Expenses include the cost of supplies, staff, and activities necessary to run a unit or organization. In an operating budget, the two main areas found are employment costs and non-salary-related expenses. Items taken into consideration with employment costs include salaries, overtime, new employee orientation, education, holiday and shift differential pay, and benefits. Typical non-salary expenses include supplies (medical and office), equipment (including leased and rentals), maintenance, and travel (educational opportunities for staff) (Rundio, 2022).
Statement of Net Worth
The Statement of Net Worth gives a financial snapshot at a given point in time.
Assets – Liabilities = Net worth
Assets are the items your company owns that can provide future economic benefit. Liabilities are what you owe other parties. Current assets and current liabilities provide an indication of the cash flow of the business during the coming year.
Subtracting current liabilities from current assets determines the amount of working capital in the business and the value of the business.
Statement of Cash Flow
The Statement of Cash Flow is a summary of the actual cash received (inflow) or disbursed (outflow) during a stated period, such as monthly, quarterly, or annually. The cash flow statement measures how well a company generates cash to fund its operating expenses, pay debt obligations, and fund investments.
Balance Sheet
The Balance Sheet shows the organization’s assets, liabilities, and net worth on a stated date as a snapshot in time, usually at the end of the organization’s fiscal year. The basic accounting equation is used as a foundation for the balance sheet.
Assets = Liabilities + Equity

Workload or Unit of Service (UOS)
Workload volume forecasts are necessary for effective budgeting. The UOS is distinct for each unit; for inpatient units, it is patient days. Workload variations must also be identified. Planning for variable trends can lead to reduced costs without a decrease in care.
• Direct care hours per patient day
• Indirect care hours per patient day
• Total worked hours per patient day
• Total paid hours per patient day (Waxman & Knighten, 2023)
Admission, Discharge and Transfer Work Intensity Index©
It can be difficult to accurately capture the extent of how intense or busy a unit is. The following is a formula developed by the Labor Management Institute (LMI) to calculate the admissions, discharges and transfers (ADT) (Waxman & Knighten, 2023):
(Total Admissions + Discharges +Transfers in 24 Hours) / Midnight Census
Using the calculated ADT activity can be beneficial to the DNP-prepared nurse as this may provide justification for additional staffing during peak activity times.
Cost Center
Distinguishing costs associated with individual units is important for financial accountability. This allows for corrective action to be taken for each identified cost center when applicable. Other names for cost center include department number or cost unit (Waxman & Knighten, 2023).
Hours per Patient Day or Unit of Service
A usual method for comparing levels of care from one cost center to another is through the use of the number of hours per patient day (HPPD). Determining if hours are total worked (or productive) or total paid (annual) as the difference may vary considerably with any comparison.
Essential Hours
• Hours Classification: encompasses direct, indirect, total works, nonproductive, and total paid hours
• Direct Care Worked Hours: hours worked in the direct provision of patient care
• Indirect Care (or Fixed) Worked Hours: hours worked but not in the direct provision of patient care
• Total worked (or Productive) Hours: actual hours worked
• Nonproductive Hours: paid time off (sick, vacation, and holiday); some organizations may also include education, orientation, and meetings as nonproductive time
• Total Paid (or Annual) Hours: all hours paid from the cost center (productive and nonproductive hours)
Basic Formulas
When obtaining the average total worked (productive) hours of care and total paid hours provided per patient, divide the total worked (productive) hours and total paid hours on a patient unit for a specified period of time by the UOS during that same period (Waxman & Knighten, 2023). Example:

  1. Total Worked (Productive Hours):
    a. 1760 total direct worked hours + 336 total indirect hours = 2096
  2. Total Nonproductive Hours:
    a. 256 Benefit hours (time paid but not worked)
  3. Total Paid Hours: 2096 + 256 = 2352
  4. Hours per Unit of Service (hours per Patient Day or HPPD):
    a. Total direct (variable) worked hours per UOS or HPPD: 1760 divided by 348 = 5.06
    b. Total indirect (fixed) worked hours per UOS or HPPD: 336 divided by 348 = 0.97
    c. Total worked (productive) hours per UOS or HPPD: 2096 divided by 348 = 6.02
    d. Total paid hours per UOS or HPPD 2096 + 256 = 2352 divided by 348 = 6.76
  5. Average Daily UOS (Example Average Daily Census [ADC])
    a. Divide the total UOS (patient days) by days in the survey period: 348 divided by 14 = 24.9
    Full Time Equivalents (FTEs)
    • Direct FTEs
    • Indirect FTEs
    • Total worked or productive (direct and indirect) FTEs
    • Total nonproductive FTEs
    • Total paid or annual FTEs (Waxman & Knighten, 2023)
    Full-Time Equivalents and Formulas
    • 2096 total worked hours ÷ 80 hours/2 weeks = 26.2 FTEs
    • 2096 total worked hours ÷ 8-hour shift = 262 8-hour shifts
    • 2096 total worked hours ÷ 12-hour shift = 174.66 12-hour shifts (Waxman & Knighten, 2023)
    Productive Cost or Dollar per Patient Day
    The Cost of Care per Day or Unit of Service is a mathematical calculation of the cost of care in worked hours per day or unit of service (UOS) using average salary costs by category of employee and the primary metric for units of service (Hours per Patient Day [HPPD]).
    Hours per UOS and FTEs must first be determined; then, average salary information by category of employee is used to calculate dollars or cost per UOS goals per unit. Unit-specific staffing pattern or Variable Staffing Plan (VSP) for each increment of workload is used for this calculation.
    Targets for dollars or cost per UOS will vary among units depending on tenure of employees, approved overtime, special pay, and use of agency staff. Total worked (productive) and total paid targets are beneficial in budget monitoring in order to evaluate operational decision making. When the actual cost per inpatient day is over budget and the HPPD is within budget, then the unit was staffed with overtime and other premium pay (travel nurses, etc.) (Waxman & Knighten, 2023).

Project topic- Mindfulness Based Stress Reduction as an Alternative Treatment for Mild to Moderate Depression

To improve the daily personal and professional functioning of patients with psychiatric mental illness such as major depressive disorder or anxiety disorder.
Translation Science Model: Knowledge-to-Action Model
PICOT- In adult patients with mild to moderate depression at an outpatient mental health clinic, does implementation of MBSR compared to standard care improve depression symptoms in 8-10 weeks?
From Practice Readiness form
Week 1:

  • Eligible patients informed about the study project, sign informed consent
  • Baseline depression assessment performed using PHQ-9
  • Participants instructed on project expectations
    Weeks 2-9:
  • Participants allocated to 2-4 groups for weekly in virtual lessons on mindfulness meditation, and mindful movement based on the Palouse mindfulness based stress reduction program (Hoge et al., 2022). Participants instructed on downloading and using MyPossibleSelf app for daily guidance and logging of MBSR activities. The project leader will collect weekly logs of MBSR activities and schedule VSEE FaceTime or Zoom meetings to review progress and answer questions.
    Week 10:
  • Post-test depression assessment performed using the PHQ-9
  • Data analyzed for pre-and post-test comparisons.

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