Budgeting Case Study -1

Report
Managing Fiscal Resources
A Budget & Productivity Case Study
Exploring the Process of Healthcare Financial
Management
March 30, 2012
Introduction
Fiscal responsibility and accountability are essential to the well-being of the hospital.
When considering budget management functions, be sure to consider the following areas:
PLANNING – Fiscal responsibilities include predicting resource needs – both human and
material resources – and developing plans to meet those needs.
ORGANIZING – Collate and reviewing fiscal reports in a timely manner making
adjustments in supply and personnel usage as necessary to manage within budget
LEADING – Fiscal responsibilities include keeping staff informed about the unit’s budget
and involving them as appropriate in making adjustments in supply and personnel usage
to manage within budget
EVALUATING – Fiscal responsibilities relate to cost control or the actual, economic use of
all resources
Budget Considerations
1.
2.
3.
4.
Objectives:
Define Key Budget Terms
Calculate Hours of Care
Describe the flexing of the budget
Interpret potential variance scenarios and their
impact on the budget
FTE Definition
FTE – Full Time Equivalent. One FTE equals 40 hours in one week time frame and 2080 hours
in one year. ONLY paid hours are used in FTE calculations (includes vacation, holiday, and
sick leave)
EXAMPLE: on a given unit, 22 positions may be filled, but they may only account for 20 FTEs.
This is due to some staff working less than 40 hours per week. Often times nurses are
budgeted as .9.
6 – 12 hour shifts in a two week period = 72 hours/80 hours = .9 FTE
FTEs are calculated by taking the number of hours paid in a given time period divided by the
number of hours equal to 1.0 FTE for that time period.
EXAMPLE: 880 hours paid in a two-week (80 hr) time period reflects 11.0 FTEs
What equals one FTE?
Time Period
Total Hours
Per Week
40 Hours
4 Week Cycle
160 Hours
6 Week Cycle
240 Hours
Quarter (13 weeks)
520 Hours
Year
2080 Hours
Productive and Non-Productive Time
The total time paid to staff consists of productive and nonproductive time.
Productive (worked) time includes straight time, overtime, and any
other paid time worked (e.g. conference attendance).
Non-Productive time includes vacation, holiday, sick time, and
other non-worked paid time (bereavement, etc.).
Generally, a staffing pattern is built upon an 86%/14% nonproductive mix.
Determine the number of FTEs used during each scheduled period
described below:
____ FTE
____ FTE
____ FTE
____ FTE
____ FTE
640 hours in one week
4240 hours in a 4 week month
5160 hours in a 5 week month
16,328 hours in a quarter
39,936 hours in a year
Determine the number of FTEs used during each scheduled period
described below
16 FTE
26.5 FTE
25.8 FTE
31.4 FTE
19.2 FTE
640 hours in one week
(640 hours/40 hours in a week)
4240 hours in a 4 week month
(4240 hours/160 hours in 4 weeks)
5160 hours in a 5 week month
(5160 hours/200 hours in 5 weeks)
16,328 hours in a quarter
(16,328 hours/520 hours per quarter)
39,936 hours in a year
(39,936 hours/2080 hours per year)
Your staff was paid 2,560 hours during the past
month (4 weeks) as follows:
2148
48
56
84
176
48
Regular
Overtime
Holiday Premium (worked holiday)
Holiday (off holiday)
Vacation
Sick
Calculate the number of FTE’s. _____
Calculate the % of Productive time. _____
Your staff was paid 2,560 hours during the past
month (4 weeks) as follows:
2148
48
56
84
176
48
Regular
Overtime
Holiday Premium (worked holiday)
Holiday (off holiday)
Vacation
Sick
Calculate the number of FTE’s. 16.0
(2560 hrs/160 hrs in a 4 week period)
Calculate the % of Productive time. 88%
(2252 productive hours/2560 paid hours)
Average Daily Census (ADC)
The census report describes on a daily basis the number of patients who were occupying a bed
as of midnight. One patient occupying one bed equals one day
The ADC reflects the average number of patients per day.
ADC =
# of Pt. Days in a given time period
# of days in a given time period
EXAMPLE: if a census report for a 4 week (28 days) time period shows the number of patient
days is 450, then the ADC would equal 16.07.
450 Patient Days = 16.07 ADC
28 Days
Occupancy
Occupancy is the ratio of the ADC compared to the number of beds
available:
Occupancy = ADC in time period
# of available beds in time period
EXAMPLE: If you have a 20 bed unit and your ADC is 15, your
occupancy rate is 75%
Determine the ADC & Occupancy of the following units using the
daily census information listed below
Unit
Available
Description Beds
1
2
3
4
5
6
7
Total
Patient
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Days
8
A
35
31 30 31 30 29 30 31 30 31 29 29 32 31 33 31 31 33 34 34 34 34 32 30 32 31 30 30 33 31 34 0
941
B
16
15 14 11 9
7 12 12 15 13 13 16 15 15 15 16 16 15 14 15 16 15 13 13 17 16 15 16 16 14 15 0
424
C
13
10 12 11 11 11 13 13 13 12 13 12 12 12 13 13 13 13 13 13 13 13 13 13 12 12 12 12 13 13 13 0
372
D
32
30 27 27 24 26 23 27 29 28 28 25 27 30 26 31 31 30 30 30 32 32 32 26 25 25 25 23 31 31 30 0
841
E
6
6
97
3
3
3
3
5
5
5
2
Unit
A
B
C
D
E
2
2
2
4
4
ADC
3
3
0
0
0
6
5
Occupancy
5
3
3
3
2
5
4
3
3
0
Determine the ADC & Occupancy of the following units using the
daily census information listed below
Unit
Avail.
Description Beds 1 2 3 4 5
A
35 31 30 31 30 29
B
16 15 14 11 9 7
C
13 10 12 11 11 11
D
32 30 27 27 24 26
E
6
6 3 3 3 3
6
30
12
13
23
5
7
31
12
13
27
5
8
30
15
13
29
5
9
31
13
12
28
2
Unit
A
B
C
D
E
10
29
13
13
28
2
11
29
16
12
25
2
12
32
15
12
27
2
13
31
15
12
30
4
14
33
15
13
26
4
15
31
16
13
31
3
ADC
(941/30) = 31.4
(424/30) = 14.1
(372/30) = 12.4
(841/30) = 28.0
(97/30) = 3.2
16
31
16
13
31
3
17
33
15
13
30
0
18
34
14
13
30
0
19
34
15
13
30
0
20
34
16
13
32
6
21
34
15
13
32
5
22
32
13
13
32
5
Occupancy
941/(35x30) = 90%
424/(16x30) = 88%
372/(13x30) = 95%
841/(32x30) = 88%
97/(6x30) = 53%
23
30
13
13
26
3
24
32
17
12
25
3
25
31
16
12
25
3
Total
Patient
26 27 28 29 30 31 Days
30 30 33 31 34 0
941
15 16 16 14 15 0
424
12 12 13 13 13 0
372
25 23 31 31 30 0
841
2 5 4 3 3 0
97
Average Length of Stay (ALOS)
Length of stay equals the number of days a patient is hospitalized from admission through
discharge.
ALOS = # of pt. days in a given time period
# of discharges in same time period
Considerations
It is important to be cognizant of length of stay. Every effort should be made to strive for
the lowest length of stay possible. ALOS is often used as a comparison between
hospitals for like DRGs/Cases.
Determine the ALOS for the following units:
25 bed unit with 662 patient days and 92 discharges in a month
18 bed unit with 1285 patient days and 102 discharges in a quarter
21 bed unit with 6900 patient days and 1408 discharges in a quarter
Determine the ALOS for the following units:
25 bed unit with 662 patient days and 92 discharges in a
month
662 days/92 discharges = 7.2
18 bed unit with 1285 patient days and 102 discharges in a
quarter
1285 days/102 discharges = 12.6
21 bed unit with 6900 patient days and 1408 discharges in a
quarter
6900 days/1408 discharges = 4.9
Hours of Care
Hours of care reflect the amount of nursing resources used by a particular unit during a
specified time frame as compared to the census data for that same time frame. Paid
hours of care reflect all hours paid (productive & non-productive) during the time period;
whereas, productive hours of care reflect only the productive hours which were paid
during the time period. The formula used for the calculation of paid hours of care is:
Total Hours Paid in Time Frame OR Total Hours Paid in Time Frame
(ADC)(# Days in Time Frame)
Total Census During Time Frame
To determine productive hours of care, use the following calculation
Total Productive Hours Paid in Time Frame
(ADC)(# Days in Time Frame)
OR
Total Productive Hours Paid in Time Frame
Total Census During Time Frame
EXAMPLE: During a 4 week time period, 3,200 hours were paid and the average daily census was 15. The
paid hours of care would equal 7.6. The calculation to determine this answer is:
3200 Hours
(15 pts per day) (28 days)
3,630 hours were worked in a 4 week time period and the ADC was
16.2. Determine the productive hours of care.
________
108,162 hours were paid over one year on a unit which had 4,292
patient days during the same time period. Determine the paid
hours of care.
________
3,630 hours were worked in a 4 week time period and the ADC was
16.2. Determine the productive hours of care.
8.0 = 3630 hours worked in 4 weeks/(16.2 patients per day)(28
days)
108,162 hours were paid over one year on a unit which had 4,292
patient days during the same time period. Determine the paid
hours of care.
25.2 = 108,162 hours paid in one year/4,292 patient days
Volume Adjustments/Flexing Budgets
As volume fluctuates from actual budgeted volumes, the flex budget (or variable cost budget)
should be used to accurately account for necessary change. In using a flex budget
methodology, a hospital must analyze all costs to determine if and how much each cost
changes with different levels of volume. Costs are then broken into fixed and variable costs.
Fixed costs on a unit may be the nurse manager, charge nurses on each shift, unit clerks, etc.
For the normal range of patients on a unit, personnel costs will always exist. On the other
hand, nurses and nursing extender roles may vary based on the number of patients on a given
unit. The same theory holds true for all other costs on the unit. Based on such an analysis a
percentage of variable costs is determined and used to flex budgeted expense budgets up or
down based on changes in patient volume.
The budget is based on predicted volumes. An expense budget is based on the budgeted
volume. The expense budget may be flexed in order to correspond to actual volume.
When a unit has more volume than was budgeted, more dollars may be added to the budget to
offset the cost of the additional volume. Likewise, when volume is less than budgeted, money
may be subtracted from the budget. The amount of money by which your budget would be
flexed is dependent upon the % of variable costs which are applicable to your unit.
Flex Exercise
Last month, your actual census was 603 compared to a budgeted census of 642. You were
budgeted for 23.6 FTE’s
If your unit was determined to have 50% variable costs, then you would use the following
calculation to determine your volume adjusted FTEs:
23.6+[(603-642)](23.6)(50)
642
= adjusted FTEs would be 22.9
In other words the following calculation should be used to determine your volume adjusted or
flexed budget based on your percent of variable costs:
Budgeted FTE Amount + [(Actual Census – Budgeted Census) ](Budgeted FTE Amount)(% Variability)
Budgeted Census
In FY ‘11, your unit’s actual census was 6,937
compared to a budgeted census of 6,798. You were
budgeted for $100,025 personnel dollars. If your unit
was determined to have 20% variable costs, determine
the volume adjusted personnel dollars.
If your unit was determined to have 80% variable
costs, determine the volume adjusted personnel
dollars.
In FY ‘11, your unit’s actual census was 6,937 compared to a budgeted
census of 6,798. You were budgeted for $100,025 personnel dollars. If your
unit was determined to have 20% variable costs, determine the volume
adjusted personnel dollars.
$100,025+(6,937-6798)($100,025)(.20)=
$100,025+409=
$100,434
If your unit was determined to have 80% variable costs, determine the volume
adjusted personnel dollars.
$100,025+(6,937-6798)($100,025)(.80)=
$100,025+1636=
$101,661
VARIANCE
A variance is the difference between the budgeted figure (or flexed
budget figure) and the actual figure. A variance may refer to patient
days (volume), dollars (price), or FTEs (volume). A variance may be
considered favorable or unfavorable.
Example: If your unit was budgeted for 500 patient days for one month
and the actual patient days were 525, then your unit experienced a
favorable patient day variance of 25. However, if your unit was
budgeted for 20 FTEs and the actual FTEs paid were 21.5 then your
unit experienced an unfavorable FTE variance of 1.5.
Variance Classifications
A volume variance occurs when actual volume is more or less than the budgeted volume. Volume may be
expressed in terms of patient days or FTEs. The calculation to determine volume variance is:
(Budgeted Volume – Actual Unit Volume)(Budgeted Rate) = Volume Variance
A Unit Cost Variance exists when the average unit cost of an item differs from the amount that was
budgeted. The calculation to determine unit cost variance is:
(Budgeted Unit Price – Actual Unit Cost)(Actual Volume) = Unit Cost Variance
A Labor Rate Variance is a type of unit cost variance which is specific to dollar per hour costs of personnel.
The calculation to determine a labor rate variance is:
(Budgeted Rate – Actual Rate)(Volume Adjusted Budgeted Hours) = Labor Rate Variance
A Quantity Variance is a type of Volume Variance, which occurs when the amount of a resource used
differs from the amount expected to be used for the given workload. The calculation used to determine
quantity variance is:
(Budgeted Use – Actual Use)(Budgeted Unit Cost) = Quantity Variance
An Efficiency Variance is a type of volume variance which is specific to personnel use. The calculation to
determine an efficiency variance is:
(Volume Adjusted Budgeted Hours – Actual Hours)(Budgeted Rate) = Efficiency Variance
Variance Example
Formulas:
Total Variance = Unit Cost Variance + Volume Variance
Unit Cost Variance = (Budgeted Rate – Actual Rate) (Actual Volume)
Volume Variance = (Budgeted Volume – Actual Volume) (Budgeted Rate)
Budgeted Rate = Budget Allocation/Budgeted Volumes
Actual Rate = Actual Expense/Actual Volume
Assume your monthly patient days were:
Budget: 450 Actual: 540
Variance:90
RN Salaries:
Unflexed Budget: $47,474
Actual: $49,597
Variance: ($2,123)
Determine how much of the salary variance is due to unit cost and how much due to volumes.
Budget Rate = 47,474/450 = 105.5
Actual Rate = 49,597/540 = 91.85
Unit Cost Variance = (105.5 – 91.85) (540) = 7,371
Volume Variance = (450 – 540) (105.5) = (9,495)
Total Variance = 7,371 + (9,495) = (2,124)
Interpretation: Actual Rate is less than budgeted rate by $13.65. If the unit worked at the budgeted rate, salaries would have been
over by $7,371, but since productivity was up with the increased volumes, there was a cost avoidance. The unfavorable variance is
due to increased volume. Total costs would have been $9,495 higher than the budgeted just because of the increased patient days
(volume variance). However, the Actual Labor Rate was less than the Budgeted Rate (Unit Cost Variance) so $7,371 of the negative
variance was regained, leaving a $2,124 total negative variance.
Last month your actual patient days were 630 and you
were budgeted at 600 patient days. After reviewing the
“Statement of Direct Income and Expense” report, you
see that the non=chargeable medical surgical supplies
were over budget by $1,609. (actual supply = $9,727,
budgeted supply = $8,118.)
Justify the variance. What conclusions can you make?
Last month your actual patient days were 630 and you were budgeted at 600 patient
days. After reviewing the “Statement of Direct Income and Expense” report, you see that
the non=chargeable medical surgical supplies were over budget by $1,609. (actual
supply = $9,727, budgeted supply = $8,118.)
Justify the variance. What conclusions can you make?
Budget Rate = 8,118/600 = 13.53
Actual Rate = $9,727/630 = $15.44
Unit Cost Variance = ($13.53 – $15.44) (630) = (1,203.30)
Volume Variance = (600 – 630) (13.53) = (405.9)
Total Variance = (1,203.3) + (405.9) = (1,609.2)
75% ($1,203.30) of the unfavorable variance is related to the increase in the cost of the
supplies not explained by the increased patient days. The remaining 25% ($405.90) is
due to the increased usage of supplies due solely to increased patient days.
There may be internal and/or external causes of variance. Internal causes of variance include changes in technology being
used, changes in the efficiency of nurses, or changes in policy. External causes include price changes, census changes, or
type of staff available.
At what point should a variance be investigated? When is a variance too favorable/unfavorable?
Variance – Application to Practice
If six months into the year there was an unfavorable supply variance of $10,000 for dietary, you would need to analyze the
reason for this variance – is it a price variance or a volume variance? Some steps that could be taken to offset the variance
would be to: re-educate staff about communicating diet changes in a timely manner, put a lock on the nutrition pantry,
readjust the nutrition standard for your unit (perhaps even choosing lower cost alternatives), decrease use of banquet services
for meetings.
In order to control variances, you have to be timely in identifying the variance, timely in determining the cause and timely in
putting plans in place to correct/offset the unfavorable variance.
For example, if there was an unfavorable salary variance of $25,000 six months into the fiscal year then steps would need to
be taken to a) determine the cause of variance (rate v. volume) and b) make plans to offset the variance, such as holding a
portion of a position open for the remainder of the year or decreasing the use of agency personnel, float pool, and overtime.
Volume adjustments of budgets are done on a functional unit level. Unit and departmental performance are measured against
volume budgets since the rate of variability for flexing budgets may be altered each year and the current reporting system
does not afford a mechanism to build the calculations on hospital reports.
Staffing Patterns/FTE Requirements
It is sometimes necessary for a nurse manager to be able to calculate daily staffing patterns and/or FTE
requirements. The process for doing this involves several different pieces of information.
In determining the FTE requirements for a unit, it is first necessary to decide how many of the hours of care
should be provided by RN’s and Tech’s, in other words what the staffing mix should be.
Elements Needed to Build a Daily Staffing Pattern:
(Average Daily Census)(Average Direct Hours of Care) = Hours Required to staff a unit for 24 hours
ABOVE EQUATION/Hours in a Normal Work Day = Target Number of Staff to be Prescheduled Daily
Shift
7A - P
3P - 11P
11P - 7A
Total
% of Workload by
Shift
45%
35%
20%
100%
Daily FTE's
5.1
4.0
2.2
11.3
Daily Staffing Pattern
A 20-bed pediatric unit has an ADC of 15. The budgeted RN hours per patient day are 5.6 and Clinical
Associate hours per patient day are 2.37.
15 ADC
5.6 Avg. dir HPPD
84 RN hours required to staff
the unit 24-hours daily
x
8 Hours in a normal work day
⁄
10.5 Target Number of RNs to
be prescheduled daily
RN Shifts
7A - 3P
3P - 11P
11P - 7A
Total
% of Workload by
Shift
Daily FTEs
45% (10.5)(45%) = 4.7
35% (10.5)(35%) = 3.7
20% (10.5)(20%) = 2.1
100%
10.5
15 ADC
x 2.37 Avg. dir HPPD
35.6 Clin. Assoc. hours required to staff
the unit 24-hours daily
⁄
8 Hours in a normal work day
4.5 Target number of Clin Associates
to be prescheduled daily
Clinical
Associate Shifts
7A - 3P
3P - 11P
11P - 7A
Total
% of Worklad by
Shift
Daily FTEs
45% (4.5)(45%) = 2.0
35% (4.5)(35%) = 1.6
20% (4.5)(20%) = .9
100%
4.5
FTE Requirements
Elements needed to Determine Total FTE Requirement
14.70 ADC
x
6.30 Productive (direct) RN Hours of Care
14.70 ADC
x
92.60 Hours reqiured to staff the unit 24 hours daily
x
7.00 days per week
23.52 Hours reqiured to staff the unit 24 hours daily
x
648.20 Hours required to staff the unit
40.00 Hrs/wk for 1 FTE
16.20 FTE (direct care productive time)
x
100.00 percent total staff
88.00 percent productive staff
18.40 FTE (direct care productive
+ non-productive time)
18.40 Total RN FTE's Needed
7.00 days per week
164.64 Hours required to staff the unit
24 hours daily, 7 days per week
⁄
1.60 Productive (direct) Clin Assoc Hours of Care
24 hours daily, 7 days per week
⁄
40.00 Hrs/wk for 1 FTE
4.12 FTE (direct care productive time)
x 100.00 percent total staff
88.00 percent productive staff
4.68 FTE (direct care productive
+ non-productive time)
4.68 Total Clinical Associate FTE's Needed
18.40 RN FTE
4.68 Clin Assoc FTE
2.60 Coordinator FTE (Fixed)
1.00 Nurse Manager (Fixed)
Question: Daily Staffing Pattern
Complete the missing data elements in the following problem:
A 24 bed surgical unit has an ADC of 20. The direct hours of RN care are 6.2 and the Clinical Associate hours of care
are 2.4
RN
X
⁄
Clinical Associate
Average Daily Census
Average Direct HPPD
RN hours required to staff the unit 24 hours
daily
Hours in a normal work day
Target number of RN's to be prescheduled
daily
RN Shift
7A - 3P
3P-11P
11P-7A
% of
Workloa
d by
Shift
45%
35%
20%
Daily
FTEs
X
Average Daily Census
Average Direct HPPD
Clin Assoc hours required to staff the unit 24 hours daily
⁄
Hours in a normal work day
Target number of Clinical Associates to be prescheduled
daily
RN Shift
7A - 3P
3P-11P
11P-7A
% of
Workloa
d by
Shift
45%
35%
20%
Daily
FTEs
Answer: Daily Staffing Pattern
Complete the missing data elements in the following problem:
A 24 bed surgical unit has an ADC of 20. The direct hours of RN care are 6.2 and the Clinical Associate hours
of care are 2.4
RN
Clinical Associate
20.00 Average Daily Census
X
⁄
20.00 Average Daily Census
6.20 Average Direct HPPD
RN hours required to staff the unit 24 hours
124.00 daily
15.50 Target number of RN's to be prescheduled daily
Daily FTEs
2.40 Average Direct HPPD
48.00 Clin Assoc hours required to staff the unit 24 hours daily
⁄
8.00 Hours in a normal work day
% of
Workload
RN Shift by Shift
X
8.00 Hours in a normal work day
Target number of Clinical Associates to be prescheduled
6.00 daily
% of
Workload
RN Shift by Shift
Daily FTEs
7A - 3P
45%
15.5 x 45% = 7.0
7A - 3P
45%
6 x 45% = 2.7
3P-11P
35%
15.5 x 35% = 5.4
3P-11P
35%
6 x 35% = 2.1
11P-7A
20%
15.5 x 20% = 3.1
11P-7A
20%
6 x 20% = 1.2
Total
100%
15.50
Total
100%
6.00
Question: FTE Requirements
Problem: (FTE Requirement)
You will be the new nurse manager of a 20 bed medical unit. The anticipated ADC is 16. 96
hours (80 RN, 16 Clinical Associates) are required to staff the unit 24 hours per day
A. Determine the direct productive Hours of Care
B. Determine the total (productive & Non-productive Direct FTEs needed if non productive time
is set at 12%
C. Determine the total number of FTE’s needed if the unit has the following personnel with fixed
costs
A. 1.0 Nurse Manager
B. .5 Clinical Nurse Specialist
C. 2.4 Clerical Associates
Answer: FTE Requirements
Problem: (FTE Requirement)
You will be the new nurse manager of a 20 bed medical unit. The
anticipated ADC is 16. 96 hours (80 RN, 16 Clinical Associates) are
required to staff the unit 24 hours per day
A. Determine the direct productive Hours of Care
1. RN 5.0; calculation is 80 hours per day/16 ADC
2. Clin Assoc 1.0; calculation is 16 hours per day/ 16 ADC
Answer: FTE Requirements
Problem: (FTE Requirement)
You will be the new nurse manager of a 20 bed medical unit. The anticipated ADC
is 16. 96 hours (80 RN, 16 Clinical Associates) are required to staff the unit 24
hours per day
B. Determine the total (productive & Non-productive Direct FTEs needed if non
productive time is set at 12%
1. RN = 15.9; calculation is (16 ADC)(5.0 Hours of care)(7 days)/40 hours per
week for 1 FTE) = 14productive hours of care x 100/88 = 15.9
2. Clin Assoc = 3.1; Calculation is 16 ADC)(1.0 Hour of care)(7 days)/40
hours per week for 1 FTE) = 2..8 productive hours of care x 100/88 = 3.2
Answer: FTE Requirements
Problem: (FTE Requirement)
You will be the new nurse manager of a 20 bed medical unit. The
anticipated ADC is 16. 96 hours (80 RN, 16 Clinical Associates) are
required to staff the unit 24 hours per day
C. Determine the total number of FTE’s needed if the unit has the
following personnel with fixed costs
A. 1.0 Nurse Manager
B. .5 Clinical Nurse Specialist
C. 2.4 Clerical Associates
15.9 + 3.2 + 1.0 + .5 + 2.4 = 23 Total FTEs
Workloads:
Examples of Workloads:
Emergency Departments = Number of Visits
Nursing Units = Patient Days
Procedural Areas = RVUs
An expense budget is set based on budgeted workloads. The flexed budget is
contingent upon actual workloads. Based on actual volumes, the variable expense
budgets are flexed up or down.
A unit’s variable budget will increase & decrease appropriately to reflect the percentage
of volume fluctuation.
Hours per Workload Unit (HPWU)
Each variable budget is based on the standard for each area: Hours per workload unit
(HPWU) for FTEs and Cost per Workload Unit (CPWU) for salary and non-salary expense.
Bost HPWU and CPWU are fixed for a cost center.
HPWU reflects the amount of resources used by a particular cost center during a specified
time frame for one workload. If a unit’s HPWU statistic is 14.9, that means it takes 14.9 hours
in a 24-hour time period to take care of one patient on the unit. These hours include all staff
(RN’s, techs. Management, unit clerks, etc.) and all non-productive time of staff (sick, FMLA,
vacation, etc.)
CPWU is the salary expense spent on providing care to one patient in a 24 hour period.
The flexed budget is then calculated based on HPWU/CPWU and volume:
FTE = (HPWU x Annual Workload)/2080
CPWU = Budgeted Salary Dollars/Workloads
Productivity Metrics to Monitor
Total Workload – Patient Days for 26 pay periods (364 days)
Average Pay period Workloads – Annual Workloads/26
Total FTE’s – annual budgeted total FTEs
Total Cost – Annual budgeted salary
Average FTEs and Salary – FTEs and salary for a pay period
Variable Productive HPWU/CPWU
Total Productive HPWU/CPWU
Variable Paid HPWU/CPWU
Total Paid HPWU/CPWU
Look for trends & variances in these statistics over varied time frames (pay periods,
quarters, annually) to make efficient decisions for the unit.
Creating a budget…
Please Refer to your Budget Case
Study Handout
Copies of this presentation are
available on the Maryland HFMA
chapter homepage
hfmamd.org

similar documents