Introduction
The Krona Community Hospital, founded in 1977, is a 60-bed, acute care facility, which is situated in Banconota County. The facility presently offers a full range of care services and maintains a staff of around 400 workers, 100 physicians and specialists and several volunteers. Nouveau Health, which is a private, non-profit health care chain, has acquired the management of the Krona Hospital. The new facility will have 74 acute beds, which are entirely private, four observation rooms, a 24-hour emergency center, four surgical operating rooms, intensive care unit, and maternity department that will have one C-section room. In addition, the new facility will contain an extensive support services such as physical therapy and cardiac rehabilitation. To make sure that the new care facility becomes successful, there is the need to prepare next year’s operating budget as well as financial plan. This is achieved through careful finance management, forecasting, and planning (Baker, 2013).
Funding Sources
The main source of funding is via government health insurance programs. Medicare accounts the largest source of funding, which represents 40% of the total funding directed to health care facilities. The second government funding prospect is Medicaid that is a joint responsibility of both the state as well as federal governments. As a result of their fast reimbursement turnaround time, several healthcare facilities depend on the reimbursements to cater the overhead costs and pay their workers. On the other hand, Medicaid account for about 25-35 % of the funding based on the state guidelines for Medicaid. The other accessible source of funding will be through grants. Founded on the demographics and geographic location of the facility, it will qualify for funding from diverse agencies and organizations that provide grants to different community facilities for building cost to extend their facilities. The facility has received an approval for the new renovation as well as the addition of several services. The facility has $3 million to add to its operational budget for the expansion of the new facility (Hoque, 2005).
Methodology in Revenue Forecasting
The forecasting of the revenue will cover different time periods and serve several purposes. Thus, a 5-year forecast will be ideal to be used for purposes of executive decision-making processes concerning organization’s future, whilst a short-range prediction is classically ideal for one year and is beneficial in determining financial trends as well as yearly changes to the operational budget. The method of forecasting for this assignment was founded on utilization and trend analysis, which will permit calculation of some factors to determine unknowns in the budget, utilizing past trends in different areas (Baker, 2013).
How New Service Impact Revenue
The new facility will indeed have a positive impact on revenue, though the initial costs of starting the operations will take some time to reimburse. Thus, from the operational budget perspective, the revenue will be immediate whereas overall costs of payroll as well as benefits compared to revenue will be somehow approximated at 50% of the total revenue. The different methods to look at it, every dollar spend on quality staff will be reflected in the overall revenue. Therefore, the increase as compared to the previous year will be about 56% or estimated $23 million in terms of revenue (Trend in Hospitals, 2011).
Fixed and Variable Costs
Fixed cost does not differ in total when activity level of operations varies. Variable costs , on the other hand, vary in direct proportion to the change in terms of activity levels of operations. Therefore, when making key decisions on how to allot the $3 million to the expenses, it will be essential to ascertain the type of costs that will increase in direct relation to the increased level of operations, like additional hospital beds, be its acute level private beds, maternity unit, surgical unit, recovery unit among others. This will have direct effect on costs that will about 50% of the $3million spend on payroll and benefits meant for new employees. Also the remaini8ng budget was raised at a fixed level founded on the total increase in costs of about 10% per service (Baker, 2013).
Project Inpatient and Outpatient Visits Based on Trends
So as to determine the present trends for outpatient and inpatient, there is need to pull information from reliable sources. The information indicates a definite drop in the overall length of stay from previous years till now. As a result of the new reimbursements as provided in Affordable Act, the number will persist to decline, and readmissions will remarkably decreased to allow the hospitals to get maximum reimbursement via government provisions, like Medicaid Tricare, and Medicare. This will lower the overall trend in inpatient revenue of about 2% whilst outpatient services are the new sources of revenue for majority of the facilities, coming in at a rise of about 9.7% in revenues as a result of the newly implemented and tailored outpatient programs, like physical therapy, outpatient surgical centers, and cardiology care (Trend in Hospitals, 2011).
Conclusion
The discussion provides a compelling idea that advocates for the change of product offerings and reassesses the forecasting of the new facility revenue. The new facility has restructured its product offering and employed new workers to provide high quality service for the new facility. The high quality service will result to satisfaction among customers because the services offered to the community are superior (Baker, 2013). Furthermore, there will also development in the place of treatment; consequently, prompting another formation of operational budget in the subsequent year. This will absolutely keep the organization and its objectives in line with certainty as well as designing better plans for the prospect. This implies that the operational budget will be restructured constantly to make sure that the required changes are accommodated.
References
Baker, B. &. (2013). Operating Revenue Forecasts. In B. &. Baker, Health Care Finance (pp. 142-143). Sudbury: Jones and Bartlett.
Hoque, Z. (2005). Handbook of cost and management accounting. London: Spiramus.
Joint Commission Resources, Inc., & Joint Commission on Accreditation of Healthcare Organizations. (2008). Environment of care: Essentials for health care. Oakbook Terrace, IL: Joint Commission Resources.
Reports. (2012). Retrieved from American Hospital Association: www.aha.org/research/reports/tw/chartbook/2012/table3-1.pd
Trend in Hospitals. (2011). Retrieved from Masslive.com: http://www.masslive.com/business news/index.ssf/2011/08/trend_in_hospitals_is_increase_revenues.html
