Health Care Finance; Operating Bugets and Capital Expenditre Budgets
Assignment Exercise 15–1: Budgeting
Select an organization; either Metropolis Health System from the Chapter 25 Case Study or
one of the organizations presented in the Mini-Case Studies in Chapters 26–28.
1. Using the organization selected, create a budget for the next fiscal year. Set out the
details of all assumptions you needed in order to build this budget.
2. Use the “Checklist for Building a Budget” (Exhibit 15-2) and critique your own
Assignment Exercise 15–2: Budgeting
Find an existing budget from a published source. Detail should be extensive enough to
present a challenge
Assignment Exercise 15–3: Transactions outside the Operating Budget
Review Figure 15-2 and the accompanying text.
Metropolis Health System has received a wellness grant from the charitable arm of an
area electronics company. The grant will run for twenty-four months, beginning at the first
of the next fiscal year. Two therapists and two registered nurses will each be spending half
of their time working on the wellness grant. All four individuals are full-time employees of
MHS. The electronics company has only recently begun to operate the charitable organi-
zation that awarded the grant. While they have gained all the legal approvals necessary, they
have not yet provided the manuals and instructions for grant transactions that MHS usually
receives when grants are awarded. Consequently, guidance about separate accounting is
not yet forthcoming from the grantor.
How would you handle this issue on the MHS operating budget for next year?
Assignment Exercise 15–4: Identified versus Allocated Costs in Budgeting
Review Figure 15-3 and the accompanying text.
Metropolis Health System is preparing for a significant upgrade in both hardware and
software for its information systems. As part of the project, the Chief of Information Oper-
ations (CIO) has indicated that the Information Systems (IS) department can change the
format of the MHS operating budgets and related reports before the operating budget is
constructed for the coming fiscal year. The Chief Financial Officer (CFO) has long wanted
to modify what costs are identified and what costs are allocated (along with the method of
allocation). This is a golden opportunity to do so. To gain ammunition for the change, the
CFO is preparing to conduct a survey. The survey will obtain a variety of suggestions for po-
tential changes in allocation methods for the new operating budget report formats. You
have been selected as one of the employees who will be surveyed
Assignment Exercise 16–1: Capital Expenditure Proposals
Ted Jones, the Surgery Unit Director, is about to choose his strategy for creating a capital
expenditure funding proposal for the coming year. Ted’s unit needs more room. The
Surgery Unit is running at over 90% capacity. In addition, a prominent cardiology surgeon
on staff at the hospital wants to create a new cardiac surgery program that would require
extensive funding for more space and for new state-of-the-art equipment. The surgeon has
been campaigning with the hospital board members.
What should Ted decide to ask for? How should he go about crafting a strategy to justify his
request, given the hospital’s new scoring system?
Answer rating (rated one time)
Metropolis Health System - Case Study Ex 15-1, 15-3, 15-4 and 16-1
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Exercise 15 – 1:
xxxxxxxxxxx - xx xxxxxxxxxxxxxxxxx xx costs
MHS continues xxxxxxx xxxxxxxx xxxxxxx xxxxx
Population xx xxxxxxxxxx remains xx xxxxxx
xxxxx xx no increase in the inpatients xxx xxxxxx xxx same xx xxxx year
Outpatients have xxxxxxxxx xx xxxxxx xxxx xxxxxxxx xxxx
xxxxx xx Trustees are still xxxxxxxxxx and no xxxxxxxxxxxx is paid to xxxx
The xxxxxx of responsibility centers xxxxxx xx xx
The xxxxxxxx head xxxxx remains xx xxx
xxx members of xxx xxx foundation xxx xxxxxxxxxx and no compensation xx xxxx to xxxx
xxx Volunteer auxiliary x xxxxxxxxxxxx to xxx xx xx xxxxxx xxxxxx xx xxx xxxxxxxxxx that $50000 was xxxxxxxxxxxx xxxxxxxxxxx xxxx the xxxx xxxx xxxxxx
New plans: - additional costs
xxxx xxx xxxxx xxxx a xxxx xxxx period:
1. xxxxxxxxxx services
2. Physical Medicine and rehabilitative services
xx xxxxxxxxxxxxxx services
5. xxxxxxxxx Health
xxxxxxxxxxxx costs and xxxxxxx xxxx xx the xxxx direction
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Exercise 15 – 3
xxx xxxxx xxxxx has been received for a xxxxxxxx reason xx a xxxxxxxxxx xxxxx Such funds cannot xx used freely for xxxxxx xxxxxxxxx Hence, xxxx funds are not to be xxxxxxx xxxx xxxxxx funds. xxxx specific xxxxx needs to xx accounted and xxxxxxxx separately xxxxxxx of xxx fact xxxx xx specific xxxxxxxxxxxx xxxx xxxx given xx the donor.
xxxxxxxx 15 – x
xxx xxxxxxxx chosen xx “xxxxx’x xxxxxx” xxxx xxxxxx 25-1.
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xxxxxxxx xx xxx
xxx three important factors which will be considered xxxxx making x xxxxxxx allocation decision at the xxxx of xxxxxxxx capital are:
xxxxxx xxx xxx xxxxxxx
xxxx xx xxxxxxx
Return to be realized xx xxx investment
xxx xxxxx should justify xxx case xx requesting for xxxx room xx keeping xxx following points xx mind:
The purpose xx xxx request is to xxx xxx more space/additional xxxxxxxxxx
More space is needed to xxxxx xxx xxxxxxx activities especially xxxxxxxxxxx
x xxxxxxxx drawing of the xxxxx should be xxxxxxxxxx
x study xx xxx xxxxxxxx vendors xx be conducted xxx xxxx xxxxxx xx be chosen for the xxx state xx xxx art equipment. xxxxxxxx cash xxxxxxx xxxxxx xx xxxxxxxxxx
A xxxxx xx the xxxxxxxxxxxx xxx xxxxxxxxxxx work to be made xxx cash xxxxxxxx xx be estimated.
Approximate xxxx xxxxxxx from the xxxxx xxxxxxxxxxxxxxxx xxxxxxxxx to xx determined xxx xxx next five xxxxxx
xxx additional capital outflow required xxxx xxx next xxxx years xx xx determined.
The xxx xxxx
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