mc connell pp_ch27

© 2010 Jones and Bartlett Publishers, LLC

Umiker's Management Skills for the New Health

Care Supervisor, Fifth Edition

Charles McConnell


Chapter 27

Budgets and Cost ControlBudgets and Cost Control


The Supervisor and Cost

The cost-containment measures

imposed on health care providers

have greatly increased the

importance of cost control.

Supervisors are key people in the

control and reduction of expenses.


The Supervisor and Cost

Essential parts of the supervisory

role are participating in the

preparation of departmental

budgets, suggesting cost-cutting

measures, and directing the

application of control measures.


Functions of Budgets

Planning

Controlling

Evaluating


Planning

The preparation of a budget is part

of the planning function. A budget is

itself a plan, a financial plan for the

conduct of business in the near

future.


Controlling

The administration of a budget is

part of the controlling function, and

the budget itself is the most

powerful tool available for

controlling.


Evaluating

Performance appraisals of

supervisors usually include the

assessment of how accurately they

forecast their expenses and how

well their expenditures match the

monies allocated.


Principles and Rules of Budgeting

Expenses are always charged to the

department that incurs them.

Every item of expense must be under the

control of someone.

Supervisors must participate in budget

preparation.

Supervisors must not be held responsible for

expenditures over which they have no control.


Principles and Rules of Budgeting

Unused budgeted funds are not carried over from one annual budget to the next.

Unused funds for capital expenditures may not be transferred to operating expenses or vice versa.

Requisitions for individual expenditures require approval by some authority.

“Slush funds” or contingency funds not

specifically identified are not permitted.


Revenue Budget

Depending on the budgeting

approach of the organization,

revenue figures may come from the

finance or information services

departments


Preparation

A budget cannot be adequately

prepared the week before it is due.

To prepare an itemization of

expenses, collect expense figures

for several months.


Capital Equipment

There is usually a separate budget or

a section of the overall budget that is

set aside for capital equipment. Many

organizations project their capital

equipment budgets out for 2, 3, 4, or

5 years into the future


Wages, Benefits, and Overhead

The figures for salaries, benefits,

and overhead come primarily from

the finance department and human

resources.


For Controlling:

Review budget reports soon after

receiving them. If an item is not

clear or may be in error, seek

clarification. Be prepared to discuss

the variances with your immediate

superior.


Causes of Overtime

Variations in workload.

Absenteeism.

Tolerance of substandard performance.

General acceptance of overtime as a

normal practice rather than an

exception.


Causes of Overtime

Lack of supervisor accountability.

Rigid scheduling practices.

Bargaining unit work rules

Inappropriate or insufficient

equipment and inefficient physical

work area.


Toward Control of Overtime

Regulate demand

Analyze and improve staffing

practices

Analyze and improve work methods

Control absenteeism

Manage responsibly


Cost Control

Cost control involves more than

cutting staff and working more

efficiently. It can also involve

improving inventory control and

seeking price relief from suppliers.


Before Considering Layoffs

Eliminate temporary staff.

Close down unfilled positions.

Consider full-timers who will go part-time.

Consider part-timers who will reduce hours.

Ask for voluntary separations.

Ask for retirements.


Process Reengineering

Reengineering may prove to be the

most cost-effective mechanism in

health care institutions. Without

reengineering, cost-reduction

initiatives will achieve only modest

results.


Benchmarking

Benchmarking is the search for best or

preferred practices and is accomplished

by comparing current systems or

processes with highly successful ones.

Your goal is to increase efficiency, cut

costs, or improve service.


Benchmarking Approach

1) a data-collection phase that may

include literature searches or site

visits,

(2) an analysis phase, and

(3) an action plan.

mc connell pp_ch27

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