Managing a facility or a unit is no easy feat. You must take many factors into consideration and balance the priorities of everyone involved in day-to-day operations in each unit you manage. Not only do you need to look at how a unit functions today, but you’ll need to keep in mind how it may change throughout the year.
One important aspect of managing any unit is creating a nursing unit budget. To do this, you’ll need to understand the types of healthcare budgets, consider potential expenses, and find ways to reduce costs without sacrificing the quality of patient care. Here are some tips to keep in mind when it’s that time of year to plan a budget for a nursing unit.
What Is a Unit Budget?
A unit budget is a plan that outlines a particular unit’s goals and objectives, as well as planned expenses and revenues, in relation to the organization. It also provides guidance on how to best use human and material resources.
Budget planning requires the delicate balance of meeting financial goals while ensuring patients receive high-quality care. If expense projections exceed revenue projections, you’ll need to review the budget and find places to reduce costs without negatively impacting the services that support revenue. Your healthcare organization may use various types of budgets and understanding what types of budgets you may be working with is the first step in knowing how to optimize your budget.
A capital budget deals with long-term investments for the organization, such as building or remodeling facilities and purchasing medical equipment. This is typically handled at higher levels of the organization instead of at the level of individual nursing units. Depending on the organization, you may need to attend budget-planning meetings to know what is expected of you and your unit.
The funds allocated in the capital budget can have a direct impact on a unit’s operating budget. For example, if the organization is planning to expand by building a new building, all units may be asked to reduce costs or maintain the same budgets as in previous years.
An operating budget deals with the day-to-day expenses and revenues of the organization. Within a healthcare organization, each unit typically has its own operating budget. Some items commonly listed in the operating budget include anticipated daily activities, resources, personnel, supplies, and any short-term or rented medical equipment.
Fixed or Static Budget
A traditional fixed or static budget is designed to remain constant, regardless of any changes to the organization’s needs or operations. Creating a fixed budget is typically a more straightforward process than creating a flexible one. However, a static budget does not accommodate for changing or unexpected needs.
In contrast to a fixed budget, a flexible budget is designed to change alongside variables like volume, labor costs, and capital expenditures. Due to its dynamic nature, a flexible budget is often more complicated to create than a static one, but this flexibility can be a huge asset when considering the ever-changing needs of a healthcare organization.
Expenses to Consider for a Nursing Unit Budget
As you develop your nursing unit budget, you’ll need to account for projected expenses and revenue streams. It’s necessary to know your unit well, not just at the time when you’re making the budget, but throughout the fiscal year. What sort of unit are you planning for? Does the patient load change depending on the time of year? What works for one unit may not work so well for another.
When you prepare to plan the budget for the fiscal year, review records from previous years to determine trends. While you won’t be able to plan for emergencies like COVID-19, looking at what your unit needed in the past and when it was needed can help you better understand what it may need in the future.
An operating budget typically lists the number of employees in each category (e.g., RNs, LPNs, and nursing aides), as well as a breakdown of salary and benefit costs for each. It also includes the costs of new hires, current staff salaries, per diem staffing, and any professional development or continued training.
You should also consider the type of shifts your unit has and how many employees of different types you need during which shifts. If your unit sees the majority of patients during the day shift, you’ll need to budget for more staff during the day compared to the night. In some facilities, the night shift also gets differential pay, and you’ll need to take into account whether that differential pay comes from your unit’s budget or the overall capital budget.
Remember that the quality of patient care and outcomes is very much dependent on your staff. Many times, units cut costs by reducing staff or shifting responsibilities around in an attempt to avoid staffing with higher-paid staff.
Not only does this put quality patient care at risk, but the unit may face higher staff turnover and burnout. If your unit regularly has shifts uncovered due to staffing shortages, this may be the best time to research per diem staffing agencies so you can budget accordingly. Alternatively, if your unit is forced to call off staff due to low patient loads, you may need to plan on-call pay or work with other units to float extra staff.
In relation to staff, consider your patient demographics and how that can affect staffing ratios. The number of staff required on any given shift will vary based on the number of available patient beds, as well as the average patient acuity. An ICU or skilled nursing facility would require a higher staff-to-patient ratio than an assisted living floor.
Another variable to consider, depending on your unit, is whether or not your unit’s patient load and acuity changes during different times of the year. For example, a pediatrics unit in a general hospital will generally need more nurses during peak respiratory syncytial virus (RSV) season.
However, variables like RSV infection rates change yearly, depending on if infections in your area start earlier in the fall or end later in the spring that year. While you can’t predict exactly how future outcomes like these will affect your unit, being aware that they regularly happen can help you identify what areas of your budget need to be flexible.
This category includes any medical, office, and personal hygiene supplies your unit uses. Each equipment expense is typically listed under an appropriate category or line item in the budget. For example, pens would fall under the “office supplies” heading, while IV tubing would fall under “medical supplies.”
Where applicable, general categories can also be further subdivided into more discrete headings. For instance, you could list various types and sizes of gauze under the “bandages” heading, which would be a subcategory of the broader “medical supplies” heading.
Having detailed categories can help you identify what resources are used more than others and when. This can help your unit avoid running out of certain supplies at critical times and restocking with pricey rush shipping. Additionally, if the price of one item increases, you can identify the trend and see if there are cheaper alternatives of the same quality.
Depending on the facility type, your nursing unit may partner with other departments for services and supplies. For example, if you work in a hospital with an on-site pharmacy that supplies your unit with stock medications, you may be charged for those medications and need to log it as an expense. Patients who use those medications would be charged to cover the expense, which would then be logged on the revenue side of your budget.
Revenue can stem from patients, grants, donations, and any financial support from your healthcare company. Each of these revenue streams should have their own line item within the budget.
When adding patient revenue lines to the budget, consider that not all individuals pay the same rate for the same services and supplies. Both government and private health insurance companies have different rates they will cover for different services, and they will typically negotiate with healthcare providers regarding payment.
Some insurances have specific guidelines on how to qualify for reimbursement, such as charting requirements for Medicare. Know what standards are and ensure your staff follows them so your unit does not miss out on insurance payments, which can be a costly mistake.
Reducing Healthcare Costs
Part of creating a budget means understanding where to reduce costs without reducing the quality of patient care, staff, or supplies. There are several practical ways to streamline your unit’s expenses. Some units may benefit from several methods while others may only be able to use one or two. Work with your staff and learn your unit’s needs so you can effectively and safely prioritize resources.
- Monitor the use of supplies and routinely evaluate supplier cost and unit stock
- Watch for long-term trends in your unit’s patient-to-staff ratios to avoid overstaffing or understaffing
- Work with other units and cross-train staff if there are certain times when you may need to float staff
- Know your options for per diem staffing if your unit regularly needs it and budget ahead of time
- Limit excessive use of unscheduled leave
- Educate staff and enforce standards to comply with insurance company requirements
- Identify and resolve issues that contribute to overtime
- Ensure nursing hours do not exceed the target number of hours per patient day (HPPD)
Monitoring & Evaluating Outcomes of a Nursing Unit Budget
Once you’ve created your nursing unit budget, you’ll need to ensure your unit adheres to it. If your expenses are greater than planned, even by a small amount, adjust as soon as possible to ensure you don’t go over budget. And while streamlining costs in the initial budget plan is ideal, underspending throughout the year is not. If you’re spending less money than anticipated, you may lose that amount in next year’s budget.
Once you have reached the end of your budget cycle, it’s time to review your results and start planning for the next cycle. Monitoring your budget closely and continuously is the best way to prevent surprises in the evaluation process. While you’ll want to carry the lessons learned from the previous budget into the next one, be careful not to rely too much on the past. The needs of both your organization and your nursing unit, as well as available resources and opportunities, may look different than what they once were.
Developing a nursing unit budget can be challenging. However, it’s necessary to ensure your unit has everything they need to provide the best quality patient care. Taking the time to create a strong plan, and then monitoring it consistently, is the best way to ensure your nursing unit budget is a success.
If your facility would like to hire qualified staff on a shift-by-shift basis, fill your staffing needs with Clipboard Health.