Use the 2010 Operating Budget Projections. Develop a budget for Patton-Fuller Co
ID: 2766442 • Letter: U
Question
Use the 2010 Operating Budget Projections.
Develop a budget for Patton-Fuller Community Hospital based on the 2009 Operating Budget and the 2010 Operating Budget Assumptions.
Write a 1,050- to 1,400-word paper in which you do the following: Discuss which financial management practices are most effective in creating and monitoring an operating budget. Discuss which financial management practices are least effective in creating and monitoring an operating budget.
2009 (Proj)
2010 Budgeted % Change From 2009 Projection
2010 Budget
2010 Operating Budget Assumptions
Revenue
Based on these 2009 assumptions: a 3% overall deflation rate for prices in 2009—due to the weak economy—will continue into 2010.
Net patient revenue
459,900
3%
473,697
Patient revenue will continue to increase, but at a decreased rate, with little or no increase in patient volume, due to new managed care contracts.
Other revenue
3,082
15%
3,544
Marketing's plan to increase donations by 15%
Total revenue
462,982
3%
477,241
2009 (Proj)
2010 Budgeted % Change From 2009 Projection
2010 Budget
2010 Operating Budget Assumptions
Expenses
Salaries and benefits
220,752
1%
Salaries will hold to a 1% overall increase in cost due to price deflation nationwide, with no increase in labor hours, due to no increase in patient volume. This assumption could be affected by a board decision either to raise nursing wages by $1 per hour or to increase the nursing hour ratio.
Supplies
74,584
-3%
Supplies cost will decrease 3% due to the price deflation and our current over-stock purchased last year.
Physician and professional fees
110,376
3%
Contracts for fees have a built-in 3% increase.
Utilities
1,200
5%
Utilities cost will increase to the rising cost of oil partially offset by the efficiency of the hospital's new heating and cooling systems.
Other
1,840
0%
No net change in the cost or volume of these items.
Depreciation & amortization (noncash expenses)
36,036
0%
Some high-cost equipment—air conditioning, telephone system, all patient beds, and headwalls—were replaced in 2009, and depreciation rose sharply. Depreciation will remain at this level in 2010.
Interest
3,708
30%
The repayment plan for any monies borrowed in 2009 will come due in 2010, with a sharp increase in interest cost.
Provision for doubtful accounts
13,797
10%
The renegotiation of managed care plans has delayed collection and made collections less certain.
Total expenses
462,293
Total expenses will rise ____%.
2009 (Proj)
2010 Budgeted % Change From 2009 Projection
2010 Budget
2010 Operating Budget Assumptions
Income
Operating income
689
Operating Income will improve, with the hospital's loss reduced by 2/3.
Loss (nonoperating income)
Investment income
(62)
The market is down, expected to hold steady; a zero-return is expected, with neither losses nor gains.
Net income
627
The hospital will continue its dramatic turnaround, taking advantage of the stagnation in patient volume, price deflation, the efficiency of new equipment, and the improved arrangements with the managed care companies.
2009 (Proj)
2010 Budgeted % Change From 2009 Projection
2010 Budget
2010 Operating Budget Assumptions
Revenue
Based on these 2009 assumptions: a 3% overall deflation rate for prices in 2009—due to the weak economy—will continue into 2010.
Net patient revenue
459,900
3%
473,697
Patient revenue will continue to increase, but at a decreased rate, with little or no increase in patient volume, due to new managed care contracts.
Other revenue
3,082
15%
3,544
Marketing's plan to increase donations by 15%
Total revenue
462,982
3%
477,241
Explanation / Answer
2009 2010 2010 Projections Budget % Budget Change Revenue Net Patient Revenue 459900 3% 473697 Other Revenue 3082 15% 3544 Total Revenue 462982 477241 Expenses Salaries and Benefits 220752 1% 222960 Supplies 74584 -3% 72346 Physican and Professional fees 110376 3% 113687 Utilities 1200 5% 1260 Others 1840 0% 1840 Depreciation and Amortization 36036 0% 36036 Interest 3708 30% 4820 Provision for Doubtful accounts 13797 10% 15177 Total Expenses 462293 468126 Total expenses raise by 1.26% Operating Income 689 9115 Investment income -62 0 Net Income 627 9115
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