Health Care System Budgeting Procedures

Larry Scanlan, in his article about hospital budgeting, presents seven keys to a successful budget. These “reality keys”, as he calls them, are designed to help insure that the CFO and CEO are able to navigate through a difficult process.Health Care System Budgeting Procedures

The first of these is accountability. He recommends communicating about the status of financial performance in all areas, and instituting a compliance plan that monitors and responds quickly to problems. Teamwork and a high sense of management integrity are essential. The budget is everyone’s responsibility, not just management.

The second key is to know your market. The budget process should mesh seamlessly with the strategic plan. Management should have a clear enough understanding of their market, so that they can respond to changes quickly and accurately.

The third key is to know how the institution’s revenue is generated. Physicians are the key to revenue, and management should be actively involved in physician service, retention, and recruitment. This will allow management to accurately predict volume from admissions and subsequent revenue.

The fourth key is to base the budgets on reasonable objectives. Scanlan discusses basing budget numbers on realistic achievements, rather than “what the boss wants.” The budget should have specific action steps, responsibility, and timelines and milestones so that progress can be monitored and corrective action taken when needed.Health Care System Budgeting Procedures