Creating, Choosing and Analyzing an Operating Budget

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2010OperatingBudgetProjection.docx

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2010 Operating Budget Projection

HCS/577 Version 6

University of Phoenix Material

Patton-Fuller Community Hospital

Statement of Revenue and Expense

2009 to 2010 Operating Budget

Complete the Operating Budget. Assume the 2009 projections were realized. Use the 2009 budget and the 2010 budget assumptions to calculate expenses and income for 2010. The revenues have been completed for you.

		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%	222,959	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%	72,347	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%	113,687	Contracts for fees have a built-in 3% increase.
	Utilities	1,200	5%	1,260	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%	1,840	No net change in the cost or volume of these items.
	Depreciation & amortization (noncash expenses)	36,036	0%	36,036	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%	4,820	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%	15,176	The renegotiation of managed care plans has delayed collection and made collections less certain.
Total expenses	462,293	1%	468,125	Total expenses will rise 1%.

		2009 (Proj)	2010 Budgeted % Change From 2009 Projection	2010 Budget	2010 Operating Budget Assumptions
Income
	Operating income	689	33%	916	Operating Income will improve, with the hospital's loss reduced by 2/3.
Loss (nonoperating income)
	Investment income	(62)	0%	(62)	The market is down, expected to hold steady; a zero-return is expected, with neither losses nor gains.
Net income	627	10%	854	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.