Health Budget Request Workbook NURS 6211

Health Budget Request Workbook: Step-by-Step Guide

NURS 6211: Finance and Economics in Healthcare Delivery

Healthcare Budget Request Workbook: Step-by-Step Guide

Healthcare Budget Request Workbook: Step-by-Step Guide


Table of Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1: Spreadsheet Orientation (optional) . . . . . . . . . . . . 3
Section 2: Assignment 1: Spreadsheet Fundamentals . . . . . . 11

As is the case with any organization, healthcare organizations establish strategic goals in support of their vision and mission. In turn, initiatives are pursued in hopes of achieving goals.


In a perfect world, every initiative that the organization values would be pursued. But healthcare organizations have limited resources. Hence decisions must be made about which initiatives to pursue. Such decisions are typically based on several factors, including:

· the perceived value of the initiative

· how strongly the initiatives support organizational missions and goals

· potential for return on investment

· resources required.

Nurse leaders and others who drive the pursuit of these initiatives need to be sensitive to these factors. Value, support of objectives, and return on investment are usually communicated by developing a business case for the initiative. The need for resources is typically communicated by developing a formal budget request.

budget request is a formal document that most organizations require from those seeking resources (funding) for various projects and initiatives. When successful, a budget request results in the initiative being included as part of the organization’s budget ; a planning tool that allocates resources (such as money or personnel) to the activities and capital needed to support the pursuit of strategies for a given time period (typically a year).

Throughout this course you will work on the development of a budget request for a healthcare product or service you propose to the leadership of your organization. As you do so, you will consider your audience for that request, financial and other resources you will need to launch the initiative, and other factors. You will utilize spreadsheets to help you analyze the financial impact, and you will develop a business case to advocate for your proposal to the leadership of your organization.

Spreadsheet Orientation (optional)

Section 1

spreadsheet is a category of software designed to help analyze numeric information. Microsoft Excel is the most common spreadsheet tool used in business.

Spreadsheets like Excel are especially useful when performing financial calculations and analyses, such as those you will conduct in subsequent assignments in this course to analyze the financial impact of the initiative you propose. Spreadsheets enable the quick manipulation and calculation of large amounts of numeric data. When developed properly, they also help conduct “what-if” analyses, allowing users to change certain values to determine the impacts on results (such as profits).

The following material will guide you through completion of the Assignment Spreadsheet Fundamentals . To complete this assignment, you will need:

· This section of the Healthcare Budget Request Workbook: Step-by-Step Guide

· The Excel file “Clinic.xlsx”, located in the Learning Resources

The following is a practice exercise designed to introduce, or provide practice for, the following:

· Creation of worksheet tabs

· Navigation of a worksheet

· Management of various types of worksheet data

· Creation of Excel formulas and functions

This guided exercise is optional and will not be graded. If you are new to spreadsheets and/or Microsoft Excel, you are strongly encouraged to complete this exercise to familiarize yourself with important spreadsheet functionality that you will utilize throughout this course. If you are already familiar with these spreadsheet fundamentals, you may nevertheless benefit from this activity as a refresher. Depending on your comfort level with the material, you may choose to skip the practice exercise and proceed to the next section, titled Assignment 1: Step-by-Step Guide , to begin work on Assignment 1.

Practice Exercise (Optional): Spreadsheet Fundamental

The following exercise will help orient you to the basic functionality of Microsoft Excel in preparation of Assignment 1. To complete this optional exercise, you will need:

· This section of the Healthcare Budget Request Workbook: Step-by-Step Guide

· The Excel file “Clinic.xlsx”, located in the Learning Resources

1) Download and open the file “Clinic.xlsx” located in the Learning Resources.

Note : An open Excel file is also referred to as a workbook .

2) Spreadsheets organize screens of data by using columns and rows. Columns are labeled with letters and rows with numbers. The intersection of a row and column is referred to as a cell . Cell locations, or addresses , are identified based on the letter of the column and the number of the row. For example, the first cell in the spreadsheet is referred to as “A1”. Cell addresses are always shown in the Address box near the top of the screen.

3) Notice the tabs at the bottom of the screen that read “HealthWaysBudget” and “HealthwaysFinancials”. When clicked, these tabs open separate worksheets (individual pages used to organize different categories of data within a workbook).

4) In Excel, you can create many different worksheets within a single workbook. For example, in this workbook the HealthWaysBudget worksheet presents a budget report for the organization, while the HealthwaysFinancials worksheet presents several financial statements for the organization.

Note : Financial statements will be discussed in more detail later in the course.

5) Create a new tab in this workbook. To do so:

a. Click the New sheet (“+” symbol) at the bottom of the screen.

b. To name the worksheet, double-click the tab and type “Practice”.

Note : You can also rename the new tab by right-clicking the tab and selecting “Rename”.

6) Note that there are various types of data used in Excel:

· Text is data that utilize letters. Numbers can also be used in text data. However, these numbers must be used in conjunction with letters, or must manually be set to text.

· Numerical data utilize numbers exclusively. Unlike text data which can use numbers, numerical data cannot contain letters.

· Currency/Accounting data utilize numbers in conjunction with a currency marker.

· Dates are pieces of data that denote a date and/or time. There are multiple formats for dates within Excel.

· Percentage data are a subset of numerical data that is converted into a percentage. Percentage data can be converted back into numeric, and vice versa. Converting to numeric from percentage will display the number as a decimal. For example, 89% would be converted to 0.89.

7) Enter the following text and numeric values on the Practice worksheet in the cell locations shown below:

8) Note that the text in columns H and I may be cut off as you type in adjacent columns. This is because the column is not currently wide enough to display the text without overlapping into the next column. To adjust column widths:

a. Place your mouse pointer between the two columns in the header area between any two columns that you wish to adjust; the column to be increased should be on the left. Double-click the mouse and the column will automatically adjust to the required size to display the results.

b. Using the same approach above, you can drag your mouse (instead of double-clicking) to manually adjust the column to your preferred width. Note that the precise size is displayed as you drag your mouse.

c. You can also click the entire column by clicking the column header. This highlights the entire column. From here you can then right-click anywhere in the column and choose “Column Width”, then replace the current value with a desired value.

NoteIf a column is too narrow to display numeric values, a series of repeating “#” symbols will appear.

9) Save your work by clicking the SAVE icon in the title bar (or by choosing ‘File’ and ‘Save’).

NoteBe sure to save your work frequently.

10) Excel allows for most primary formatting of text and numeric data, such as typeface (bold, underline, etc.), font size and color, cell color, etc. Most of these options are available in the menu ribbon on the top of the screen (much like MS Word). If you like, make various formatting changes, such as boldface for column headings.

11) One of the most important features of Excel is the ability to use formulas and functions. An Excel formula is a statement you enter in a cell to calculate a value or perform some similar action. Formulas contain a combination of operators and operands. In effect you write a formula to “teach” Excel how to calculate a value.

12) Functions are similar to formulas, but they are prewritten formulas that are “built into” Excel, via the function bar . You only need to populate certain elements of a function, such as the range of cells (typically a contiguous group of cells) needed to calculate the value.

13) Use the SUM function to calculate totals. To do this:

a. Navigate to cell C10.

b. Click the AutoSum button from the task bar

c. Drag your mouse pointer over the range of values to be summed (in this case, C4 through C8)

d. Hit the ENTER key. The result in cell C10 should be 1221, meaning 1,221 units were sold across all product lines in January.

NoteExcel contains the AutoSum key as a shortcut because the SUM function is used so frequently. You can also manually type the sum function as =SUM(C4:C8) , yielding the same results.

e. Calculate totals for February and March (cells D10 and E10). If you are successful, your results should be 1970 (for cell D10) and 894 (for cell E10).

f. Calculate total units sold of Product A for the quarter (cell F4). If you are successful, your result should be 2036.

NoteIf you click cell F4 after you have entered your function, you will see the result. If you examine the formula bar near the top of the screen, you will see the actual contents of the cell, which is your function (=SUM(B4:E4) ).

g. A powerful feature of Excel is the ability to copy formulas and functions. This enables you to create a formula or function once but use it many times without retyping. Using this you can copy your function from cell F4 and paste it in cells F5 through F8. To do this:

i. Click on cell F4.

ii. Hover the mouse pointer on F4 until you see a small square in the bottom right corner of the cell. This is referred to as the “fill handle”.

iii. Click and drag the fill handle (your mouse pointer will change to a crosshair “+” symbol) until you have highlighted Cells F5 through F8.

iv. Release the mouse button. The function will now be pasted in the highlighted cells.

NoteIf you click cell on any cell in your pasted range, you will see the function displayed in the formula bar near the top of the screen.

h. Your worksheet should now look as follows:

14) SUM is just one of many Excel functions. Another in the AVERAGE function, which will calculate the average of a range. To calculate the average number of products across all product lines sold in January, do the following:

a. Navigate to cell C11.

b. Enter the following text:


c. Highlight the range C4 through C8 (or type =AVERAGE(C4:C8) )

d. Hit ENTER

e. If you are successful, C11 should contain the value 244.2.

15) Using the AVERAGE function (or copying the function from cell C11), calculate averages for March and April in cells D11 and E11. Similarly calculate average units sold per product line by using or copying the AVERAGE function in cells G4 through G8. If you are successful, your worksheet should now look as follows:

16) You can also use the SUM function to calculate the total number of products sold in Q1. Use the SUM function in cell D13 to calculate this value by summing the values in C10 through E10. If you are successful, the result will be 4085.

17) You can write a formula to calculate revenue, which is price/unit times number of units sold, by using the asterisk “ * ” symbol for multiplication. To do this:

a. Navigate to cell H4.

b. Enter the formula =B4*C4 and press ENTER

18) Copy or retype the formula to calculate appropriate revenue values for all product lines in all months in cells H5 through J8.

19) Lastly, navigate to cell D14 and calculate the total revenue in Q1 by using the SUM function to add all values between H4 through J8. If you are successful, your worksheet will look as follows:

Note : You have completed the practice exercise. Return to the Healthcare Budget Request Step-by-Step Guide Section 2 when you are ready to begin work on Assignment 1.

Assignment 1: Spreadsheet Fundamentals

Section 2

Spreadsheet software like Excel is widely used when making proposals like the one you are preparing for a new healthcare product or service. Spreadsheet skills are valuable whenever there is a need to develop, analyze, and/or present financial and other numeric information.

In Assignment 1 Spreadsheet Fundamentals , you will analyze data pertaining to a fictitious healthcare organization, HealthWays Clinic Inc. You will perform various calculations and analyze the results.

The following material will guide you through completion of the assignment. To proceed, you will need:

· This section of the Healthcare Budget Request Workbook: Step-by-Step Guide

· The Excel file “Clinic.xlsx”, located in the Learning Resources

Assignment 1: Step-by-Step Guide

1) If you have not done so already, download and open the file “Clinic.xlsx” located in the Learning Resources.

Note : Be sure to save the file to the location you typically save documents and resave after each step to avoid losing work.

2) Navigate to the worksheet labeled “HealthWaysBudget

3) Develop formulas or functions that calculate totals for the budgeted and actual encounters for June 2018, May 2018, and 2018 Year-to-Date (YTD) in the appropriate shaded cells of row 12.

4) Develop formulas or functions that calculate the variance between June 2018 budgeted and actual amounts in the appropriate shaded cells in Column D.

5) Develop formulas or functions that calculate totals for personnel expenses and non-personnel expenses in the appropriate shaded cells in rows 17 and 24.

6) Develop formulas or functions that calculate totals for health center expenses and their variances in the shaded cells in B25 through G25.

7) Create a new worksheet tab titled “Assignment 1”.

8) On the Assignment 1 Worksheet, answer the following question related to the results of your calculations:

a. What interpretations can you make based on the data? What is happening in regard to such measurables as:

i. The full-time equivalents (FTE) for HealthWay employees

ii. The number of encounters, both new and established

iii. Non-personnel expenses

iv. Total expenses

b. If these trends continue, what could it mean for HealthWays? What strategies might they employ to address any issues your analysis suggests?

9) Save and submit your file to the Assignment 1 submission link by the due date specified in the classroom.

NURS 6211 Finance and Economics in Healthcare 1


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Table 1. HealthWays Clinic, Monthly Expense Budget Report, June 2018.
Item June 2018 May 2018 2018 YTD
Budget Actual Variance Actual Budget Actual
Physician FTE 1.0 1.0 1.0 1.0 1.0
Nurse PractitionerFTE 3.0 3.0 3.0 3.0 3.0
Established patients 275 291 286 1650 1671
New patients 25 18 27 150 164
Total encounters
Physician Salaries & Benefits $10,500 $10,502 $10,509 $63,000 $63,149
NP Salaries & Benefits $20,000 $20,992 $20,191 $120,000 $122,001
Clerical (2 FTE) Salaries & Benefits $6,667 $6,771 $6,683 $40,000 $41,978
Total personnel expense
Medical supplies $7,500 $8,136 $7,994 $45,000 $47,883
Office supplies $583 $623 $508 $3,498 $3,407
Rent $2,917 $2,917 $2,917 $17,502 $17,502
Depreciation $333 $346 $346 $1,998 $2,050
Capital Expenses $3,333 $3,480 $3,480 $19,998 $20,439
Overhead $167 $167 $167 $1,002 $1,002
Total non-personnel expense
Total health center expense
The FTEs have not changed, at least for the first 6 months of 2018.
The number of encounters, both new and established, is increasing over the year.
Personnel expense:
Although the FTEs are not changing, the personnel budget is somewhat more than budgeted, particularly the NP and clerical budgets. The management should investigate why this is the case, and better control the personnel budget.
Non-personnel expense:
Medical supplies are over budget. Office supplies are under budget. Depreciation and capital expenses (new equipment) increased over the budget year. Rent and overhead remain stable, but might be expected to increase next year.
Total expenses:
The clinic must carefully control expenses as its profitability is very low. Possible strategies might include improving staff productivity, reducing the cost of medical supplies, and postponing further capital purchases.


Nurse-Run Clinic Scenario
Patient Encounters FY 2018 FY 2017
Established patients 3,348 3,204
New patients 331 287
Total Encounters 3,679 3,491
Cash $5,675 $12,098
Financial Ratios:
Expense per Encounter = Total Operating Expenses / Total Encounters
Total Operating Revenue per Encounter = Total Operating Revenue / Total Encounters
Operating Margin = Net Income/Total Operating Revenue
Days Cash On Hand = (Cash + Cash Equivalents) / (Operating Expenses / Days in Time Period)
Table 2. HealthWays Clinic, Income Statement, FY 2018. Table 3. HealthWays Clinic, Balance Sheet, December 31, 2018.
FY 2018 FY 2017 Current Assets December 31, 2018 December 31, 2017 Current Liabilities December 31, 2018 December 31, 2017
Gross Revenue (charges) $558,520 $497,221 Cash 5,032 9,877 Notes Payable 27,449 50,000
Less write-offs & adjustments 117,254 104,332 Short-term Investments 40,389 34,181 Accounts Payable 78,702 69,412
Net Patient Revenue (collected) $441,266 $392,889 Accounts Receivable 63,392 59,359 Accrued Expenses:
+Other Revenue 209,671 234,953 Supply Inventories, at Cost 16,029 14,918 Salaries & Benefits 38,265 28,274
Prepaid Expenses & Other 2,104 1,876 Taxes 1,419 1,398
Total Operating Revenue $ 650,937 $ 627,842 Total Current Assets $ 126,946 $ 120,211 Interest Payable 3,294 500
Total Current Liabilities $ 149,129 $ 149,584
Operating Expenses
Salaries & Benefits 459,171 445,396 Property, Plant & Equipment (Fixed Assets) Long-Term Liabilities $0 $0
Medical Supplies 97,627 92,418 Cost of PP&E 56,047 55,701
Office Supplies 7,471 7,302 Less Accumulated Depreciation 4,194 3,943 Net Assets
Rent & Depreciation 39,148 37,023 Net PP&E (Net Fixed Assets) $ 51,853 $ 51,758 Unrestricted 28,541 20,569
Other 43,762 47,009 Other Assets $ 1,289 1289 Restricted 2,418 3,105
Total Operating Expenses $ 647,179 $ 629,148 Total Assets $ 180,088 $ 173,258 Total Net Assets $ 30,959 $ 23,674
Net Income $ 3,758 ($1,307) Total Liabilities & Net Assets $ 180,088 $ 173,258
Financial Reports: Quick Tips for Interpretation
•income statement: positive net income indicates profitability
•balance sheet: positive equity indicates that there is a positive net worth, representing the amount remaining if an institution went bankrupt and had to liquidate
•compare changes in reports from prior year(s) to identify trends in financial performance, and with industry standards or internal benchmarks.
Financial Ratios FY 2018 FY 2017
Expense per Encounter $ 175.91 $ 180.22
Total Operating Revenue per Encounter $ 176.93 $ 179.85
Operating Margin 0.58% -0.21%
Days Cash On Hand 3.2 7.0
Income Statement
The clinic operated at a loss the prior year, this reporting year the clinic made a small profit.
One thought is about collections. The collection rate should be as high as possible, ideally 90-95 percent. It is likely that a lot of the write-offs and adjustments represent uncollected patient fees. More analysis and strategies to improve collections should be considered.
Balance sheet
The current liabilities are greater than the current assets, so the ability of the clinic to pay its short-term obligations is at risk.
Expense per Encounter:
In the prior year, the expense per encounter (patient visit) exceeded the revenue per encounter, so that the operations of the clinic operated at a loss. It is important that the clinic carefully manages its costs because if revenue is not greater than cost, the clinic is not profitable and might not be able to remain solvent.
Total Operating Revenue per Encounter:
In the current year, operating revenue is greater than expenses per encounter, but the two amounts are very similar. The clinic management must more carefully control costs, or negotiate higher reimbursement, or both.
The clinic’s financial health is at risk if it cannot generate adequate profits that cover increases in costs and unexpected expenses.
Operating Margin:
The prior year’s net income was negative, thus leading to a negative operating margin. The current year’s operating margin is very low. This low operating margin is related to the very low profitability of the clinic.
As stated before, the clinic managers should consider how to improve the collection rate, how to negotiate higher reimbursement, and how to better control costs. Another possible strategy is grant writing and fund raising to increase funding and donations.
Days Cash On Hand
The clinic’s days cash on hand is very low, with only three days of ability to pay short-term expenses.
Concerns about meeting short-term obligations are more serious because current liabilities exceed current assets, so it might not be possible for the clinic to meet short-term obligations if there is an interruption in revenue. This puts the clinic at risk of bankruptcy.

1) Develop formulas or functions that calculate totals for the budgeted and actual encounters for June 2018, May 2018, and 2018 Year-to-Date (YTD) in the appropriate shaded cells of row 12.

2) Develop formulas or functions that calculate the variance between June 2018 budgeted and actual amounts in the appropriate shaded cells in Column D.

3) Develop formulas or functions that calculate totals for personnel expenses and non-personnel expenses in the appropriate shaded cells in rows 17 and 24.

4) Develop formulas or functions that calculate totals for health center expenses and their variances in the shaded cells in B25 through G25.

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