HEALTHCARE BUDGETING

Healthcare Budgeting

Budgeting defined

In any given area, the most essential premise that deals with the operations of any business entity. In hospital and health management domain, the process of budgeting is all about ensuring the standards of health are being met; however, the costs are to be monitored to be minimum, in terms of expenditure. There are various methods in which budgets for hospitals are made.

The paper discusses the essential processes and methods for developing the budgeting processes within various health departments and divisions. It shows how cost expenditure relates to the development of most essential and fundamental processes of healthcare and quality (Donovan, 2005).

Budgeting methods

Cash budget

In most of the healthcare institutions, the method that is used for the development of budgets is called 'cash budgeting'. It is defined as “an estimate for the current cash position of the institution”. The term cash budget pertains to the enlisting of the cost of and expenditure of the operation of the institutions. This pertains to the estimation of the future expenditure that encompasses of the current accounting period. It is the easiest method of budgeting, since the expenditure for the current year is recorded in each domain or area of the institution and the budget of the future is projected.

Cash budgets fail to accommodate complete picture of the budgeting year for the future. For instance, they have estimation that all the expenditures would be same as the last year, and therefore, there would be no change in the expenditure as the healthcare of the institution develops. As a result, large hospitals and healthcare institutions now avoid the use of cash budgets. The usage of cash budgets is now limited to small medical chambers and local healthcare institutions.

Incremental budget

This is another budgeting method widely used in the hospitals. It pertains to the rationale that every year, the expenditure has to increase up to a fixed percentage. Therefore, the budgeting process has to accommodate the change by increasing all the expenditure figures posted for the previous year by a fixed percent. This has an edge that the healthcare institutions estimate their expense to increase up to a fixed ratio, and therefore, it does not bother them when the changes occur. As a result, the development of the budget is more reliable for future expenses.

The healthcare institutions those are expanding, as well as, enhancing their service standards are ...