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Budget Proposal
Liberty University
BUSI 523: Financial Analysis and Decision Making in Health Care
, 2
Budget Proposal
Health care organizations are known to be behind in the budget process. Other
organizations use leading-edge and data-driven forecasting approaches to develop an annual
budget (Gragg, 2018). However, most health care organizations continue to approach their
annual budget proposal in a different manner. Gragg (2018) explains that most health care
organizations continually invest a large amount of time developing a budget at the end of the
year that can take weeks to complete since there is a lot negotiating between department
managers and administrators. This paper will focus on the proposed operational budget for a
health care organization as well as discuss the different steps of financial management.
Financial Statement Analysis
The Proposed Operational Budget for 2018 focuses on patient revenue, expenses, income
loss before taxes, and income loss after taxes. The first section of the table focuses on patient
revenue. Patient revenue can be broken down into three separate terms based off the information
provided in the table. Patient revenue (price x quantity) is the amount of income that is produced
through the sales function of a health care organization to sell products/services to
customers/patients (Harrington, 2020, p. 17). Deductions from patient revenue focus on losses
generated from uncompensated care and contractual allowances. The Alaska Department of
Health and Social Services (2013) explains that uncompensated care originates from charity and
bad debt and that contractual allowances originate from the differences between charges and
payments for all payers. Net revenue is the amount left after deductions. The Alaska
Department of Health and Social Services (2013) explain that net revenue is the total amount of
cash collected from gross charges. The expense section focuses on all the expenses that a health
care must manage. Harrington (2020) defines expenses as expending resources to operate the
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organization daily to generate revenue (p. 17). The expenses listed in this table are salaries and
wages; staff benefits; administrative expenses; advertising; collection fees; consultants;
computer support; equipment leases; insurance; laboratory; laundry and housekeeping;
legal/audit; medical supplies; printing and postage; professional fees; rent; repairs; telephone;
utilities; depreciation; and bad debt expenses. Another aspect of The Proposed Operational
Budget for 2018 is the section that addresses income loss before taxes, income loss after taxes,
and total taxes. Income loss before taxes can also be referred to as profit before tax (PBT). Boyle
(2020) explains that PBT measures the organization’s profit before the organization pay
corporate income taxes. Therefore, PBT represents the organization’s profits without the
consideration of any taxes (Boyle, 2020). Income loss after taxes is also known as after-tax
income. Kagan (2021) explains that after-tax income is the organization’s net income after
paying corporate income taxes. Therefore, after-tax income represents the amount of disposable
income the organization must spend (Kagan, 2021). Overall, the budget proposal creates a
reference for the health care organization’s expected revenue, expenses, and taxes. Based off the
information in the Proposed Operational Budget for 2018, the health care organization appears to
have a solid foundation as it will continue to gain liquid assets while continuing to generate a
profit.
Budget Analysis
A budget analysis helps health care organizations to keep track of their finances by
maintaining a balanced budget (Brooks, 2018). A budget analysis also helps the organization
keep their finances organized. Brooks (2018) explains that this is done by running regular
financial reports, collaborating with executives about funding needs, and assessing budget
decisions regarding special programs or one-time expenses. A budget analysis can also assist the
organization with making decisions about purchases. Brooks (2018) explains that the budget
Budget Proposal
Liberty University
BUSI 523: Financial Analysis and Decision Making in Health Care
, 2
Budget Proposal
Health care organizations are known to be behind in the budget process. Other
organizations use leading-edge and data-driven forecasting approaches to develop an annual
budget (Gragg, 2018). However, most health care organizations continue to approach their
annual budget proposal in a different manner. Gragg (2018) explains that most health care
organizations continually invest a large amount of time developing a budget at the end of the
year that can take weeks to complete since there is a lot negotiating between department
managers and administrators. This paper will focus on the proposed operational budget for a
health care organization as well as discuss the different steps of financial management.
Financial Statement Analysis
The Proposed Operational Budget for 2018 focuses on patient revenue, expenses, income
loss before taxes, and income loss after taxes. The first section of the table focuses on patient
revenue. Patient revenue can be broken down into three separate terms based off the information
provided in the table. Patient revenue (price x quantity) is the amount of income that is produced
through the sales function of a health care organization to sell products/services to
customers/patients (Harrington, 2020, p. 17). Deductions from patient revenue focus on losses
generated from uncompensated care and contractual allowances. The Alaska Department of
Health and Social Services (2013) explains that uncompensated care originates from charity and
bad debt and that contractual allowances originate from the differences between charges and
payments for all payers. Net revenue is the amount left after deductions. The Alaska
Department of Health and Social Services (2013) explain that net revenue is the total amount of
cash collected from gross charges. The expense section focuses on all the expenses that a health
care must manage. Harrington (2020) defines expenses as expending resources to operate the
, 3
organization daily to generate revenue (p. 17). The expenses listed in this table are salaries and
wages; staff benefits; administrative expenses; advertising; collection fees; consultants;
computer support; equipment leases; insurance; laboratory; laundry and housekeeping;
legal/audit; medical supplies; printing and postage; professional fees; rent; repairs; telephone;
utilities; depreciation; and bad debt expenses. Another aspect of The Proposed Operational
Budget for 2018 is the section that addresses income loss before taxes, income loss after taxes,
and total taxes. Income loss before taxes can also be referred to as profit before tax (PBT). Boyle
(2020) explains that PBT measures the organization’s profit before the organization pay
corporate income taxes. Therefore, PBT represents the organization’s profits without the
consideration of any taxes (Boyle, 2020). Income loss after taxes is also known as after-tax
income. Kagan (2021) explains that after-tax income is the organization’s net income after
paying corporate income taxes. Therefore, after-tax income represents the amount of disposable
income the organization must spend (Kagan, 2021). Overall, the budget proposal creates a
reference for the health care organization’s expected revenue, expenses, and taxes. Based off the
information in the Proposed Operational Budget for 2018, the health care organization appears to
have a solid foundation as it will continue to gain liquid assets while continuing to generate a
profit.
Budget Analysis
A budget analysis helps health care organizations to keep track of their finances by
maintaining a balanced budget (Brooks, 2018). A budget analysis also helps the organization
keep their finances organized. Brooks (2018) explains that this is done by running regular
financial reports, collaborating with executives about funding needs, and assessing budget
decisions regarding special programs or one-time expenses. A budget analysis can also assist the
organization with making decisions about purchases. Brooks (2018) explains that the budget
