Financial and Planning in Healthcare

Financial and  Planning in Healthcare

Operations management is an area of business that is concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient and effective. It is the management of resources, the distribution of goods and services to customers, and the analysis of queue systems (Engineered. typepad. com, n. d. ) Origins The origins of Operations Management can be traced back to the Industrial Revolution, the same as Scientific Management and Operations Research.Financial and Planning in Healthcare

Operational management in simple words is a study that is keen about setting up, arrangement, using and controlling of the manufacturing organization. It is also a part of the production department, goods and services produced, and the principles involved in turning inputs into profitable outputs. The task of the nurse leader would be to keep an eye on production and operation management, administer people and their activities and on resources utilized in outputs. Fixed Cost: A cost that remains unchanged even with variations in output.


(Scott, 2003) Example: An airline with 20 airplanes has the fixed costs of depreciation and interest (if the planes are partially financed with debt), regardless of the number of times the planes fly or the number of seats filled on each flight. A retailer must pay rent and utility bills irrespective of sales to be considered part of fixed costs, but treated differently. (Answer, 2008) Firms with high fixed costs tend to engage in price wars and cutthroat competition because extra revenues incur little extra expense.

These firms tend to experience wide swings in profits. (Scott, 2003) If, for example, a hospital has fixed cost of production then the nurse leader there would have to work very hard and put in much efforts to achieve the desired targets to gain the amount equivalent of the cost. He/she would have to be very precise about quality, and rules to have cutting-edge. Variable Cost: Variable costs by contrast change in relation to the activity of a business such as sales or production volume. Example:Financial and Planning in Healthcare

In the example of the retailer, variable costs may primarily be composed of inventory (goods purchased for sale), and the cost of goods is therefore almost entirely variable. In manufacturing, direct material costs are an example of a variable cost. (Stag. utb. cz, n. d. ) A good example of variable cost is the fuel for an airline. This cost changes with the number of flights and how long the trips are. (Chandler, 2007) Examples are direct materials and gasoline expense based on mileage driven. Variable cost per unit is constant (Answer, 2008)

Variable cost and fixed costs affect the profit maximization differently. If a firm has fixed cost they can choose to produce goods because costs are fixed but when they have variable costs they will have to keep in view the cost of the inputs and demands and sales of their products. So nurse leaders will have to keep the demand of their organization at a high level if they want to earn more profits and revenues. Revenue Budget: This is the budget for revenue expenditure or expenditure not meant for creating assets. (Window2India, n. d.

)It covers salaries of government staff and defense personnel, ministerial perks, expenses for office furniture, state government grants, interest paid on loans among others. This spending is financed from the revenue earned by the government in the form of taxes, duties, receipts, fees and dividends. (window2india, 2008) This is basically that revenue which projects about the future sales of a company/firm. Nurse leader won’t have much to do with this field because he/she won’t be responsible for paying the salaries of the employees or to but the furniture.Financial and Planning in Healthcare

But they can play a major role in buying medicines for their patients and the other requirements. Capital Budget: The Capital budget makes payment towards assets such as roads, highways and dams and also for purchasing land, building, machinery and equipment. (Window2India, n. d. ) Loans given by the center to various state governments and government-owned companies, as well as any investments made by the government are included in here. These expenses are funded by government receipts or by money received by the government in the form of loans. (window2india, 2008)

Nurse leaders have a small part to play in capital budget. They can just buy the machineries and equipment required there to stay on the edge and in cut-throat competitive environment. Flexible Budget: The flexible budget is a performance evaluation tool. It cannot be prepared before the end of the period. A flexible budget adjusts the static budget for the actual level of output. The flexible budget asks the question: “If I had known at the beginning of the period what my output volume (units produced or units sold) would be, what would my budget have looked like?Financial and Planning in Healthcare

” The motivation for the flexible budget is to compare apples to apples. (classes. bus. oregonstate, 2008) Example: If the factory actually produced 10,000 units, then management should compare actual factory costs for 10,000 units to what the factory should have spent to make 10,000 units, not to what the factory should have spent to make 9,000 units or 11,000 units or any other production level. (classes. bus. oregonstate, 2008) The role played by the nurse leader in this financial matter could be that they can contribute in assessing the true performance of the hospital.


They can account for the lacking areas and the improvement needed. He/she can also guide the management in finding out the actual costs incurred in buying the materials, equipment etc. Budget Variance: Any difference between a budgeted figure and an actual figure. The budget variance is used in the Two-Way Analysis of factory overhead. It includes the fixed and variable spending variances and the variable overhead efficiency variance that are used in the Three-Way Analysis. (Answer, 2008)

The nurse leader can only tell and help the management in finding out the mistakes they have made and differences that are coming in the actual and predicted costs. Flexible Budget variance: The flexible budget variance is the difference between any line-item in the flexible budget and the corresponding line-item from the statement of actual results. (classes. bus. oregonstate, 2008) Conclusion: Nurse leader, overall has a very significant role to play in the management and administration of the hospital and in taking care of the patients.Financial and Planning in Healthcare