You are the administrator of the medical-surgical department at UMUC Health. Review the transcripts from the budget meeting and recent voicemails from your CFO and, using the available information and resources, develop an operating budget for your department.

Your budget should include an accompanying Excel spreadsheet that:

Provides the revenue and expenses through the current month of the current year.

Estimates the revenue and expenses for the rest of the current fiscal year based on the assumptions provided in the transcript documents

Transcripts:

Transcript of the VOICEMAIL FROM George Costanza (CFO):

Hi, it's George. I hear you're working on a budget for the Med-Surg department for FY 2020. I'd like you to come to the budget meeting this afternoon, because I'm going to be sharing some numbers that are likely to have an impact on your budget. I've sent you the year-to-date statements through December, the overall budget for the year, and the year-to-date budget variance for your department. Take a look at them, and bring them with you to the meeting. See you later!

Transcript from BUDGET MEETING:

George C.,CFO

Hi, everyone. Thanks for coming. We've got some important numbers to go through and a big challenge to respond to, so I think we better get started.

Jerry,Vice President of Operations

That sounds ominous.

Newman,Vice President of Medical Support

Well, can we at least get an idea of how we're doing year-to-date before you go to the 40,000-foot level?

George

I think you might need to hear this first. Here's the situation: The hospital has to cut operating expenses by 5 percent for next fiscal year.

Kramer,Director of Clinical Operations

I'm sorry, did you say 5 percent? Operating expenses?

George

That's right.

Jerry

That's a big ask. We're already operating awfully lean.

George

Agreed. But it's the situation we're in. I'll get to the reasons, but based on what I'm going to go over, I just want everyone to keep in mind that we can't make assumptions we were making before. So let me give you an overview of the budget and the year-to-date numbers, and I think you'll see why we're going to have to make those cuts.

Now, last year, for the entire hospital, we assumed that we would see $1.2 billion in total patient revenue. But as you can see, for half the year, we've only hit just over $607 million. By this point in the year, we should be over $612 million. So already in terms of total patient revenue, we've got a deficit of nearly $5 million that we didn't expect. The problem is made worse when we see that other operating revenue is also under budget by $1.5 million.

I believe that recent efforts in the billing department coupled with some of the solid work by the c-suite team on physician engagement and external marketing are going to have an impact on the revenue side of things. We're also currently negotiating with a couple of our primary commercial payers, but those negotiations remain uncertain. All things considered, I'm hoping for about a 5% bump on the revenue side for FY 20. Our operating expenses are fairly close to target so far this year, but given the situation with uncertain revenue, we will need to try to find some additional cost savings opportunities. I want to be reasonably conservative in case market conditions change or negotiations with our payers don't go as expected.

Newman

Wow. Well, okay, so that's the reality. What's the timeline? How long do we have to make these cuts?

George

Well, implementation is obviously by June 30 since the next fiscal year starts July 1. The board will approve the new budget probably by mid-June, but all the negotiation at the unit and department level will be going on this month. Our first official budget committee meeting is in early May. So I'd suggest getting your ducks in a row within the next week or so.

Prepares a budget for the next fiscal year.

See attachment for the Budget spreadsheet

Med/Surg Department Budget FY 2019 YTD (Jul FY 2019 - Dec) FY 2019 Budget Variance TYD OPERATING REVENUE: Inpatient Revenue 23, 123,516 50,000,000 (1,876,484) TOTAL PATIENT SERVICES REVENUE $ 23, 123,516 $ 50,000,000 $ (1,876,484) OPERATING EXPENSES Salaries and Wages 12,157,632 23,000,000 657,632 Employee Benefits 3,040,408 5,750,000 $ 165,408 Professional Fees 250, 160 400,000 $ 50, 160 Supplies 5,883,497 10,000,000 $ 883,497 Purchased Services - Utilities 27,456 50,000 $ 2,456 Purchased Services - Other 23,484 50,000 (1,516) Insurance 57,315 105,000 4,815 License and Taxes 21,456 40,000 1,456 Other Direct Expenses 972,157 1,500,000 EA 222,157 TOTAL OPERATING EXPENSES $ 22,433,565 40,895,000 $ 1,986,065 NET REVENUE OR (EXPENSE) $ 689,951 $ 9,105,000 $ (3,862,549)