NR 630 Budget and variance calculation
1. The salary budget is established by determining the number of full-time-equivalent (FTE) staff needed for the
fiscal year. To prepare a salary budget, the first step is to figure out the volume of work for the coming year.
2. Workload: The amount of work performed by a unit/department is referred to as the workload. It can be
measured in a variety of ways, such as the number of patient days, number of outpatient visits, and number of
operations per day. Each cost center determines the measure that is most appropriate for its unit of service.
3. Units of service that will be provided the coming year. This is usually based on the past year’s number of
units, plus a predicted incremental increase for the coming year, based on population increases and needs.
4. Hours-per-patient-day (HPPD) is the number of hours of nursing care delivered per patient. To calculate
HPPD, the total-care-hours required for the year is divided by the number of patient days.
Budgeting is based on a patient-classification system, which is the amount of resources used related to
different levels or categories of patient acuity. For example, let’s say that a certain cardiac-observation unit is
forecasting 12,500 patient-days for the coming year. Assume that this unit classifies these 12,500 patients into
one of four categories: category one being fewest resources used or lowest acuity; and category four being
most resources used or highest acuity patients. Assume that, for category one, the average-patient-care-hours
equals 1.5 hours of nursing care provided to these patients during a 24-hour period; for category two, 5.0 care
hours; for category three, 8.0 care hours; and, for category four, 12.0 hours of nursing care is provided to
these patients during a 24-hour period.
Calculating Hours Per-patient-day (HPPD)
1. Calculate the total-care-hours required for the year:
# of Patient Days X Average Care Hours/24 Hours = Total Care Hours
NR630 Directions & Rubric.docx 1
, Cat 1 1,000 pts 1.5 = 1,500
Cat 2 2,500 pts 5.0 = 12,500
Cat 3 4,000 pts 8.0 = 32,000
Cat 4 5,000 pts 12.0 = 60,000
12,500 106,000 total-care-hours needed
2. Total-Care-Hours Required for the Year / Number of Patient Days
106,,500 = 8.48 care hours
Thus, for this cardiac observation unit, an average of 8.48 nursing-care hours are provided to patients per a 24-hour
period. Once the manager has the workload forecasted, the next step is to determine the
Staff requirements for the unit. Staff mix varies from hospital to hospital and may consist of RNs, LPNs, and aides.
The manager needs to determine how many full-time equivalents (FTEs) will be required to provide patient care.
One FTE is equivalent to 2,080 hours per year (40 hours per week times 52 weeks). A 0.9 FTE is equivalent to 36
hours per week; a 0.6 FTE is equal to 24 hours per week. If the manager calculated FTE requirements by dividing
total-care-hours by 2,080 to determine the number of FTEs for the unit, this would underestimate the needed FTEs.
This calculation would assume that all 2,080 paid hours were worked by the staff member. However, employees
take vacation time, sick leave, and educational days—which are nonworked time, or nonproductive hours. Instead,
we must relate to productive hours rather than paid hours. Data on nonproductive hours are generally provided by
the institution’s payroll department and equal between 15–20% of paid hours. In our example, let’s say that
productive hours equal 85% of the employee time worked, which would equal 1,768 productive hours.
NR630 Directions & Rubric.docx 2
1. The salary budget is established by determining the number of full-time-equivalent (FTE) staff needed for the
fiscal year. To prepare a salary budget, the first step is to figure out the volume of work for the coming year.
2. Workload: The amount of work performed by a unit/department is referred to as the workload. It can be
measured in a variety of ways, such as the number of patient days, number of outpatient visits, and number of
operations per day. Each cost center determines the measure that is most appropriate for its unit of service.
3. Units of service that will be provided the coming year. This is usually based on the past year’s number of
units, plus a predicted incremental increase for the coming year, based on population increases and needs.
4. Hours-per-patient-day (HPPD) is the number of hours of nursing care delivered per patient. To calculate
HPPD, the total-care-hours required for the year is divided by the number of patient days.
Budgeting is based on a patient-classification system, which is the amount of resources used related to
different levels or categories of patient acuity. For example, let’s say that a certain cardiac-observation unit is
forecasting 12,500 patient-days for the coming year. Assume that this unit classifies these 12,500 patients into
one of four categories: category one being fewest resources used or lowest acuity; and category four being
most resources used or highest acuity patients. Assume that, for category one, the average-patient-care-hours
equals 1.5 hours of nursing care provided to these patients during a 24-hour period; for category two, 5.0 care
hours; for category three, 8.0 care hours; and, for category four, 12.0 hours of nursing care is provided to
these patients during a 24-hour period.
Calculating Hours Per-patient-day (HPPD)
1. Calculate the total-care-hours required for the year:
# of Patient Days X Average Care Hours/24 Hours = Total Care Hours
NR630 Directions & Rubric.docx 1
, Cat 1 1,000 pts 1.5 = 1,500
Cat 2 2,500 pts 5.0 = 12,500
Cat 3 4,000 pts 8.0 = 32,000
Cat 4 5,000 pts 12.0 = 60,000
12,500 106,000 total-care-hours needed
2. Total-Care-Hours Required for the Year / Number of Patient Days
106,,500 = 8.48 care hours
Thus, for this cardiac observation unit, an average of 8.48 nursing-care hours are provided to patients per a 24-hour
period. Once the manager has the workload forecasted, the next step is to determine the
Staff requirements for the unit. Staff mix varies from hospital to hospital and may consist of RNs, LPNs, and aides.
The manager needs to determine how many full-time equivalents (FTEs) will be required to provide patient care.
One FTE is equivalent to 2,080 hours per year (40 hours per week times 52 weeks). A 0.9 FTE is equivalent to 36
hours per week; a 0.6 FTE is equal to 24 hours per week. If the manager calculated FTE requirements by dividing
total-care-hours by 2,080 to determine the number of FTEs for the unit, this would underestimate the needed FTEs.
This calculation would assume that all 2,080 paid hours were worked by the staff member. However, employees
take vacation time, sick leave, and educational days—which are nonworked time, or nonproductive hours. Instead,
we must relate to productive hours rather than paid hours. Data on nonproductive hours are generally provided by
the institution’s payroll department and equal between 15–20% of paid hours. In our example, let’s say that
productive hours equal 85% of the employee time worked, which would equal 1,768 productive hours.
NR630 Directions & Rubric.docx 2
