NR 630 Budget and variance calculation

NR 630 Budget and variance calculation Calculating a Salary Budget 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 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 106,000 / 12,500 = 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. FTE Calculation Apply HPPD to Census and Determine Full-Time Equivalents (FTEs) a. Determine FTE requirements for number of expected patient -care hours: FORMULA: Total Care Hours /1,768 productive hours per FTE (1,768 = 85% of 2,080; 40 hours per week X 52 weeks per year = 2,080; less vacation, sick, education time) 106,000 / 1,768 = 59.95 FTEs = 60 FTEs Allocate the number of FTEs per position type and shifts. To calculate how many staff members will be working every day, first determine the number of care hours that are required per day. Staff Requirements 1. Calculate number of staff required per 24-hour period: 2. Divide total care hours by 365 days per year 106,000 / 365 = 290 hours of care per day Assuming employees work 12 hour shifts: 290 / 12 = 24.2 shifts per 24-hour period