-Describe the department or clinic personnel that you might utilize to help you with this process? Why would you choose these people?
-What is the third-party payer, and why do you care about their forecasted reimbursement?
-Define a cash budget as you understand it.
-What type of historical data will you consider? How far back should you look?
-Explain what is meant by outflows and inflows--provide examples.
-How do local and federal legislation, policy, and the economy affect your cash budget decisions? How do you think healthcare organizations plan for these changes?
-If you followed the steps outlined in the case, would you accomplish the goals of the organization? what might you add or delete to streamline the process as you understand it?
-Once your are finished putting the information in Part IV together, is the process complete? Do you believe that budgeting is used daily, weekly, monthly or annually? Explain.
Case Study Write-up
-Background Statement
-Major Problems and Secondary Issues
-Major characters and their roles
-Organizational Strengths and Weaknesses
-Alternatives and Recommended Solutions
-EvaluationPart I You have been working as an assistant to the financial manager at Happy Town Neurology for the past three and a half years, and there is finally an opportunity for you to advance to a lead position within the finance department. You are excited about this new position, but first, you must be able to accomplish a task that the current CFO is assigning to you. He is going to evaluate you on your ability to understand a cash budget and provide the neurology center with the necessary information to obtain the operating loans that they will need for the next calendar year. This process is more important than ever before because new federal legislation is putting a pinch on lending institutions by restricting their lending practices, and therefore, the new legislation will impact most. It is your goal to use sound financial management principles, utilize the department employees as time allows, fully calculate third-party reimbursement, and ultimately determine Happy Town’s borrowing requirements.
Part II You feel prepared because of the experience you have within the finance department, but you also know that cash budgets are never certain, and that financial forecasting can help the organization to be prepared. First, you fully understand that you need to budget for the next 12-month period, so you decide to look at the historical data from the last several years. Also, you determine that you must also look at what cash is on hand today and what needs to be paid. Finally, you must consider each and every inflow and outflow that may affect your budget and, ultimately, your organization.
Part III After looking at the available data, you realize that the neurology center is in an envious position because the patient revenues are extremely consistent throughout the year. This makes preparing your budget very easy, as you will be able to more readily break down the numbers and manage them on a monthly basis. As you continue your research, you find that more than 60% of your collections are from third-party payers. This is also something that is beneficial to you, as you will be able to compute the amount of income that the clinic will make on a per-procedure basis. Also, you have found that about 20% of your collections come from private pay and the final 20% comes from other sources such as government programs, local charities, and so on. It is in this arena that you find numerous inconsistencies, so you are uncertain how this may affect your final financial forecast. To fully understand and present this data, you will develop a revenue budget.
Part IV Through your coursework, you understand that finance by definition is forecasting, and as such, it is not going to provide 100% accuracy all the time. You must consider this when you are preparing a cash budget, especially a cash budget that is 12 months in duration. As you know, there are several factors that you and your organization cannot control, and this makes this type of forecasting all the more difficult. Also, you will have to ensure that you consider loans that may be paid off during the term of the cash budget. Both inflows and outflows must be carefully considered to allow for consistent and accurate accounting practices. Taxes, both local and federal, and other items such as insurance, licenses, and so on, must also be in the mix. It is key to fully account for all items that affect your organization.
We can now return to the opening paragraph and look at your goals for this project. As you look at the issues presented by your CFO, you will need to ensure that you have accomplished what you set out to do. Were you thorough? Did you consider all inflows and outflows? By understanding the limits of finance, you are in a great position to complete what is required to benefit the organization and its cash needs.
