Types of Operating Budget in Healthcare
Types of Operating Budget in Healthcare
Operating budget in healthcare, therefore, would fall into several types. Understanding of those types would, therefore, effectively present the financial planning in healthcare.
1. Fixed Budget: The fixed budget is static and does not change along with volume changes. The fixed budget depends on the revenues and expenses that are estimated over a particular period. Such a budget would be fitting for those organizations that have a fairly stable patient population with reasonably predictable service delivery.
2. Flexible Budget: Unlike a fixed budget, this depends on the volume of patients. This budget allows healthcare organizations to set up different scenarios, from various anticipated patient loads to the changes in operations. By giving an estimate of the actual revenue and expenses, it represents a more realistic financial picture, especially for dynamic health care settings.
3. Zero-based Budget: At the beginning of each budget period, a zero-based budget is initiated from a “zero base.” Each expense has to be justified and approved instead of taking last year’s budget and making adjustments. This helps health care organizations to get rid of unnecessary expenditures and keep a focus on key services.
4. Incremental Budget: This is done on the basis of the previous year’s budget. The next step after that is making adjustments for inflation and every other influence. Easier this may be, it is suppose to make the inefficiencies worse by repeating obsolete expenses.
5. Capital Budget: Although technically separate, the capital budget is one that has many implications on the operating budget. Included herein are expenses connected to major investments in facilities, equipment, and technology that may have effects on the operating cost and financial planning in health institutions.
