As a member of the finance team, you have been asked to forecast the upcoming year's operational budget for Krona Community Hospital. Look below for last year's budget. After reviewing specific data, internal input, and external input from various sources, you find that the executive management team would like the budget to reflect the following:
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KRONA HOSPITAL OPERATING BUDGET FOR 20XX
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Revenues
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Inpatient
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$ 25,000,000
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Outpatient
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15,000,000
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Emergency Room
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10,000,000
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Laboratory
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5,000,000
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Pharmacy
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1,500,000
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Home Health and Hospice
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1,500,000
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Ambulance Services
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950,000
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Substance Abuse
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250,000
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Other
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850,000
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Subtotal
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$ 60,050,000
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Less Chartiy Care
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18,000,000
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Net Revenues
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$ 42,050,000
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Expenses
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Payroll (including nursing salaries)
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$ 12,500,000
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Benefits
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3,000,000
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Contract Labor
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100,000
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Insurance
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300,000
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General Services (laundary, security, etc)
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3,000,000
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Depreciation
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1,500,000
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Interest Expense
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300,000
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Professional Services
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10,000,000
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Total Operating Expenses
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$ 30,700,000
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Net Income
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$ 11,350,000
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- 10% increase in inpatient revenue
- 15% increase in outpatient revenue
- 5% increase in pharmacy revenue
- 15% increase in home health and hospital revenue
- 10% increase in payroll and benefits
The budget should be formatted to reflect the percentage increase or decrease from last year's budget.
Additionally, provide discussion on the following:
- How might you increase revenue in each of the areas? Think outside of the box, and perform research to determine current trends in those areas.
- Why would there be a need to increase payroll, particularly nurses' salaries?
- Provide an explanation as to how the Krona Community Hospital may be able to achieve an increase in the revenue areas that the chief executive officer (CEO) wishes you to address.
- Understand health care financial statements
- Comprehend the principles of health care accounting.
- Apply cost information
- Develop an understanding of budgeting and forecasting.