The Budget Process 2025

Page 1: Introduction to Fiscal Management

• Overview of Fiscal Management Process

• Importance of budgeting in financial operations

• Key elements related to financial planning and reporting

Page 2: Fiscal Responsibility

• Essential Knowledge for Managers:

  • Basic principles of finance and reporting

  • Understanding operational budgets

  • Analyzing financial statements

  • Basic economic concepts (supply and demand)

  • Handling contracts

  • Utilizing databases and information systems

Page 3: Budgeting

• Definition: Process of preparing a detailed statement of expected financial results for a specific future time period.

• Components include:

  • Estimating revenue and expenses

  • Determining staffing levels (quantity and mix)

  • Productivity assessment per unit cost

Page 4: Operational Budget

• Planned estimate of revenue and expenditures related to daily operations.

• Managed by department/clinic managers.

• Importance of adhering to the operational budget.

Page 5: Budget Terminology

• Fiscal Year (FY): A 12-month period; not always aligning with the calendar year.

• Cost Center: A department/unit responsible for its costs; e.g., Physical Therapy, Radiology.

• Line Item: Specific cost within a budget; examples include Rent, Supplies, Travel.

Page 6: Revenue

• Definition: Money received for services provided or goods sold.

Page 7: Revenue Breakdown in Physical Therapy

• Key payments models include:

  • Fee schedule (cost per unit billed)

  • Per visit (cash-based payment)

  • Per case (payment for one year)

• Important to anticipate visit volume to project revenue.

Page 8: Revenue Considerations

• Recognizes that billed amounts differ from actual payments due to:

  • Contractual agreements

  • Payer mix in insurance models

• Need to understand payer mix to accurately project revenue and identify profitable services.

Page 9: Payor Case Mix Example

• Overview of PT Clinic profitability based on payer mix.

• Specific payer percentages and associated revenues are detailed, including:

  • BCBS, Medicaid, Medicare, Self-Pay, etc.

• Assessment of net revenue, variable costs, collection rates, and contribution margins.

Page 10: Expenses

• Definition: Money paid out for goods, services, and operations.

Page 11: Expense Categories

• Direct Expenses: Directly related to producing goods/services (e.g., supplies, salaries).

• Indirect Expenses: Necessary operational costs that are not directly related to production; often allocated percentages (e.g. rent, utilities).

Page 12: Expense Classification

• Variable Expenses: Costs fluctuating with service volume (e.g., supplies).

• Fixed Expenses: Constant costs irrespective of service volume (e.g., rent).

Page 13: Capital Expenses

• Definition: Expenses for high-cost items (>$2,500); typically long lifespan equipment (e.g., machines).

• Tax implications due to asset classification and depreciation considerations.

Page 14: Costs of Doing Business

• Importance of knowing:

  • Cost per visit

  • Cost per unit billed

• Understanding costs critical for negotiating reimbursement rates.

Page 15: Expenses Summary

• Salaries and benefits are major direct operational budget components.

• Financial viability relies on effective expense management and control.

• Evaluating pros and cons of salaried versus hourly staff.

Page 16: Budgeting Examples

• Examples include:

  • Budget workbook

  • Profit & Loss statements.

Page 17: Determining Staffing Needs

• Importance of assessing staffing levels for operational efficiency.

Page 18: Staffing Terminology

• FTE (Full-time Equivalent): Measurement of workload.

  • 1.0 FTE = full-time employee; 0.50 FTE = half-time employee.

Page 19: Staffing Example - FTE Calculation

• Illustration of staffing based on hours worked:

  • Total hours and derived FTE calculations:

    • Total of 10 employees results in 8.2 FTE.

Page 20: Yearly Productivity Per FTE Calculation

• Steps to calculate productivity include:

  • Identify working days/hours and paid time off.

  • Calculate productive days and multiply by units produced.

Page 21: Productivity Example

• Calculation breakdown indicating:

  • 241 productive days/year

  • 9 patients/day results in 2,169 visits/year, equating to 6,507 units/year.

Page 22: Projecting Staffing Needs

• Formula to determine staff required:

  • Divide projected yearly treatment units by yearly productivity per FTE.

Page 23: Staffing Projection Scenario

• Scenario: To cover expenses with 9,500 units,

  • Various staffing combinations to meet treatment responsibilities.

Page 24: Cost Per Unit of Service Calculation

• Formula:

  • Total Expenses / Total Units Produced = Cost per Unit.

  • Includes all variable and fixed costs.

Page 25: Implications for Staff

• Assessment areas include:

  • Productivity and efficiency.

  • Patient flow and service quality.

  • Accuracy in billing and effective scheduling.

Page 26: Starting a Business or Department Management Questions

• Considerations include:

  • Market for services

  • Startup costs and funding sources

  • per unit cost considerations

  • Productivity standards and operational budget projections.