NURS FPX 6226 Assessment 3 Preparing and Managing an Operating and Capital Budget

NURS FPX 6226 Assessment 3

Preparing and Managing an Operating and Capital Budget

Student name

NURS-FPX6226 Advanced Operations and Finance Management

Capella University

Professor Name

Submission Date

Preparing and Managing an Operating and Capital Budget

Financial management in healthcare depends on elaborate budgets as they give strategic planning information and resource allocation advice. Monetary accuracy helps organizations to locate the gaps in operations and justifies the investment actions and fiscal stability. Medical analysts use thorough data assessments to approximate future needs and reduce financial risks and match monetary resources with clinical care goals (Batko and Ślęzak, 2022). Efficient resource optimization through data utilization allows for enhancing the organizational effectiveness as well as the quality of patient care and meeting accountability requirements. The essence of the assessment covers planning of budgets, both operating and capital, with the analysis of the development processes and administration systems.

Capital Budget

The Foundation of capital expenditures is laid in infrastructure development of healthcare. The main individual capital investment is acquisition of property, which lowers the cost of operations in the future. The revenue comes in through construction equipment and also through consultant charges and levies, which allow the institution to expand the facilities. There is a moderate increase in capital of power systems and depreciation cost. The institution seeks capital enhancement funding under other sources because the institution is not currently experiencing new sources of revenues thus generating high amounts of deficit spending within the financial period. The year will be followed by a significant improvement in the spending situation when a property purchase is made.

• Knowledge Gaps and Missing Information

The financial analysis demonstrates that the main shortcomings are in the income stream details of the Medicare/Medicaid payments, as well as equipment needs and depreciation strategies of the facility, and cash flow studies. There are several unpredictable elements that influence the project, such as the rationale for acquiring such intensive property and future project schedule and funding possibilities, as well as the change in regulations. Understanding of the third-party payment rates and seasonal spending patterns would make the budgeted forecasts more precise and capital planning more effective in the long term.

• Operating Budget

The projected $46.2 million revenue during the fiscal year 2012 proposes a systematic management of the healthcare facilities in the annual operating budget. The key budget areas of healthcare operations include personnel costs (wages and benefits of up to $30.4 million) and materials costs (up to 11.8 million), as it is a work-intensive industry. In a continual attempt to ensure its success in the financial arena, the institution expects to maintain a positive net income of $1.38 million in the current year and generate 2.35 million in earnings in the coming year through its structural 5% revenue boost schemes.

• Knowledge Gaps and Missing Information

The operating budget does not include important details about diversifying the revenues, which are not based on traditional inpatient care only, and this leaves the organization at the mercy of the market changes. The operating budget does not contain important data regarding the expected volumes of patients and payers’ distribution, as well as service-line profitability measurements. The variables that are not taken into consideration such as inflation of salaries, cost of pharmaceuticals and disruptions in the supply chains make forecasting unreliable because of the unpredictable nature of these factors that challenge forecasting accuracy. The company lacks transparency in relation to key performance measures and workforce planning which has the potential effect on the intended goals of 5% improvement in revenue and cost management.

Capital Budget Design and Creation

The capital budget preparation was a detailed process, which paid attention to purchasing land resources and equipment and paid the experts to consult. The cost estimates were based on past actual costs and supplier estimates, and industry rates to guarantee the accuracy of the forecasts. The identified costs of the property acquisition amounted to the expansion needs with adequate reasons, as did the overall costs of the facility equipment amounting to $6.2M and the expert services amounting to $512K. An effective application of capital planning leads to improved healthcare delivery results and feasible fiscal control (Homauni et al., 2023). The planned taxation payments of 12M and the electrical infrastructure upgrades amounting to 56K were planned in the institution because of the compliance requirements and projected growth in operations. The accounting approach followed the generally accepted accounting principles (GAAP), which enabled the institution to determine the accurate trends of depreciating assets over periods (Tomaszewski and Shoaf, 2020).

• Conflicting Data

Different contradictory data in the capital budget are also indicative of accounting concerns of fiscal accountability in the entire process of planning. The actual land spending amount of 156M on the current year-to-date period of time exceeds the budgeted figure of 23M, thus creating high financial volatility. The categories of revenue income, such as Medicare, Medicaid, and third-party insurance, are left empty with the budget not even reflecting the true revenue despite the present blank categories. The current unfavorable net revenue position of the hospital of -$166M YTD shows that there is a significant error in the budgeting process or it has excessive spending that needs to be investigated immediately.

• Cost calculating process

The methodology used to calculate capital budget costs requires past data analysis, market research and institutional knowledge to make decisions. The land cost analysis inclusive of $4.6M in property valuation, acquisition cost, and building equipment cost inclusive of the system breakdowns, analysis of infrastructure, and professional fees amounting to 512K based on the benchmarks of architectural engineering service. The validation of a variety of data sources can improve the accuracy of capital budgeting of companies that require accurate estimates of costs (Volopay, 2025). The calculations of tax allocation use the current property rates, evaluation value to set the sums of 12 million totals, and the electrical system expenses of 56K are based on the bids of the contractors and specialized estimation, and depreciation costs of 48K are estimated with the help of the straight line approach. The zero-based capital budgeting models prove to be the most effective in terms of reducing project overruns when compared to the traditional incremental budgeting models (Khajavi et al., 2024). Indirect costs include around 15 per cent of direct costs that include administrative overheads, compliance management, maintenance reserves, and contingency allocations. Cost calculus involves the fixed and variable aspects that are allocated indirectly by means of proportional distribution modeling to achieve the allocation of the indirect costs according to the intensity of resource use and calculated organizational benefit per category.

Ongoing Management of Capital Budget

There must be strict monitoring of the monthly variance analysis of the capital budget in order to determine deviations of the plan to take corrective actions in time. Regular stakeholder conferences promote the open communication of financial performance and necessary changes in priorities of expenditures (Trinca & Marcão, 2025). The quarterly budgetary evaluation of projects against budgets helps organizations to avoid budget deficit and redistribute expenditure resources to meet the required needs (Homauni et al., 2023). Strategic alignment is the realization that is attained through annual reviews by alignment of capital expenditures and organizational goal progression.

Role of Nurse Leader and Considerations of the Organization’s Financial Sustainability

The nurse leader is a critical financial custodian who will be watching the department-based capital expenditures against the budgeted funds and will be requesting judicious clinical equipment and better infrastructure. The leaders work together with financial units to find cost-cutting resources that ensure the quality of patient care and the same level of staff productivity (Ismail et al., 2025). Nurse leaders play dual roles of responding to the urgent operational requirement and promoting major investments to improve the system of service provision as well as infrastructure to be sustained. Expert nurse leaders apply acquired practical skills to determine equipment functionality during normal functioning so that they can determine optimal replacement costs and equipment life projections (American Nurses Association, 2023). Nurse leaders who sit in capital budget planning committees help in making financial decisions based on evidence-based practices and clinical requirements as well as financial accountability.

Operating Budget Design and Creation

The operating budget was developed systematically through the collective analysis of previous performance indicators, expected service delivery levels, and strategic growth strategies with a special focus on key sources of revenue and expenses categories. Cost estimates were based on past actuals, anticipated inflation rates, and departmental input to estimate costs on personnel ( 25M), personnel benefits ( 6.2M), consulting services ( 515K), and materials ( 12.1M). All the categories of expenditures were carefully validated: the competitive compensation systems in the marketplace ensure the presence of qualified staff in the company that is vital in the context of service delivery; elaborate benefit plans ensure consistency of the workforce and minimize the cost of high staff turnover; consultancy services are essential in ensuring the optimization of operations through specialized expertise; and material expenses of the company are directly proportional to the anticipated service demand, avoiding overstocking and reducing wastage of resources. The projected revenue of 48.5M in inpatient operations supports the costs but also allows maintaining sufficient operational margins needed to maintain a sustainable fiscal viability and further investment in the quality improvement program.

• Conflicting Data

The operational budget reveals some worrisome information that is inconsistent in its variance calculations, showing a negative variance of inpatient income amounting to 1.87M and exceeding the midpoint forecasts. At the same time, there are positive variances in all expenditure categories that portray consistent overspending that puts the organization at risk of financial sustainability. The budget does not include the inclusion of outpatient revenue streams, additional services income, and charitable care services. Moreover, expenses of unexpected regulatory changes, staffing variables or inflationary effects are not factored in creating serious fiscal planning shortcomings.

Process for Calculating Cost

In calculating the cost of the operating budget, a broad methodology has been applied to pool all the historical trend analysis, volume based forecasting and market benchmarking of each of the main categories. The payment and salaries (25M) are calculated using the elaborate FTE staffing models, which include role-specific rates, anticipated overtime and scheduled merit adjustments. Staff benefits (6.26M) are calculated by taking the set percentages (about 25 percent of the compensation costs) of insurance plans required, retirement benefits and paid leave benefits accrued. The use of the right operating budgeting strategies for professional services leads to a reduction in costs in comparison to the traditional incremental strategies in healthcare entities (Anderson et al., 2020). Computations of professional fees are based on contracted service agreements and anticipated patterns of utilization costs ($515K). It has been studied that supply chain analytics combined with clinical utilization data significantly improves the accuracy of cost forecasting when determining relevant supply budget allocations (Nuaimi & Niyi Awofeso, 2025). Consumption-based algorithms with analysis of per-procedure usage rates multiplied by projected service volumes are used to forecast materials (12.1M). The overhead costs include administrative costs, facility maintenance, utilities, insurance, and information technology support which is calculated using the cost allocation methodology that separates the costs among departments using pre-determined drivers, such as square-footage, number of personnel, or levels of service intensity.

Ongoing Management of Operating Budget

Budget management involves monthly comparison and contrast of the projected and actual figures to allow corrections of any variances before they get out of control. Budgets are properly reviewed by the department managers on a regular basis, according to which it is possible to analyze expenses and introduce changes to allocate the available resources to the previously identified priorities (Homauni et al., 2023). Financial dashboards provide real-time budget performance indicators using current data, allowing managers to make fast data-driven operational decisions when circumstances change (Liang and He, 2023). To achieve consistency in the budget with the organizational goals, companies carry out annual budget reviews by introducing strategic changes that are found during variance analysis.

• Role of Nurse Leader and Considerations of the Organization’s Financial Sustainability

To manage budget efficiently in healthcare work, nurse leaders will be required to make use of real-time monitoring of staffing expenditure and performance measures to help streamline resource utilization and, at the same time, deliver the highest quality of patient care (Ismail et al., 2025). The healthcare unit supervisors study the medical supply usage to identify where costs can be reduced and use evidence-based solutions to produce positive clinical and economic results. Nurse administrators work closely with financial departments in the exact demand forecasting processes that facilitate budgeting of resources in the future for resource planning purposes (American Nurses Association, 2023). Medical expertise of healthcare professionals is the source of vital information that can be useful in assessing the cost-to-efficiency ratio of novel technology, interventions, and care models with the same quality outcomes. The staff is being trained on the financial implications of clinical decisions continuously, and this equips nurse leaders to develop sustainable healthcare systems by using effective fiscal management practices.

Conclusion

The review indicates that the interaction of capital and operational budgets in healthcare facilities seems to operate in unity, thus indicating stringent planning and active monitoring processes. The lack of information still exists, but the systematic cost analysis system demonstrates the dedication of the institution to financial accountability. The next step the facility should take is to increase the diversification of its sources of income, as well as implement proper methods of prediction and increase the budgetary control functions of nurse administrators to ensure a sustainable future and offer high-quality care.

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