Preparing and Managing a Capital Budget

Preparing and Managing a Capital Budget

A Capital Budget for a 50-Bed Step-Down Unit in a Hospital Prepared by the Unit’s Nurse Manager

Healthcare quality in today’s healthcare system is the most important single factor that determines every other aspect of the sector. For instance, since the enactment of the Patient Protection and Affordable Care Act of 2010, reimbursement for health services rendered has been done based on quality rather than volume. This is the so-called pay-for-performance policy (Holmström, 2017). Only healthcare services that meet the quality criteria get the highest rates of reimbursement. These quality criteria have been enumerated by the Institute of Medicine (IOM) as safety, timeliness, efficiency, effectiveness, equitability, and patient-centeredness (Beattie et al., 2013). To ensure that hospitals and other healthcare organizations adhere to standards of quality prescribed, the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) monitors quality parameters of these institutions (such as readmission rates, patient falls, nursing and medical errors, and so on) ad produces an annual report on the same. In a nursing unit such as this one with 50 intermediate care or high-dependency beds, the quality of care provided will be directly proportional to the efficiency of the nursing workforce. As such, factors such as a high turnover rate will negatively impact the quality of care delivered in the unit. To prevent this, staff retention must be made a priority and be considered as a quality improvement (QI) initiative. Studies have shown that some of the measures that are effective in achieving this are the practicing of transformational leadership and the provision of all the necessary tools and equipment required by the nurses to perform their functions.Preparing and Managing a Capital Budget This increases the morale of the nurses and boosts job satisfaction. A transformational nurse leader creates a welcoming workplace environment in which nurses feel free to voice their opinions and suggestions without fear. She also encourages them to report any mistakes and errors without fear of victimization, thereby creating psychological safety at the workplace (Cheng et al., 2016). The result is usually greater job satisfaction, high morale, high staff retention rates (low turnover), less burnout, improved patient safety, and a general increase in the quality of healthcare and nursing care offered. This 50-bed high dependency unit has experienced a high staff turnover rate in the last 3 years, with the main reasons being cited as poor job satisfaction, low staff morale, obsolete equipment, and a non-conducive work environment. In this paper, the nurse manager responsible for the unit proposes a capital budget aimed at addressing this staff turnover problem through capital expenditure. The whole project is a quality improvement initiative.

Capital Acquisition

A capital budget is concerned with the acquisition of long-term (fixed) assets (Gealan, 2013). Capital budgets are normally prepared separately from recurrent or operational budgets by the unit’s nurse manager. The items (capital assets) in a capital budget are typically expensive and last longer than one year in their productive life. Usually, the nurse manager must provide the rationale for requesting such capital assets that are cost-intensive (Brown et al., n.d.). In this case, the rationale for the proposed capital acquisition is to:

• Replace old and obsolete equipment and facilitate the nurses’ efficiency and effectiveness
• To improve patient safety and the productivity of the nurses by investing in more state-of-the-art health information systems (HIS) and equipment
• To decrease nursing errors
• To increase staff motivation and job satisfaction
• To make the work environment enjoyable.

Being a step-down unit within the hospital, this is a unit that has patients with high acuity levels near those requiring critical care in the intensive care unit or ICU (Armony et al., 2016; Prin & Wunsch, 2014). As such, a high quality of nursing care is needed to facilitate exceptionally good patient outcomes. To increase the quality of care, the nurse manager seeks to motivate the nursing staff, boost their morale, and improve their job satisfaction by proposing capital acquisition or expenditure as follows:

1. Renovation and equipping of the nurses’ lounge to make them feel appreciated and valued
2. Purchase of 25 smart infusion pumps to ease the administration of intravenous (I.V) therapy

• Purchase and installation of an automated medication dispensing cabinet (ADC) and system to reduce medication errors by the nurses (Pyxisᵀᴹ MedStationᵀᴹ)

1. Upgrading of the existing electronic health record system to make work even easier for the nurses

The assumptions on which the above plan is based include that there will be negligible inflation between the time of making the budget and the time of implementation after approval, nurses will be able to use the novel technologies (clinical systems) incorporated into the hospital’s existing EHR system without the need for upskilling (which is another cost), and that funding will be available for the quality improvement project since it is quite capital-intensive. Preparing and Managing a Capital Budget

Justification for the Need for Capital Acquisition

In the past three years, the unit has experienced a high rate of staff turnover which has been established to have been due to low morale and poor job satisfaction among nurses. Also, the other reasons were established to be the view by the departing nurses that the equipment in the unit is obsolete, and that the workplace environment is depressing and uninspiring. This affected the quality of care that the nurses could deliver, resulting in unpleasant patient outcomes and errors caused by equipment malfunction. To solve these, renovation and equipping (with television and furniture) of the nurses’ lounge is proposed to correct the “depressing work environment,” purchase of new smart infusion pumps is also proposed to do away with the antiquated analogue pumps in the unit, and purchase and improvement of the electronic clinical systems is proposed to facilitate and ease the work of the nurses (boosting their morale and increasing their job satisfaction). The pros of these improvements include improved patient safety and staff retention, while the cons include a huge capital outlay as well as a rise in maintenance costs in the operational (recurrent) budget.

The Capital Budget and Process for Calculating Costs

The following is the capital budget prepared by the nurse manager of the unit, showing all the capital assets proposed for acquisition to improve care quality. The total capital expenditure will amount to USD 618,600.

	Table 1: Capital budget for the 50-bed step-down unit for the year 2020
	Item		Justification		USD
1	Smart infusion pumps (25 pieces)		Better I.V. therapy		50,000
2	Pyxisᵀᴹ MedStationᵀᴹ		Less errors		88,600
3	EHR system upgrade		More efficiency		300,000
4	Renovation (nurses’ lounge)		Staff motivation		180,000
	TOTAL CAPITAL EXPENDITURE				618,600

From the budget, the smart infusion pumps will improve the administration and efficiency of I.V therapy, the ADC will improve the administration of medications and greatly lower then incidence of nursing medication errors, and the renovation of the nurses’ lounge will boost their morale and create a welcoming work environment that is appreciative of their efforts. Lastly, the EHR upgrade is aimed at increasing the efficiency of the nurses and making their work easier through electronic sign-out and hand-off tools, bar code medication administration (BCMA), electronic medication administration record (eMAR), and patient data management systems (PDMS).Preparing and Managing a Capital Budget

In this budgetary plan, the knowledge gaps and areas of uncertainty include the possibility that the initial vendor of the EHR system may not be able to incorporate the suggested clinical systems and make them interface, the nurses may require upskilling (an expense on the organization) for them to effectively use the proposed electronic clinical systems, and inflation may make the estimated costs in te budget balloon at the time of implementation.

The process for calculating the above costs involved a comparison of current costs of the capital assets, as well as interviews with experts in construction to find out the approximate cost of the project. No attempt was made at adjusting for inflation since the period between approval and implementation is not expected to be more than three months. The only data that is questionable is the cost of the EHR upgrade as well as the renovation. This is because the figures are just estimations that may be more or may fall short of the actual costs.

ORDER A FREE-PLAGIARISM PAPER NOW

Plan for Budget Management and Impact on the Organization’s Financial Health

The plan for budget management is to stay within the estimated budget limits and improvise where the estimates are insufficient, to go for the lowest bidders who can provide the capital assets, and to possibly save and return the remaining finances to the organization’s coffers. The assumption for this is that even after improvisation in the event of insufficiency of funds; the required quality of capital assets will still be realized. This capital expenditure will affect the financial health of the organization in a big way since capital assets are cost-intensive. However, the impact will be minimised by the fact that capital expenditure in the whole organization is factored in the five-year strategic plan of the hospital. The only areas of uncertainty or knowledge gaps are whether the Board of Directors will reduce some of the proposed assets to cut costs, and whether the capital budgets of the other units in the hospital will so high as to necessitate reduction of all the budgets.

Conclusion

Capital budgeting is an important function of the nurse manager, just like with the operational or recurrent budget. There must be justification for any proposed capital expenditure, since capital assets are quite cost-intensive.

References

Armony, M., Chan, C.W., & Zhu, B. (2016). Critical care in hospitals: When to introduce a step down unit. Columbia Business School, 1-39. https://www8.gsb.columbia.edu/researcharchive/articles/19222

Beattie, M., Shepherd, A., & Howieson, B. (2013). Do the Institute of Medicine’s (IOM’s) dimensions of quality capture the current meaning of quality in health care? – An integrative review. Journal of Research in Nursing, 18(4), 288-304. Doi: 10.1177/1744987112440568.Preparing and Managing a Capital Budget

Brown, P., Eubank, G. & Leger, J.M. (n.d.). Budgeting. Retrieved 14 June 2020 from http://samples.jbpub.com/9781284127256/Chapter_5.PDF

Cheng. C., Bartram, T., Karimi, L. & Leggat, S. (2016). Transformational leadership and social identity as predictors of team climate, perceived quality of care, burnout and turnover intention among nurses. Personnel Review, 45(6), 1200 – 1216. Doi: http://dx.doi.org/10.1108/PR-05-2015-0118

De-Carvalho, D., Alvim-Borges, J., & Toscano, C. (2017). Impact assessment of an automated drug-dispensing system in a tertiary hospital. Clinics, 72(10), 629–636. Doi: 10.6061/clinics/2017(10)07

Fung, E.Y., & Leung, B. (2009). Do automated dispensing machines improve patient safety? The Canadian Journal of Hospital Pharmacy, 62(6), 516-519. Doi: 10.4212/cjhp.v62i6.852

Gealan, R. (2013). Budgeting knowledge of nurse managers in selected units of Rumailah Hospital, Doha, Qatar [Thesis]. Doi: 10.13140/2.1.1226.5920

Holmström, B. (2017). Pay for performance and beyond. American Economic Review, 107(7), 1753–1777. Doi:10.1257/aer.107.7.1753

Prin, M., & Wunsch, H. (2014). The role of stepdown beds in hospital care. American Journal of Respiratory and Critical Care Medicine, 190(11), 1210–1216. Doi: 10.1164/rccm.201406-1117pp

Preparing and Managing a Capital Budget

 

“Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!”