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What are the issues to be considered when the Nurse Manager develops a HPPD labor budget? Explain each.

An operating budget is usually comprised of employee total in each category, such as RNs, LVNs, nursing aides, etc. A summation of salary or hourly rates and the cost of benefits. New hires, per diem staffing, and professional development. Payroll budgeting is the primary cost factor that I am responsible for where I am employed, but I also have facility responsibility to include maintenance and upkeep, as well as equipment and supplies purchasing.
To calculate hours per patient day (HPPD) are calculated by dividing total productive hours of nursing staff spent in direct care of patients by number of in-patient days. Salary will remain fixed for designated employees, thusly remaining predictable for pay period, unless salaried employees are hired and add to payroll costs. Hourly employees can be charted and planned to reduce or even eliminate overtime costs. New hires, per diem staffing and professional development time aren’t necessarily applied to HPPD calculations.
Fixed costs and variable costs also must be examined and accounted for in the budget.
Fixed costs are expenses that will remain constant through the fiscal cycle. Variable costs are expenses that can be estimated based on past fiscal cycles, but as the name implies, these expenses will fluctuate (Leger, 2023).
Financial managers will review submitted budget, traditionally submitted as an annual plan. Should the budget appear satisfactory, meet financial goals and patient quality of care requirements, then the financial manager will submit to executive level for review and approval.
Budget planning necessitates a precarious balance of achieving fiscal goals while also providing patients with the highest quality of care (Hartman et al., 2018).

Discuss methods of labor budgeting other than HPPD.

The main budgetary tool that works in conjunction with HPPD, is full-time equivalents (FTEs). FTEs need to be calculated for each class of employee to determine annual staffing needs. After FTEs are calculated, the total hours required to meet staffing needs can be determined (Leger, 2023).
Unit of Service (UOS) is another term for patient days in the HPPD calculations. Average Daily Census (ADC) is representative of the volume of patients assigned to the nursing unit. Nursing workload is the time associated with nurses performing direct or indirect care. The position control report is the main list of all budgeted and approved FTEs assigned by each job category for a nursing unit (Smith et al., 2021).
All budgetary items will be reviewed by a financial manager. Upon review, the financial manager will either approve the budget proposal, or send back to unit manager for revisions or corrections.

Describe non labor related budget lines commonly included in nursing department budgets.

As the labor budget is the largest line item on the financial statement, it is typically the item to which the most attention is given. However, there are numerous budgetary line items that have a significant impact on the fiscal bottom line.
Other line items included in a nursing unit’s operating budget include equipment, materials, supplies, publications, consulting, and research. There are also indirect costs such as long-term projects as well as capital expenditures (Smyth, 2021).
One example of these budget items would be an equipment purchase. A large-scale equipment expense outlay would be considered a capital expenditure. These items can be a significant cost and the ultimate purchase decision could be impacted by the overall profitability of the organization. The combined budget proposals of all units within the organization will decide the feasibility of large purchases.
The finance manager would need to review and approve these line items. The importance of accurate budgets, forecasting and finance management approval cannot be understated.

An organization’s budget is their formalized financial plan. Nurse leaders play an important role in the budget planning process of their unit and are accountable for the management of their budget. Making it important that nurse leaders understand the link between money received from payer sources and balancing that revenue with unit expenses. Budgeting consumes a large portion of the nurse leader’s time therefore they need a strong foundational understanding of finance principles (Leger, 2023). At the center of the fiscal decision making of any organization must remain its mission and commitment to high quality patient care.
What are the issues to be considered when the Nurse Manager develops a HPPD labor budget? Explain each.
The largest line item for an organization’s general budget, consuming the most financial resources, is the personnel budget (Welch & Smith, 2020). According to our text, Leger (2023) explains that dividing nursing total productive hours by the total number of in-patient days calculates the total hours per patient day (HPPD). The number of nursing hours needed to provide care to an in-patient in 24 hours is HPPD and is considered a volume-based approach. The nurse manager must also consider the unit of service (UOS) and expected volume of the unit, the nursing workload, and the nursing skill mix when developing a personnel budget (Welch & Smith, 2020). The UOS is the number of admitted in-patients at midnight which calculates the average daily census (ADC). The time to carry out direct and indirect patient care is known as the nursing workload. This metric is usually gathered through algorithms embedded in the unit’s electronic documentation system to ensure that work is accomplished efficiently to meet clinical expectations (Welch & Smith, 2020). The breakdown of the percentage of staff in each job category, such as RN, LVN, nurse’s aide, unit clerk, monitor tech, or other ancillary staff is the skill mix.
Discuss methods of labor budgeting other than HPPD.
Methods of labor budgeting that are not volume-based like HPPD can be considered task-based, professional judgement-based, or benchmarking approaches (Griffiths et al., 2020). Using a patient classification system such as diagnosis-related groups (DRG) based on levels of acuity to determine staffing requirements is a task-based method. Another relies on the patient’s detailed care plan to determine what tasks will be required, ultimately determining which staff and how many will be required for the unit. When staffing is based on objective measures to determine staffing needs it is considered a professional judgement-based approach. Benchmarking approaches base staffing levels on comparable units (Griffiths et al., 2020).
Describe non labor related budget lines commonly included in nursing department budgets.
As previously discussed, staffing and nursing services is often the largest expense for a nurse leader in any organization (Leger, 2023). With that expense comes multiple other non-labor related budget items to consider in the day-to-day operation of an organization. These can include cleaning supplies, office supplies, medical equipment, printing, postage supplies, furniture, legal services, licensing fees, professional memberships and subscriiption dues, linen services, meals, computer software for documentation and timecard management, building lease fees, utilities, lab supplies, uniforms, and marketing expenses to name a few.

What are the issues to be considered when the Nurse Manager develops an HPPD labor budget? Explain each.

Tracking hours per patient day (HPPD) helps to ensure hospital departments are meeting financial targets in order to remain financially healthy. Nurse administrators as financial managers share the responsibility of working toward a financially secure hospital. Knowing how HPPD is calculated will help nurse leaders use benchmark data to influence decision making within their unit (Gartley, 2021).
One of the issues with using the HPPD budget-based staffing model is that it provides a snapshot of the overall day and shift, without concern for changes in patient census within a shift. One concern often expressed by nurses is the amount of time required for admissions and discharges is not accounted for. Once a patient is discharged, it is likely that a new patient will be admitted, requiring increased workload to assess and develop the patient’s plan of care, draw labs, start IVs, initiate medications and implement safety interventions. This additional work does feel accounted for in an HPPD budget.
Another issue with this type of budgeting is there is no accounting for acuity of patients. There are no additional hours built in for patients that may require a sitter for safety or suicide watch. In order to meet the HPPD when the acuity is high or there is a need for sitters, care has to be compromised elsewhere on the unit.
Discuss methods of labor budgeting other than HPPD.
Two other ways of labor budgeting are skill mix, and nurse-patient ratio. Skill mix is calculated in a variety of ways, including combining LVNs with RNs or LVNs with CNAs. Since the cost of an LVN or CNA is less than that of an RN, the budget could allow for more staff at a lower skill mix. This staffing works best in lower acuity units such as skilled nursing units (Paulsen, 2018).
Fixed hours or FTE labor budgeting is a method where the staffing is fixed, or constant. The staffing doesn’t change based on acuity or volume of patients. This type of staffing is commonly seen in outpatient departments where patients are scheduled throughout the day and acuity is relatively constant. In the acute care setting fixed staffing budgets are challenging because you cannot adjust for higher or lower volumes. If volumes are lower the unit will be losing money. If volumes are higher, staffing may not be safe.
Describe non labor related budge lines commonly included in nursing department budgets.
Some non labor related budget line items commonly included in nursing department budgets include items such as equipment, service agreements, supplies, and education for staff. It is important to account for these items when preparing a budget to ensure they will be accounted for when needed. For example, even a fully functional unit needs to plan for yearly equipment allowance. Pre-planning for this expense in the budget ensures the unit can replace and upgrade items such as vital sign machines or medication scanners, worn out computer on wheels cabinets or malfunctioning nurse call systems. Failure to budget for these items threatens the operation of the unit.
It is equally important to budget for staff education. Ongoing education is required by the Joint Commission. Advanced education opportunities such as certifications or advanced cardiac life support improves the outcomes of the unit and is also a tool for employee retention and satisfaction. If these expenses are not included in the annual unit budget the manager will not be able to offer these opportunities to staff.
Accurate and thorough budgeting is an important role for nurses leaders as financial managers to ensure the continued operations of their department.

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