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HA4200D – Healthcare Financial Management

HA4200D – Healthcare Financial Management

HA4200D – Healthcare Financial Management

Discussion 04.1: LP04 NAUXChange

LP04-Owning a car is a big responsibility. Pretend that you are helping your child, nephew, or niece understand the various financial expenses that come with owning a car. Help them by making a list of direct and indirect cost that will allow them to understand how to manage their finances related to owning a vehicle. Share your list to the discussion board. HA4200D – Healthcare Financial Management

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Health Care Finance: Basic Tools for Nonfinancial Managers -Vitalsource Bookself-username-crtshhill49@yahoo.com-Password-#magicMAN61

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    9781284118308_SLID_CH07.ppt

    Chapter 7:

    Cost Classifications

     

    Distinction Between Direct and Indirect Costs (1 of 2)

    • Direct Costs are specifically associated with a particular unit or department or patient.
    • Direct costs are directly attributable to the cost object (any unit for which a separate cost measurement is desired).

    Distinction Between Direct and Indirect Costs (2 of 2)

    • Indirect Costs, on the other hand, cannot be specifically associated with a particular unit or department or patient.
    • Indirect costs cannot be directly attributed to the cost object (any unit for which a separate cost measurement is desired).

    Practice Exercise 7-1:
    Identifying Direct and Indirect Cost

    Distinction Between Direct
    and Indirect Costs

    • Direct Costs are for the sole benefit of a particular operating unit (department) and can be traced.
    • Indirect Costs are for the benefit of the overall operation and not for any one unit (department). They must be allocated.

     

    Figure 7-1 Assigning Costs to the Cost Object.

    Why the Difference Is
    Important to Management

    • The Manager is often responsible for the traceable expenses (Direct Expenses) but is not responsible for the allocated expenses (the Indirect Expenses, or overhead).

    (Study the examples in the chapter closely.)

     

    Responsibility Centers

    • In a Responsibility Center the Manager is responsible for both the revenue/volume (inflow) side and the expense (outflow) side of a department, division, unit, or program.
    • Another term for responsibility center is “profit center.”
    • Responsibility Center information is especially important because the Manager is responsible for the operation. HA4200D – Healthcare Financial Management

    (Study the Westside Center example in the chapter carefully.)

    Figure 7-2 Lines of managerial responsibility at Westside center.

    Courtesy of Resource Group, Ltd., Dallas, Texas

     

    Distinction Between
    Product and Period Costs (1 of 4)

    • Traditionally, Product Costs represent a product that has been manufactured and placed into inventory while waiting to be sold.
    • Then, when the product is sold, it is removed from inventory, matched with revenue, and recognized as a cost. HA4200D – Healthcare Financial Management

    Distinction Between
    Product and Period Costs (2 of 4)

    • A Period Cost is not connected to the manufacturing process.
    • Instead it is matched with revenue on the basis of what period the cost is incurred; thus “period” costs.*

    * The term comes from the span of time in which matching occurs, known as a “time period.”

    Distinction Between
    Product and Period Costs (3 of 4)

    • Medical Supply and Pharmacy Departments have inventories on hand.
    • They use the Product Cost method, removing the item from inventory and then matching it with cost.

    Distinction Between
    Product and Period Costs (4 of 4)

    • Except for departments that carry inventories, however, health care is a service business.
    • One way to think of product costs in this instance is as necessary to the department, division, unit, etc. to deliver the service, while period costs are necessary to support the existence of the organization itself.
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    9781284118308_SLID_CH10.ppt

    Chapter 10: Staffing: Methods, Operations, and Regulations

     

    Staffing Requirements

    • In Health Care, many positions must be filled, or covered, 7 days a week, 24 hours a day.

    Productive and
    Non-Productive Time (1 of 3)

    Why annualize?

    • Employees are paid for more hours than the hours they are on duty (vacation days, etc.)
    • Annualizing allows the full cost of the position to be computed through a “burden” approach.

    Productive and
    Non-Productive Time (2 of 3)

    • Productive Time: Represents the employee’s net hours on duty when performing the functions in his/her job description.
    • Non-Productive Time: Represents the paid-for time when the employee is not on duty and not performing his/her job description functions.
    • Includes paid-for vacation days, holidays, personal leave days, and/or sick days

    Productive and
    Non-Productive Time (3 of 3)

    Exhibit 10-1 illustrates:

    • Productive Time—net days when on duty
    • Non-Productive Time—additional days paid for but not worked

    FTEs for Annualizing
    Staff Positions (1 of 2)

    FTE Definition for purposes of understanding annualizing positions:

    • The equivalent of one full-time employee paid for one year, including both productive and non-productive time
    • Two employees working half-time for one year would be the same as one FTE

    FTEs for Annualizing
    Staff Positions (2 of 2)

    • The calculations to annualize staff positions is a two-step process:

    Compute the net days worked.

    Convert the net paid days worked to a factor.

    (See Exhibit 10-2 as an example.)

    Number of Employees Required to
    Fill a Position (1 of 3)

    • Why calculate by position?
    • Computing by position is used in controlling, planning, and decision-making.
    • The scheduled position method is often used when forecasting new programs and services.
    • You will also find scheduling software using this method. HA4200D – Healthcare Financial Management

    Number of Employees Required to
    Fill a Position (2 of 3)

    FTE definition for purposes of filling a scheduled position:

    • A factor expressing the number of employees required measured against, or the equivalent of, one full-time employee’s standard work week.

    Number of Employees Required to
    Fill a Position (3 of 3)

    The calculation to fill scheduled positions is as follows:

    • Compute the number of hours for a full-time position filled for one year. This measure is the baseline.
    • Compute a factor representing the position to be filled for the required number of days (a required seven-day week to cover, for example, versus a five-day work week equals a factor of 1.4).

    (See the cast room example in the text.)

    Tying Cost to Staffing (1 of 6)

    • In the case of the annualizing method, the cost of nonproductive days is already in the formula.

    So…

    • Multiply the factor times the base hourly rate to compute cost.

    (Study the example in the chapter.)

    Tying Cost to Staffing (2 of 6)

    • In the case of the scheduled position method, the base rate must be increased, or burdened, by the nonproductive time.
    • First, increase the hourly base rate by a percent or factor that represents the nonproductive time. Then multiply the burdened based rate by the factor to compute the cost.
    • Then, multiply the factor times the base hourly rate to compute the cost.

    (Examine the examples in the chapter.)

    Tying Cost to Staffing (3 of 6)

    • The actual cost is attached to staffing in the books and records
    • Using…
    • a subsidiary journal and
    • a basic transaction record

    (Both of which are more fully described in another chapter.)

     

    Tying Cost to Staffing (4 of 6)

    • An example of a subsidiary journal is the Payroll Register illustrated in Exhibit 10-5.

     

    Tying Cost to Staffing (5 of 6)

    • An example of a basic transaction record is the time card illustrated in Exhibit 10-6.

    (Of course this time card format will probably be computerized.)

     

     

     

     

    Tying Cost to Staffing (6 of 6)

    • In summary, hours worked and pay rates are essential ingredients of staffing plans, budgets, and forecasts
    • Appropriate staffing is the responsibility of the manager.

     

    Staffing Regulatory Requirements

    • The IMPACT Act’s Staffing Report Requirements:
    • Regulatory specifics about staffing reports
    • Additional reporting requirements
    • Funds provided for report implementation

    Staffing Regulatory Requirements

    • State Certificate-of-Need (CON) Laws and Requirements:
    • Health planning background
    • Certificate-of-need programs
    • How CON-related regulations affect staffing

    Courtesy of J.J. Baker and R.W. Baker, Dallas, Texas

    Calculation for Annualizing
    Master Staffing Plan Example

    Step 1: Compute Net Paid Days Worked Total Days in Business Year Less two days off per Week Number of Paid Days per Year RN 364 104 260 LPN 364 104 260 NA 364 104 260
    Less Paid Days Not Worked: Holidays Sick Days Vacation Days Education Days Net Paid Days Worked 9 7 15 3 226 9 7 15 2 227 9 7 15 1 226

     

     

     

     

     

     

     

     

    Calculation for Annualizing
    Master Staffing Plan: Example

    Step 2: Converting Net Paid Days Worked to a Factor

    RN

    LPN

    NA

    364

    226

    =

    1.6106192

    364

    227

    364

    228

    =

    =

    1.6035242

    1.5964912

     

     

     

    FTEs to Annualize Staffing:
    Assignment Exercise 10-1

    Compute Net Paid Days Worked Laboratory Medical Records
    Total Days in Business Year Less Two Days off Per Week Number of Paid Days Per Year _________ _________ _________ ________ ________ ________
    Less Paid days Not Worked
    Holidays Sick Days Education Days Vacation Days Personal Leave Days _________ _________ _________ _________ _________ ________ ________ ________ ________ ________
    Net Paid Days Worked ________ ________ _______ _______
    Covert Net Paid Days Worked to a Factor: For the Lab. Total days in business year divided by net paid days worked = factor _______________ For Medical Records Total days in business year divided by net paid days worked = factor _______________
    Compute Net Paid Days Worked Laboratory Medical Records
    Total Days in Business Year Less Two Days off Per Week Number of Paid Days Per Year 364 104 260 364 104 260
    Less Paid days Not Worked
    Holidays Sick Days Education Days Vacation Days Personal Leave Days 9 7 3 15 0 9 0 0 0 21
    Net Paid Days Worked 34 226 30 230
    Covert Net Paid Days Worked to a Factor: For the Lab. Total days in business year divided by net paid days worked = factor 364/226 = 1.610619 For Medical Records Total days in business year divided by net paid days worked = factor 364/230 = 1.582609

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    FTEs to Fill Position
    Example (Exhibit 10-4): 8-Hour

    Emergency Department Scheduling for Eight-Hour Shifts:
    Shift One Day Shift Two Evening Shift Three Night = 24-Hour Scheduling Total
    Position: Emergency Room Intake 1 1 1 = Three Eight-Hour Shifts
    Staff needed to cover position 7/24 1.4 1.4 1.4 = 4.2 FTEs
    One full-time employee works 40 hours per week. One eight-hour shift per day times seven days per week equals 56 hours on duty. Therefore, to cover seven days or 56 hours requires 1.4 times a 40-hour employee.

     

     

     

     

     

     

     

     

     

     

     

     

     

    FTEs to Fill a Position:
    Practice Exercise 10-2: 8-Hour

    Scheduling for Eight-Hour Shifts:
    Shift One Day Shift Two Evening Shift Three Night = 24-Hour Scheduling Total
    Position: Admissions Officer 2 1 1 = Four Eight Hour Shifts
    FTEs to cover position equals 2.8 1.4 1.4 = 5.6
    Position Clerical 1 0 0 = One Eight Hour Shift
    FTEs to cover position equals 1.4 0 0 = 1.4

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    FTEs to Fill a Position:
    Assignment Exercise 10-2: 8-Hour

    Scheduling for Eight-Hour Shifts:
    Shift One Day Shift Two Evening Shift Three Night = FTEs Seven Day Week
    Position: Nursing Supervisor Technician Nurses Clerical Aides 2.8 2.8 4.2 1.4 1.4 1.4 2.8 2.8 0 0 1.4 1.4 2.8 0 0 = 5.6 7.0 9.8 1.4 1.4
    Total FTEs needed to cover all shifts 25.2

     

     

     

     

     

     

     

     

     

     

     

     

    FTEs to Fill a Position:
    Example: 12-Hour Shifts

    Emergency Department Scheduling for Twelve-Hour Shifts: 36-Hour Week
    Shift One Shift Two = 24-Hour Scheduling Total
    Position: Emergency Room Intake 1 1 = Two Twelve Hour Shifts
    Staff needed to cover position 7/24 2.33 2.33 = 4.66 FTEs
    One full time employee works 36 hours per week. One twelve-hour shift per day times seven days per week equals 84 hours on duty. Therefore, to cover seven days or 84 hours requires 2.33 times a 36-hour employee.

     

     

     

     

    FTEs to Fill a Position:

    Assignment: 12-Hour Shifts

    Scheduling for Twelve-Hour Shifts: 36 Hour Week
    Shift One Shift Two = FTEs Seven Day Week
    Position: Nursing Supervisor Technician Nurses Clerical Aides 4.66 2.66 7 1.4 2.33 2.33 4.66 4.66 0 0 = 7 9.33 11.66 1.4 2.33
    Total FTEs needed to cover all shifts 31.75

     

     

     

     

     

    FTEs to Fill a Position:

    Example: 12-Hour Shifts

    Emergency Department Scheduling for Twelve-Hour Shifts: 48-Hour Week
    Shift One Shift Two = 24-Hour Scheduling Total
    Position: Emergency Room Intake 1 1 = Two Twelve Hour Shifts
    Staff needed to cover position 7/24 1.75 1.75 = 3.5 FTEs
    One full time employee works 48 hours per week. One twelve-hour shift per day times seven days per week equals 84 hours on duty. Therefore, to cover seven days or 84 hours requires 1.75 times a 48 hour employee.

     

     

     

     

    FTEs to Fill a Position:

    Assignment 12-Hour Shifts

    Scheduling for Twelve-Hour Shifts: 36-Hour Week
    Shift One Shift Two = FTEs Seven Day Week
    Position: Nursing Supervisor Technician Nurses Clerical Aides 3.50 3.50 5.25 1.4 2.33 1.75 3.50 3.50 0 0 = 5.25 7 8.75 1.4 2.33
    Total FTEs needed to cover all shifts 24.73