Expenses
Salaries and benefits $214,129 3% $220,553
Salaries will hold to a 3% overall increase in
cost, no increase in labor hours due to no
increase in patient volume.
Supplies $71,346 3% $73,487
Supplies cost will increase more due to the
rising cost of oil and its effect on the cost of
plastics and transporation
Physician and professional fees $107,065 3% $110,277 contracts for fees have a built-in 3% increase
Utilities $1,164 5% $1,222
Utilities cost will increase more due to the rising
cost of oil.
Other $1,784 3% $1,838
Depreciation & Amorization
(“non-cash” expenses) $24,955 20% $29,946
Some high-cost equipment (air conditioning,
telephone system, all patient beds and
headwalls) will have to be replaced this year,
and “depreciation” will rise sharply.
Patton – Fuller Community Hospital
Operating Budget
2009
(In Thousands)
(Projection)Interest $3,597 3% $3,705
The repayment plan for any monies borrowed in
2009 will not come due until 2010.
Provision for doubtful accounts $13,383 10% $14,721
The renegotiation of Managed Care plans could
make collections less certain.
Total Expenses $437,424 4% $455,749 Total expenses will rise 4%
Operating Income ($16,110) ($4,719)
Operating Income will improve, with the
hosptial’s loss reduced by 2/3
Non-operating Income (Loss)
Investment Income $264 15% $304
The Market has been going up for years, the
“bull market” should continue in 2009.
Net Income ($15,846) ($4,416)
The hospital’s loss will be further reduced by
good returns on investment income.PATTON – FULLER COMMUNITY HOSPITAL
From: Zachary Hardie, CFO
To: Davis Geach, President/CEO
Fredric Adair, Chief Compliance Officer
Jess Ducat, Chief Operating Officer
Caterina Hossack, Chief Nursing Officer
Brent Houze, Chief Medical Officer
Nadene Saetteurn, Chief Human Resource Officer
Re: 2010 Operating Budget Assumptions
Based upon a review of the 2007, 2008 and 2009 Operating Budget variances, the long
and short-term plans of the various hospital departments and an in-depth analysis of
general economic conditions, we have arrived at the following assumptions that will be
used in the preparation of the 2010 Operating Budget projections.
In general, we anticipate a 3% overall “deflation rate” for prices in 2009 – due to the
weak economy – will continue into 2010.
Revenues
Net Patient Revenue Patient revenue will continue to increase –
but at a decreased rate (3%) – with little or
no increase in patient volume, due to new
managed care contracts.
Other Revenue Other revenue is projected to increase by
15% based on Marketing’s plan to increase
donations by 15%.
Expenses
Salaries and benefits Salaries will hold to a 1% overall increase in
cost due to price “deflation” nation-wide,
with no increase in labor hours (due to no
increase in patient volume). This
assumption could be affected by a board
decision to either raise nursing wages by $1
per hour or to increase the nursing hour
ratio.2
2010 Operating Budget Assumptions
Supplies Supplies cost will decrease 3% due to the
price deflation and our current over-stock
purchased last year.
Physcian and Professional Fees Contracts for fees have a built-in 3%
increase.
Utilities Utilities cost will increase 5% due to the
rising cost of oil partially offset by the
efficiency of the hospital’s new heating and
cooling systems.
Other No net change in the cost or volume of these
items.
Depreciation & Amortization
(“non-cash” expenses)
Some high-cost equipment (air conditioning,
telephone system, all patient beds and
headwalls) were replaced in 2009, and
“depreciation” rose sharply. Depreciation
will remain at this level in 2010 so no
projected increase.
Interest The repayment plan for any monies
borrowed in 2009 will come due in 2010,
with a sharp increase (30%) in interest cost.
Provision for Doubtful Accounts The renegotiation of Managed Care plans
has delayed collection and made collections
less certain. We will assume a 10% increase
in doubtful accounts.
Operating Income
Non-operating Income (Loss) We do not expect to have any non-operating
income or loss.
Investment Income (Loss) The Market is down, expected to hold
steady, so a “zero” return is expected, with
neither losses nor gains.
We believe that the hospital will continue its dramatic “turnaround”, taking advantage of
the stagnation in patient volume, price “deflation”, the efficiency of new equipment and
the improved arrangements with the managed care companies3
2010 Operating Budget Assumptions
If you have any further thoughts or comments regarding these assumptions, please
communicate them to me no later than Friday.
Patton-Fuller Community Hospital
Statement of Revenue and Expense
2009 to 2010 Operating Budget
Complete the Operating Budget. Assume the 2009 projections were realized. Use the 2009 budget and the 2010 budget assumptions to calculate expenses and income for 2010. The revenues have been completed for you.
| 2009 (Proj) | 2010 Budgeted % Change From 2009 Projection | 2010 Budget | 2010 Operating Budget Assumptions | |
| Revenue | Based on these 2009 assumptions: a 3% overall deflation rate for prices in 2009—due to the weak economy—will continue into 2010. | |||
| Net patient revenue | 459,900 | 3% | 473,697 | Patient revenue will continue to increase, but at a decreased rate, with little or no increase in patient volume, due to new managed care contracts. |
| Other revenue | 3,082 | 15% | 3,544 | Marketing’s plan to increase donations by 15% |
| Total revenue | 462,982 | 3% | 477,241 |
| 2009 (Proj) | 2010 Budgeted % Change From 2009 Projection | 2010 Budget | 2010 Operating Budget Assumptions |
| Expenses | |||
| Salaries and benefits | 220,752 | 1% | Salaries will hold to a 1% overall increase in cost due to price deflation nationwide, with no increase in labor hours, due to no increase in patient volume. This assumption could be affected by a board decision either to raise nursing wages by $1 per hour or to increase the nursing hour ratio. |
| Supplies | 74,584 | -3% | Supplies cost will decrease 3% due to the price deflation and our current over-stock purchased last year. |
| Physician and professional fees | 110,376 | 3% | Contracts for fees have a built-in 3% increase. |
| Utilities | 1,200 | 5% | Utilities cost will increase to the rising cost of oil partially offset by the efficiency of the hospital’s new heating and cooling systems. |
| Other | 1,840 | 0% | No net change in the cost or volume of these items. |
| Depreciation & amortization (noncash expenses) | 36,036 | 0% | Some high-cost equipment—air conditioning, telephone system, all patient beds, and headwalls—were replaced in 2009, and depreciation rose sharply. Depreciation will remain at this level in 2010. |
| Interest | 3,708 | 30% | The repayment plan for any monies borrowed in 2009 will come due in 2010, with a sharp increase in interest cost. |
| Provision for doubtful accounts | 13,797 | 10% | The renegotiation of managed care plans has delayed collection and made collections less certain. |
| Total expenses | 462,293 | Total expenses will rise ____%. |
| 2009 (Proj) | 2010 Budgeted % Change From 2009 Projection | 2010 Budget | 2010 Operating Budget Assumptions |
| Income | |||
| Operating income | 689 | Operating Income will improve, with the hospital’s loss reduced by 2/3. |
