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Assessment 2: Preparing and Managing an Operating Budget

Student Name

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Capella University

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Prof Name
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FEB 10, 2024

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Introduction
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Managing finances in healthcare is a critical responsibility for nurse managers, who
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must be well-versed in budget preparation and management to ensure effective
allocation of resources. A solid understanding of business acumen enables leaders to
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navigate financial challenges, adapt to healthcare trends, and optimize budget

utilization. Research underscores the importance of nurses possessing business skills
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to drive growth, empower teams, and meet consumer needs (Raftery et al., 2021).

As the nurse manager of a 35-bed hospital with 20 full-time equivalent employees, I'm
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tasked with creating and overseeing a budget for my unit. Recent staff turnover
necessitates hiring new employees, while existing staff working overtime adds to costs.
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Additionally, caring for elderly patients increases expenses due to heightened

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comorbidities and chronic disease risks.

Creating an Operating Budget

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An operating budget estimates expenses based on fixed and variable costs for a
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defined period, typically a year (Zhang & Bohlen, 2023). Major components include
salaries, medical supplies, drugs, food, and training. Revenue sources may include
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patient services, grants, and Medicaid/Medicare reimbursements.

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Budget Design and Creation

Economic constraints, resource allocation, and patient expectations influence budget

planning (Ren et al., 2021). Methods like cost-benefit analysis and linear programming
aid in rationalizing expenses and maximizing benefits.

Strategic Plan and Evaluation Criteria

Strategic planning aligns financial goals with organizational missions and prepares for
uncertainties. For instance, employee retention programs and technological
advancements improve patient care and staff satisfaction.

Approach to Ongoing Budget Management

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Continuous monitoring and adjustment of budget indicators ensure alignment with
organizational objectives. Emphasizing quality care and cost-effectiveness guides

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resource allocation.

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Conclusion

Nurse leaders must integrate business skills into their practice to navigate financial

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challenges effectively. Operational budgets must address current needs while remaining
flexible to adapt to changing circumstances. Strategic planning ensures alignment with
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organizational goals, while ongoing evaluation ensures budget effectiveness.
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References
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Benzaghta, M. A., Elwalda, A., Mousa, M., Erkan, I., & Rahman, M. (2021). SWOT
analysis applications: An integrative literature review. Journal of Global Business
Insights, 6(1), 55–73. https://doi.org/10.5038/2640-6489.6.1.1148
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Boloș, M.-I., Bradea, I.-A., & Delcea, C. (2020). Linear programming and fuzzy
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optimization to substantiate investment decisions in tangible assets. Entropy, 22(1),

121. https://doi.org/10.3390/e22010121
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Brook, J., Aitken, L., Webb, R., MacLaren, J., & Salmon, D. (2019). Characteristics of
successful interventions to reduce turnover and increase retention of early career
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nurses: A systematic review. International Journal of Nursing Studies, 91, 47–59.

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https://doi.org/10.1016/j.ijnurstu.2018.11.003
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Jiang, W., & Marggraf, R. (2021). The origin of cost-benefit analysis: A comparative
view of France and the United States. Cost Effectiveness and Resource Allocation,
19(1). https://doi.org/10.1186/s12962-021-00330-3

Ngoc Dinh, M., Nygate, J., Hoang Minh Tu, V., & Thwaites, C. L. (2020). New
technologies to improve healthcare in low- and middle-income countries: Global Grand
Challenges Satellite Event, Oxford University Clinical Research Unit, Ho Chi Minh City,
17th-18th September 2019. Wellcome Open Research, 5, 142.
https://doi.org/10.12688/wellcomeopenres.16008.2

Raftery, C., Sassenberg, A.-M., & Bamford-Wade, A. (2021). Business acumen for
nursing leaders, optional or essential in today’s health system? A discussion paper.

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Collegian, 28(6), 610–615. https://doi.org/10.1016/j.colegn.2021.08.001

Ren, W., Zhao, Y., Zhong, H., Fu, X., & Wu, J. (2021). Exploring the optimal allocation

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decision-making of expenditure budget in hospitals under multi-objective constraints:
Evidence from Urban Public Hospitals, China. SAGE Open, 11(4), 215824402110581.
https://doi.org/10.1177/21582440211058191

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Xuecheng, W., Iqbal, Q., & Saina, B. (2022). Factors affecting employee’s retention:

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Integration of situational leadership with Social Exchange theory. Frontiers in
Psychology, 13. https://doi.org/10.3389/fpsyg.2022.872105
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Zhang, R., & Bohlen, J. (2023). Healthcare business budgeting. In StatPearls.
StatPearls Publishing. http://www.ncbi.nlm.nih.gov/books/NBK589707/
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