1. EXPENSE REDUCTION PROPOSAL FISCAL YEAR END MARCH 31, 2011 JAMIE LOFTON BELLEVUE UNIVERSITY Metropolis Health System

2. Outline Title page Outline Abstract Introduction Objectives Budget Assumptions Variance example Reasons to maintain funding for certain departments Reasons to decrease funding for certain departments Schedule of Property, Plant, and Equipment Schedule of Revenue and Expense Schedule of Operating Expenses Summary References

3. Abstract The purpose of this budget reduction proposal is to reduce the Operating Expense Budget by 15% without compromising quality patient care.

4. Introduction Metropolis Health System is a cost centered medical facility where department managers are responsible for controlling costs. In the following targeted areas, General Services and General Support Services, managers have not controlled costs due to inefficient management of services. Both areas have seen wildly fluctuating variable costs beyond explanation. Budget cuts in these two areas would not effect patient care and would actually produce a more stable environment in each area of concern.

5. Objectives To reduce General Services budget by 15%. To reduce General Support Services by 15%. To maintain Nursing Services and Other Professional Services budgets at their current levels.

6. Budget Assumptions Metropolis Health System is a cost centered medical facility where department managers are responsible for controlling costs. Areas targeted for fiscal reduction have lower efficiency rates. Creation and implementation of job sharing part-time positions, elimination of two FTEs, and the subsequent reduced workload will result in minimal impact on effectiveness. Workload did not warrant the current level of staffing. The requested decrease in funding for land improvements is expected to be made up by increased tax rate (1%) in taxing district and rezoned property at a lower rate per acre.

7. Variance Example (General Services) Overview of workload in General Services Area: Two-Variance Analysis 1# Actual Cost Incurred ($3,200,000) –*Budget Costs ($3,000,000) 2# Applied Cost ($3,050,000)-*Budget Costs ($3,000,000). *computed as standard hours for actual production Proof Total=Actual Cost Incurred-Applied Cost=Total Variance

8. Reasons to Keep Nursing and Other Professional Services Funding Intact: Metropolis Health System is a thriving medical center that delivers excellent patient care in a patient-centered environment. Nurse Staffing is currently at the appropriate ratio of 5.2 patients per nurse-any further cuts would lead to poor patient care levels. Physical therapy is currently operating with 4 FTEs although 6 are needed-resulting in long waiting lists for initial evaluations. The incidence of substance abuse increased by 1% in Metropolis the previous year. Therefore, this department has the potential to generate more revenue.

9. Reasons For Intact Funding -Continued- Outpatient visits have increased by 50,000 annually (Baker & Baker, 2011) since 1998. Inpatient visits have maintained the initial increase from 1998 of a steady growth of 1000 patients annually (Baker & Baker, 2011).

10. Reasons to Decrease Funding to Assigned Areas Accountability task force has targeted specified areas for fiscal reduction. Targeted areas are functioning below JCAHO standards and risk losing accreditation. Studer Group Coaching Process Task Committee has recommended Nurse and Other Professional staffing remain at current levels. Surgical, Cardiac, and Laboratory were sited for performance excellence by Baldrige/NIST

11. Schedule of Property, Plant, and Equipment w/Revisions* Metropolis Health System Schedule of Property, Plant, and Equipment For the Year Ended March 31, 2011 Buildings$14,700,000 Land Improvements$1,100,000*($165,000) Equipment$28,900,000 Total$44,700,000 Less Accumulated Depreciation($26,100,000) Net Depreciable Assets$18,600,000 Land$480,000 Construction in Progress$220,000 Net Property, Plant, and Equipment$19,300,000*$19,135,000

12. Metropolis Health System

13. Schedule of Operating Expenses for the Year Ended March 31, 2011 Nursing ServicesGeneral Services Routine Medical-Surgical$3,880,000Dietary$1,055,000($896,750) Operating Room$300,000Maintenance$1,000,000($850,000) Intensive Care Units$395,000Laundry$295,000($250,750) OB-Nursery$150,000Housekeeping$470,000($399,500) Other$300,000Security$50,000($47,750) Total$5,025,000Medical Records$330,000($280,500) Other Professional ServicesTotal$3,200,000($2,725,250) Laboratory$2,375,000Support Services Radiology and CT Scanner$1,700,000General Services$4,600,000($3,910,000) Pharmacy$1,375,000Insurance$240,000($194,000) Emergency Service$950,000Payroll Taxes$1,130,000 Medical and Surgical Supply$1,800,000Employee Welfare$1,900,000 Operating Rooms and Anesthesia$1,525,000Other$430,000 Respiratory Therapy$525,000Total$8,300,000 Physical Therapy$700,000Depreciation$1,900,000 EKG and EEG$185,000Amortization$50,000 Ambulance Service$80,000Interest Expense$325,000 Substance Abuse$460,000Provision for Doubtful Accounts$1,500,000 Home Health and Hospice$1,295,000Total Operating Expenses$33,400,000$26,570,750 Other$130,000 Total$13,100,000

14. Summary MHS will continue to provide excellent patient care while striving to increase efficiency and eliminate duplicity and waste. The two targeted areas will be subject to reorganization with the budget committee’s approval.

15. References Baker, J.J. & Baker, R.W. (2011). Health care finances : Basic for nonfinancial managers (3 rd ed.). Sudbury, MA: Jones and Bartlett Publishers. Http://baldrige21.com Http://quality.nist.gov/ Http://www.jointcommision.org/standards