Learn — Budgeting, finance & materials management

5 notes · 22 questions on the topic

Budget — purpose, types (operating, capital, zero-based) and cost concepts

A budget is a plan for a set period, usually a financial year, expressed in money, that estimates the income and the expenditure of a unit and is then used to guide and to control spending against that estimate. For a nursing service it is the instrument by which the plan for staff, supplies and equipment is costed, defended and monitored, and budgeting stands last in POSDCORB because everything before it costs money.

A budget serves planning (it forces a forecast of workload and needs), coordination between departments, control (the variance between the actual and the budgeted figure is reviewed every month and an unfavourable variance explained), communication of priorities, motivation when the people who spend it help to prepare it, and accountability for what was spent.
By content the budgets are the operating (revenue and expense) budget for the running costs of the year — salaries and benefits, which are the largest single item of a nursing service, supplies, drugs, utilities, maintenance — the capital budget for long-life assets above a set value such as a ventilator, a monitor or a building, and the cash budget for the timing of money in and out; the personnel budget is the staffing part of the operating budget.
By method, incremental (line-item) budgeting adds a percentage to last year's figures; zero-based budgeting, introduced by Peter Pyhrr, justifies every activity and expense from zero each year as ranked decision packages; programme or performance budgeting allocates by programme and its outcomes; a flexible budget adjusts the allowance to the volume of work (patient days) where a fixed budget does not.
The process runs from preparation by the cost centres upward, through review and approval by the budget committee and the governing body, to implementation, monthly monitoring with variance analysis and revision when the assumptions change; the Indian financial year runs from 1 April to 31 March.
Cost concepts: fixed costs do not change with the number of patients (rent, the salaries of permanent staff, insurance), variable costs rise and fall with volume (gloves, syringes, drugs, linen laundering, food), and semi-variable costs have both parts (electricity); direct costs can be traced to a patient (his drugs) and indirect or overhead costs cannot (administration, security); a cost centre spends without earning and a revenue centre earns; the unit cost is the total cost divided by the patient days.
The nurse manager's part in the budget is to supply the workload and staffing data, to justify each capital request with the need, the cost, the alternatives and the consequence of not buying, to control the ward's variable costs by cutting waste and over-stocking, and to read and answer the monthly variance report.

Materials management — ABC, VED and FSN analysis, economic order quantity

Materials management is the planning, procurement, storage, distribution and control of the supplies and equipment a hospital uses, so that the right item is available in the right quantity at the right place and time at the least cost. Its examinable heart is inventory control — the analyses that decide how tightly each item is watched and the formula that decides how much to order at a time.

The cycle runs from estimating demand, through procurement (the indent, the tender or rate contract, the purchase order), receipt and inspection, storage, issue and distribution, to use and finally condemnation and disposal; centralised purchasing and standardisation of items cut cost and variety, and a hospital formulary does the same for drugs.
ABC analysis (always better control) ranks items by annual consumption value on Pareto's principle: A items are about 10 per cent of the items and about 70 per cent of the spend and get the tightest control — frequent review, small stocks, senior approval; B items are about 20 per cent of the items and 20 per cent of the spend; C items are about 70 per cent of the items and only 10 per cent of the spend and are bought in bulk with loose control.
VED analysis classifies by criticality to patient care — vital items whose absence can cost a life (adrenaline, oxygen, IV fluids) must never be out of stock, essential items are needed but can wait a short time, and desirable items merely add convenience; an ABC–VED matrix combines the two, and a vital A item gets the tightest control of all.
The other classifications are HML by unit price (high, medium, low), FSN by movement (fast, slow and non-moving — the non-moving list is the candidate for condemnation), SDE by ease of procurement (scarce, difficult, easy) and GOLF by source (government, ordinary, local, foreign).
The economic order quantity is the order size that minimises the sum of ordering cost and carrying cost, EOQ = √(2DS ÷ H), where D is annual demand, S the cost of placing one order and H the cost of holding one unit for a year; at the EOQ the two costs are equal, and it answers how much to order — the reorder level (lead-time consumption plus buffer stock) answers when.
Equipment is managed the same way from selection (need, cost, spares, maintenance, training) through a register, a preventive-maintenance and calibration schedule and an annual maintenance contract, to condemnation when it is beyond economical repair; inventory carries three costs — ordering, carrying (storage, insurance, obsolescence, interest) and the stock-out cost of not having the item.

Stores — buffer stock, lead time, FEFO issue and condemnation

Stores are where a hospital's supplies are received, kept and issued — the central store, the pharmacy store and the ward's own stock cupboard — and the rules of storage exist so that nothing runs out, nothing expires on the shelf and nothing is lost. The nurse in charge of a ward is the storekeeper of its imprest, and the examinable content is the stock levels, the issue rule for dated items and what happens to equipment that has reached the end of its life.

Stock levels have names: the buffer (safety or minimum) stock is the reserve kept above the working stock to cover a late delivery or a sudden rise in use; the lead time is the interval between placing an order and receiving it; the reorder level is the average consumption during the lead time plus the buffer stock; the maximum level caps what is held; and the danger level is the point at which an emergency purchase is made.
Issue follows two rules: FIFO (first in, first out) for undated supplies, and FEFO (first expiry, first out) for drugs, vaccines and sterile items — the vial that will expire soonest is issued first, shorter-expiry stock stands in front, and expired stock is removed from the shelf and returned or destroyed under the rules rather than left where it can be picked up.
Storage conditions matter as much as quantity: cool, dry and ventilated rooms with stock off the floor on labelled shelves; a cold chain of 2 to 8 °C for vaccines and insulin with a twice-daily temperature log; narcotic and psychotropic drugs in a double-locked cupboard with a register and a two-person count at every handover; look-alike and sound-alike drugs separated; flammables in their own store.
The ward imprest system fixes a list and a quantity for every ward, topped up by a weekly indent; a stock register records every receipt, issue and balance, a periodic physical count (stock-taking) is checked against it, and a discrepancy is reported rather than adjusted.
Condemnation is the formal write-off of equipment that is unserviceable, obsolete or beyond economical repair: a condemnation board surveys it, a certificate is issued, the register is written off and the item is disposed of by auction, transfer or destruction; expired and damaged drugs are disposed of under the waste-management rules, never sold or reissued.
Wastage control is the storekeeper's other job — pilferage, breakage, expiry and over-stocking are the four leaks — and the monthly stock report lists consumption, balance, expiries and stock-outs so that the next indent is a figure and not a guess.

Ward management — bed occupancy, equipment and maintenance

Ward management is the first-line management of a nursing unit by the ward sister or in-charge — its patients, its staff, its environment, its supplies and equipment and its records — so that safe care is given around the clock. The ward is the smallest complete unit of the hospital, and every function of management from planning to budgeting appears in it in miniature.

The ward sister carries five roles at once: clinical (rounds, supervision of care, the sickest patients herself), managerial (the roster and the assignment of patients), administrative (records, indents, reports), educational (students and in-service teaching) and coordinating (doctors, dietary, laboratory, housekeeping and the relatives), and the charge nurse on a shift coordinates the unit's activities and supervises the staff on duty.
Care is assigned by one of the recognised methods: functional nursing by task (efficient but fragmented), team nursing under a team leader responsible for a group of patients, primary nursing in which one nurse is accountable for a patient's whole stay, the case method or total patient care for one shift, and modular nursing between team and primary.
Ward statistics feed staffing and the budget: the bed occupancy rate is inpatient days divided by available bed days, multiplied by 100; the average length of stay is inpatient days divided by discharges including deaths; the bed turnover rate is discharges divided by beds; and the daily census is taken at a fixed hour, usually midnight.
Equipment on the ward is managed through an inventory register, a daily checklist of the emergency equipment — the crash trolley, suction, oxygen, the defibrillator — signed by the nurse who checked it, preventive-maintenance and calibration dates, prompt reporting of breakdowns to the biomedical department and condemnation when an item is beyond repair.
The ward environment is part of management: layout and a nurses' station that sees the beds, lighting, ventilation, noise, privacy, infection control, safety against falls and wet floors, and the sister's own daily round that checks all of them before the doctors' round.
Reports move the ward's information upward and across: the handover between shifts, the daily census and bed-state report, the incident register, the monthly report on staff, statistics, stock and equipment, and planned discharges communicated a day ahead so that beds and transport are ready.

Fire and disaster preparedness — RACE, PASS and the hospital disaster plan

Fire and disaster preparedness is the set of plans, equipment and drills that make a hospital able to protect its patients when a fire breaks out inside it, or when a disaster outside it — a flood, an earthquake, a road or rail crash, an epidemic — sends more casualties than the normal service can absorb. Both plans are written, rehearsed at intervals and known to every nurse on every shift, because in either event the nurse on duty acts before any manager arrives.

RACE is the order of action at a fire: Rescue anyone in immediate danger, raise the Alarm (the break-glass point and the fire number), Confine the fire by closing doors and windows and shutting off the piped oxygen to the area if that can be done safely, and Extinguish it if it is small or Evacuate if it is not — the sequence, not the extinguisher, is what the examination asks.
PASS is how an extinguisher is used — Pull the pin, Aim at the base of the fire, Squeeze the handle, Sweep from side to side — and the class must match the fire: A for ordinary combustibles (water), B for flammable liquids (foam, carbon dioxide, dry powder), C for gases and electrical fires (carbon dioxide, dry powder), D for metals, and never water on an electrical fire; fire needs fuel, heat and oxygen, and removing any one puts it out.
Evacuation is horizontal first — through the fire doors into the next compartment on the same floor — and vertical by the stairs only, never the lift; patients nearest the fire go first, ambulatory patients walk, wheelchair patients are pushed and bedridden patients are moved by blanket drag or two-person carry, and every patient is counted at the assembly point against the census.
A disaster is an event that overwhelms the resources at hand; it is internal (a fire, a power failure, a building collapse) or external, and disaster management has four phases — mitigation, preparedness, response and recovery; the hospital disaster plan names a disaster officer and control room, a call tree, a triage area, expansion of beds by discharging the stable, and a pre-assigned station for every nurse.
Mass-casualty triage uses colour tags — red for immediate life-threatening but salvageable injuries, yellow for delayed, green for the walking wounded, black for the dead or unsalvageable — and the START method sorts by breathing, circulation and the ability to follow commands in under a minute per patient.
Preparedness is rehearsed: fire drills and mock disaster drills at intervals the hospital's safety policy fixes, every nurse trained to use an extinguisher, evacuation routes and assembly points displayed on every floor, fire exits never locked or obstructed, and the fire alarm, sprinklers, smoke detectors and the fire no-objection certificate kept current.

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