University of Maryland University College Financial Management Paper

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Kindly read the instruction of the assignment carefully. Please use the information provided by the assignment only. Do not use any foreign material. You are the administrator of the medical – surgical department at UMUC Health. Review the transcripts from the budget meeting and recent voicemails from your CFO and, using the available information and resources, develop an operating budget for your department. Your budget should include a 2-4 page document with an accompanying Excel spreadsheet that: Provides the revenue and expenses through the current month of the current year.Estimates the revenue and expenses for the rest of the current fiscal year based on the assumptions provided in the transcript documents.Prepares a budget for the next fiscal year.An important detail is to remember you are the Director of the Med-Surg Department, and your budgets should reflect only that Department, you do not need to develop a budget for the whole hospital. When considering the information provided in the budget meeting transcript, the projections are for the whole hospital, of which the med-surf department is only a part. When reviewing the assignment consider the following Of the $1.2 billion in total hospital wide patient services revenue, approximately 57% of the total revenue is for in-patient care; the other 43% is for outpatient revenueThe Medical Surgical Budget reflects only in-patient revenueYearly budgeted Medical Surgical Dept. in-patient revenue: $50,000,000 As a percent of the total in-patient revenue, the Med-Surg Dept. represents: 7% In-patient revenue for the Dept. in the first 6 months is below budget by approximately $1.9 million

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You are the administrator of the medical – surgical department at UMUC Health. Review the
transcripts from the budget meeting and recent voicemails from your CFO and, using the
available information and resources, develop an operating budget for your department.
Your budget should include a 2-4 page document with an accompanying Excel spreadsheet
(available in the classroom) that:
•
•
•
Provides the revenue and expenses through the current month of the current year.
Estimates the revenue and expenses for the rest of the current fiscal year based on the
assumptions provided in the transcript documents.
Prepares a budget for the next fiscal year.
An important detail is to remember you are the Director of the Med-Surg Department, and your
budgets should reflect only that Department, you do not need to develop a budget for the whole
hospital. When considering the information provided in the budget meeting transcript, the
projections are for the whole hospital, of which the med-surf department is only a part. When
reviewing the assignment consider the following
•
•
•
•
•
Of the $1.2 billion in total hospital wide patient services revenue, approximately 57% of
the total revenue is for in-patient care; the other 43% is for outpatient revenue
The Medical Surgical Budget reflects only in-patient revenue
Yearly budgeted Medical Surgical Dept. in-patient revenue: $50,000,000
As a percent of the total in-patient revenue, the Med-Surg Dept. represents: 7%
In-patient revenue for the Dept. in the first 6 months is below budget by approximately
$1.9 million
Transcript of the VOICEMAIL FROM George Costanza (CFO):
Hi, it’s George. I hear you’re working on a budget for the Med-Surg department
for FY 2019. I’d like you to come to the budget meeting this afternoon, because
I’m going to be sharing some numbers that are likely to have an impact on your
budget. I’ve sent you the year-to-date statements through December, the
overall budget for the year, and the year-to-date budget variance for your
department. Take a look at them, and bring them with you to the meeting. See
you later!
Transcript from BUDGET MEETING:
George C., CFO
Hi, everyone. Thanks for coming. We’ve got some important numbers to go
through and a big challenge to respond to, so I think we better get started.
Jerry, Vice President of Operations
That sounds ominous.
Newman, Vice President of Medical Support
Well, can we at least get an idea of how we’re doing year-to-date before you
go to the 40,000-foot level?
George
I think you might need to hear this first. Here’s the situation: The hospital has
to cut operating expenses by 5 percent for next fiscal year.
Kramer, Director of Clinical Operations
I’m sorry, did you say 5 percent? Operating expenses?
George
That’s right.
Jerry
That’s a big ask. We’re already operating awfully lean.
George
Agreed. But it’s the situation we’re in. I’ll get to the reasons, but based on what
I’m going to go over, I just want everyone to keep in mind that we can’t make
assumptions we were making before. So let me give you an overview of the
budget and the year-to-date numbers, and I think you’ll see why we’re going to
have to make those cuts.
Now, last year, for the entire hospital, we assumed that we would see $1.2
billion in total patient revenue. But as you can see, for half the year, we’ve only
hit just over $607 million. By this point in the year, we should be over $612
million. So already in terms of total patient revenue, we’ve got a deficit of
nearly $5 million that we didn’t expect. The problem is made worse when we
see that other operating revenue is also under budget by $1.5 million.
I believe that recent efforts in the billing department coupled with some of the
solid work by the c-suite team on physician engagement and external
marketing are going to have an impact on the revenue side of things. We’re
also currently negotiating with a couple of our primary commercial payers, but
those negotiations remain uncertain. All things considered, I’m hoping for
about a 5% bump on the revenue side for FY 19. Our operating expenses are
fairly close to target so far this year, but given the situation with uncertain
revenue, we will need to try to find some additional cost savings opportunities.
I want to be reasonably conservative in case market conditions change or
negotiations with our payers don’t go as expected.
Newman
Wow. Well, okay, so that’s the reality. What’s the timeline? How long do we
have to make these cuts?
George
Well, implementation is obviously by June 30 since the next fiscal year starts
July 1. The board will approve the new budget probably by mid-June, but all
the negotiation at the unit and department level will be going on this month.
Our first official budget committee meeting is in early May. So I’d suggest
getting your ducks in a row within the next week or so.
In your proposal, think through the cuts that are being proposed. Do you
simply want to take a ‘salami slice’ cut across all areas of expense? Or,
are there areas where it might make more sense to protect while others
are more flexible? Since this is a simulation, you won’t know everything
that you normally would about the organization, the people involved, etc.
However, think through what the second and third order effects are of a
budget cut and provide some commentary regarding what other issues
might surface and/or may need to be addressed as a result.
Med Surg 8 Month Budget
FY 2019 – 2020 YTD
(Jul – Feb)*
OPERATING REVENUE:
Inpatient Revenue
TOTAL PATIENT SERVICES REVENUE
OPERATING EXPENSES
Salaries and Wages
Employee Benefits
Professional Fees
Supplies
Purchased Services – Utilities
Purchased Services – Other
Insurance
License and Taxes
Other Direct Expenses
TOTAL OPERATING EXPENSES $
–
NET REVENUE OR (EXPENSE)
* Your budget may vary from the FY 2029-2020 budget given changes you are projecting based on the hospitals
Med Surge 12 month Budget
2019-2020
OPERATING REVENUE:
Inpatient Revenue
TOTAL PATIENT SERVICES REVENUE
OPERATING EXPENSES
Salaries and Wages
Employee Benefits
FY 2019 – 2020 Year**
Professional Fees
Supplies
Purchased Services – Utilities
Purchased Services – Other
Insurance
License and Taxes
Other Direct Expenses
TOTAL OPERATING EXPENSES $
–
NET REVENUE OR (EXPENSE)
** Your budget may vary from the FY 2029-2020 budget given changes you are projecting based on the hopsital
Provide the rationale for your projections in the Memo
Med-Surg Budget Fiscal Year
2020-2021
FY 2020 – 2021
OPERATING REVENUE:
Inpatient Revenue
TOTAL PATIENT SERVICES REVENUE
OPERATING EXPENSES
Salaries and Wages
Employee Benefits
Professional Fees
Supplies
Purchased Services – Utilities
Purchased Services – Other
Insurance
License and Taxes
Other Direct Expenses
TOTAL OPERATING EXPENSES $NET REVENUE OR (EXPENSE)
*** For your project 2020-2021 budget highlight the percent changes from the previous FY, provide a rationale f
Medical – Surgical Budget
FY 2019 – 2020
Budget
$
$
50,000,000
50,000,000
$
$
$
$
$
$
$
$
$
$
23,000,000
5,750,000
400,000
10,000,000
50,000
50,000
105,000
40,000
1,500,000
40,895,000
$
9,105,000
FY 2019 – 2020
Variance TYD
e projecting based on the hospitals experience ov er the last 8 months
FY 2019 – 2020
Budget
$
$
50,000,000
50,000,000
$
$
23,000,000
5,750,000
FY 2019 – 2020
Variance TYD
$
$
$
$
$
$
$
$
400,000
10,000,000
50,000
50,000
105,000
40,000
1,500,000
40,895,000
$
9,105,000
re projecting based on the hopsitals experience over the last 12 months
FY 2019 – 2020
Budget
Variance (%
increase or
Decrease)***
he previous FY, provide a rationale for your decisions in the Memo
Health Care Finance
March 16, 2020
Assignment 3
Assumptions

Current fiscal year July 1, 2019 – June 30, 2020
 Patient Service Revenue
 Projected total hospital patient revenue to be under budget by $10 million

Of the projected $1.2 billion in patient services revenue, approximately 57% of the total projected revenue is for inpatient care; the other 43% is for outpatient revenue



The Medical Surgical Budget reflects only in-patient revenue
Yearly budgeted Medical Surgical Dept. in-patient revenue: $50,000,000
 As a percent of the total in-patient revenue: 7%
 In-patient revenue for the Dept. in the first 6 months is below budget by approximately $1.9 million – is
this likely to increase given the information in the Budget Mtg transcript?
Next Fiscal Year July 1, 2020 – June 30, 2021
 Assumptions
 Projected total hospital revenue to increase by 5% due to marketing and managed care contract
negotiation

When projecting revenue take into consideration that Medical-Surgical Dept. will only see increases relative to inpatient revenue
 Overall hospital goal is to decrease total spending by up to 5%

Cuts in expenses may be targeted, not all expense categories need to be decreased
2019 – 2020 Medical-Surgical
Budget
6 Month Revenue
2019 – 2020 Budget
Revenue
FY 2019 – 2020 6 Month
Variance
$23,123,516
$50,000,000
$(1,876,484)
6 Month Expenses
2019 – 2020 Budget
Expenses
FY 2019 Variance
$22,433,565
$40,895,000
$1,986,065
For the first 6 months — Revenue is below budget, expenses exceed the budget
Budget for Fiscal Year 2019 –
2020
Estimate the revenue and expenses for the Medical – Surgical Dept. through the
current month of the current fiscal year – July 2019 thru February 2020 (8 Month
Budget projections)
Estimate the revenue and expenses for the Medical-Surgical Dept. for the rest of
the 2019-2020 fiscal year based on the assumptions provided in the transcript
documents (12 Month Budget Projections)
 Detailed Excel Spreadsheet with the 2019-2020 yearly budget and explanation of
projections in budget Memo
 Total in-patient revenue (take into consideration the percent difference between budgeted

vs. actual revenue and make adjustments to account for the projected shortfall in revenue)
Total expenses (Highlight specific categories that are projected to be significantly over
budget and make any recommended cuts in specific categories of expenses)
 In the Memo, discuss changes in projected revenue, and highlight the rationale for any
proposed cuts in select expenses
 Your projections will vary from the projected 2019 -2020 budget provided to reflect
any changes you may make to revenue and expenses based on the information
contained in the Budget Meeting Transcript
2020-2021 Fiscal Year Budget
Prepare a Medical Surgical budget for the next fiscal year – July
1, 2020– June 30, 2021
 Detailed Excel spreadsheet providing revenue and expenses by
category and discuss revenue and expense projections in budget
Memo
 Total in-patient revenue (Take into consideration the total projected
revenue increases due to contracting and marketing that are projected
to benefit the whole hospital – remember the Medical-Surgical budget
only includes in-patient revenue)
 Detailed Expenses by category
 Highlight any percent expense increases and reductions based on
the 2019 – 2020 projected yearly budget by category and explain
rationale in budget Memo
Assignment Deliverables
 Excel Spreadsheets
 Projected budget for Fiscal Year 2019 through February 2020 (8 Month Budget)
 Projected remaining Fiscal Year 2019-2020 Budget (12 Month Budget)
 Revenue and Expenses
 Note: Your projections for the yearly budget will differ if you make any changes to the
revenue and expenses given the Budget Meeting Transcript
 Projected Fiscal Year 2020-2021 Budget
 Revenue and Expenses (12 Month Budget)
 Budget Memo
 Explain rationale for any increases or shortfalls in revenue and the rationale
behind any cuts in specific expense categories
Reminder – the fiscal year for this hospital is July 1st thru June 30th

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