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Budgeting Tips: Keeping Division Finances on Track

Hospital Budgeting
Photo Credit: Shutterstock / everything possible

For a hospitalist, managing a budget shouldn’t be that much different than maintaining a household budget. “Ideally, you should know approximately how much income you’ll generate and how much you expect to spend on a monthly or quarterly basis, and these numbers need to roughly match up,” said Daniel J. Brotman, MD, FACP, MHM, director of the division of hospital medicine at Johns Hopkins Hospital, an urban academic medical center with more than 1,000 beds at Johns Hopkins University in Baltimore.

Most commonly, a hospital-medicine group leader who makes staffing decisions and creates staffing models may need to understand how to manage a budget, said Joanna M. Bonsall, (@BonsallJoanna), MD, PhD, SFHM, associate professor of medicine at Emory University School of Medicine in Atlanta and chief of hospital medicine at Grady Memorial Hospital in Atlanta, an urban hospital with about 700 beds.

Other hospitalists may also benefit from understanding how budgeting decisions are made, such as a hospitalist who would like to propose a new service line or ask for administrative time, Dr. Bonsall continued.

To prepare for a position that requires budget management, take courses or seminars to understand how hospital financing works overall. When taking on a budgeting role, “Ask your business manager or finance team to explain the different budget categories and how funds flow,” Dr. Bonsall said. “Have them walk you through their budget sheets so you can understand how everything fits, and so you can see what they see.” Hospitalists in junior leadership positions may find it worthwhile to attend annual budget negotiation discussions if permitted.

When you’re in a position that requires budgeting, ask someone talented and trained in finance to advise you. “An administrator reviews my budget every month to ensure that revenues and expenses line up with expectations,” Dr. Brotman said.

Using data to achieve goals

A budget is comprised of data. People who manage budgets generally use these data to create spreadsheets and to make calculations and predictions about what their revenues and expenses will look like, Dr. Brotman said.

Track all of the metrics that are important to a hospital group or C-suite, Dr. Bonsall advised. Understand what costs are assigned to each metric, such as how much an average patient stay costs the hospital per day. What are your census and admissions trends, and is there variation over time? Having and understanding the data you need can help you make the business case for what you need to ask for.

You can use data to help make the case for additional funding requests, Dr. Bonsall said. For example, if there’s a new project you would like to implement that will reduce patients’ length of stay, understanding those costs can help you justify the return on investment.

Hospital-medicine group leaders should also be aware of national and regional data trends such as staffing volumes and salaries, said Dr. Bonsall, which is important to share when negotiating on your group’s behalf.

Understanding your budget can help you prioritize too; you can shift funds to different categories as needs arise. Understanding budget limits can help you understand what problems you can or can’t solve using additional funding, Dr. Bonsall said.

Increasing revenue

Three ways to balance a budget are to increase revenue, decrease expenses, and know when to ask for help. Dr. Brotman recommended using operational data to identify ways to increase revenue. For instance, you can find additional billing opportunities (e.g., identify practitioners who might be systematically underbilling for certain types of services), or use data to generate a business case for more hospital support (e.g., proving the value of a triage service that has limited billing revenue).

You can identify places to save money by changing staffing models. If you pay moonlighters to cover a service at night, for example, you might save money by hiring a nocturnist (even at a salary substantially above what is paid to daytime providers), Dr. Brotman said.

Finally, data, when shared with a team, can be helpful to align incentives. For example, if you have a bonus program, you may be able to reward practitioners financially for helping the program to meet its budgetary goals through billing optimization or by enhancing hospital payments to your program via shared savings arrangements, Dr. Brotman said.

Keeping costs down

To balance a budget, keeping expenses down may be necessary. Because personnel are almost always the biggest line item for any budget, you may need to start there, Dr. Brotman said—ideally via natural attrition rather than eliminating staff.

In particular, Dr. Bonsall advised evaluating staffing efficiency to keep costs down. For example, compare census and admissions flow with your staffing model, and make sure you’re optimizing staff usage.

Are there days when the admissions flow is lighter, or the census is lower? If so, could those be opportunities to downstaff? Are there certain hours of the day when work is heavier or lighter? Be careful though—don’t schedule staff too tightly to the census because you’ll need to be able to handle routine fluctuations in volume, Dr. Bonsall cautioned.

Another way to lower staffing costs is to figure out if any employees could spread their time across multiple groups, Dr. Brotman said. For example, could a staff person in your academic hospitalist group who provides research support also assist another division with their projects, so their salary is split among divisions?

Be careful when cutting costs, however. “When feasible, ask your hospitalist group for their input on budgetary decisions,” Dr. Brotman advised. “Most people are used to managing their own budgets at home and are accustomed to having some discretion over how they manage their budgets.”

For example, it may be tempting to eliminate unnecessary expenses such as bi-weekly faculty luncheons. But this can be demoralizing to members. So, consider getting group feedback on what cuts may be the most palatable. Maybe staff would be agreeable to having lunch served at every other meeting, using a cheaper caterer, and skipping dessert, to save money, Dr. Brotman said. If you do need to make cuts on items that may impact well-being, explain the reasoning, and give as much warning as possible so the decisions do not feel arbitrary or capricious.

Challenges in managing budgets

Different people look at budgets in different ways. When working with your finance team or business manager, keep in mind that hospitalists have an intuitive understanding of clinical staffing that non-physicians may not have.

For example, when looking at full-time equivalents (FTEs), who is included? Is administrative time accounted for? Do you work with dollars or FTEs? As an example, Dr. Bonsall has a moonlighting budget that is in dollars, but she has to think of shifts by the number of FTEs needed to fill them. She makes sure she aligns her FTE counts with the dollars required to pay moonlighters when necessary.

Another challenge can stem from the fact that budget cycles frequently don’t align with staffing cycles. “You often have to plan months to years ahead, to ensure that you have the increases available when you need them,” Dr. Bonsall said. She keeps her own spreadsheet with different categories to track subcategories and staffing details.

When you have a projected shortfall, tell stakeholders (such as hospital or departmental leadership) right away, and don’t sugarcoat it. “Open communication is key,” Dr. Brotman said. “You don’t want to give them any surprises at the end of the fiscal year.”

Ultimately, you will have to make tough choices. “You can’t always give everyone what they want or deserve, but you should recognize when financial choices impact your colleagues and explain your decisions. People are your most valuable resource, and they deserve open communication,” Dr. Brotman said.

Final thoughts

Maintaining a balanced budget can reap benefits beyond your expectations. “Developing a reputation as someone careful and good with finances can help with your future requests and negotiations,” Dr. Bonsall said. “Money is often the common denominator in negotiations—if you understand the costs (and sometimes, cost savings), you can be a more effective negotiator.” 

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