MHA FPX 5006 Operating Budget Proposal – Budget Reduction Proposal
Budget Reduction Proposal
Rapidly rising operational costs and reimbursement reductions frequently predispose healthcare organizations to financial pressures. Consequently, the organization experience challenges in meeting high demand for quality medical care. Healthcare organization’s management must, therefore, collaborate with external consultants in developing the most effective budget reduction strategies to maintain quality of care, while enhancing overall performance. According to Bello (2022), budgetary and effective allocation of financial resources in clinical settings maintains quality of care while optimizing patient treatment outcomes in the long-term. Recommended budgetary measures involves 10% reduction in an operating cost. However, this approach requires careful financial analysis and strategic decision-making to optimize patient outcomes in the long-term. This budgetary proposal presents recommended 10% reduction approach.
It is not recommendable to reduce every line item by 10% equally. This approach is ruled out since some operational costs are fixed and crucial for ensuring effective clinical operations, regulatory compliance, and patient safety. Fixed costs, including insurance, legal fees, equipment rental and maintenance, dues and subscriptions, and auditing fees cannot be reduced to ensure operational effectiveness and regulatory compliance. Similarly, equal reduction across all departments is inappropriate. This approach is likely to adversely affect high-priority clinical services, thereby compromising their operational efficiency. Therefore, the most effective strategy is selective reduction approach, primarily focusing on minimizing discretionary spending and nonessential expenses. This strategy should further aim at addressing operational inefficiencies without interfering with direct patient care services.
GET ASSIGNMENT HELP HERE
However, healthcare organization’s top leaders in collaboration with budgetary committee should focus on identifying line items that can be reduced without compromising operational efficiency and overall patient outcomes. In selective reduction, fixed costs can be addressed by relying on multiple data sources, including departmental productivity reports, benchmarking data, and supply utilization reports. Excessive spending areas would be identified and cost reduction measures applied, thereby minimizing overall operation costs, which would increase healthcare organization’s profitability in the long-term.
A complete freeze might be imposed on multiple budget items, including hiring, travel, training, and purchasing. This approach is the best in the short-term since it would lower operational costs, resulting in savings and increased profitability. However, this technique might be ineffective in the long-term. In particular, it would predispose the healthcare organization into workforce and operational challenges. Thus, selective restrictions should be adopted to make freezing sustainable and more effective in reducing operational costs without interfering with quality of care and overall treatment outcomes. For instance, a strategic hiring freezes targeting nonessential positions is an appropriate approach. Nonetheless, this approach should not target frontline healthcare providers since clinical staffing shortages expose multidisciplinary teams to burnout, mental exhaustion, and work-related distress (Alansari et al., 2025). These triggers would significantly contribute to high turnover rates, thereby compromising patient safety. Additionally, budget reduction should not target staff education since continuous in-service training enhances healthcare providers’ competency, resulting in regulatory compliance, high staff retention rates, and improved patient outcomes (Choopani et al., 2024) MHA FPX 5006 Operating Budget Proposal – Budget Reduction Proposal.
The healthcare organization aims at increasing its profit margin in the long-term. Thus, an effective operating budget reduction approach must align with the healthcare organization’s desired profit margin. Budgetary allocation can achieve this goal by enhancing operational efficiency and minimizing avoidable costs. Effective allocation of financial resources can further facilitate of high-quality patient care, thereby eliminating additional operational costs associated with adverse treatment outcomes. The organization’s top leadership can adopt recommended approach to reduce line operating budget in the following items by 10%.
Recommendations
Recommended Changes
Results
Reduce other expenses of 474, 578 by 10% = $474, 578
Annual reduction $189,831.4
Reduce Employee Time Off – PTO of $470 by 10% = $47
Annual reduction $ 188
Reduce other contracted services by 10% ($855) = $85.5
Annual reduction $ 342
Reduce supplies of 703 by 40% = $281.20
Annual reduction $ 1,124.80
Total Annual Reduction $ 191,486.20
Justification for Recommendations
Other expenses is an appropriate target for 10% reduction since expenses in this item can be lowered without interefering with delivery of quality care or organization’s operation efficiency. Secondly, employee time off should be reduced by 10% since actual expenses has exceeded allocated budget. Other contracted services should also be reduced by 10% since expenses in this area can be lowered without interfering with operational effiency. Lastly, supplies cost should be reduced by 40% since actual cost is below the budget by more than 40%. Adjustments in the selected cost items would result in total annual reduction of $ 191,486.20.
References
Alansari, A. N., Omri, A. E., & Singh, K. (2025). Staff shortages linked to burnout, depression, and anxiety among outpatient nurses: a cross-sectional analysis at Hamad General Hospital, Qatar.
BMC Nursing
,
24
(1), 1118.
https://link.springer.com/article/10.1186/s12912-025-03758-7
Bello, C., Urman, R. D., Andereggen, L., Doll, D., & Luedi, M. M. (2022). Operational and strategic decision making in the perioperative setting: Meeting budgetary challenges and quality of care goals.
Best Practice & Research Clinical Anaesthesiology
,
36
(2), 265-273.
https://www.sciencedirect.com/science/article/pii/S1521689622000167
Choopani, A., Arabloo, J., Arkian, S. H., & Vatankhah, S. (2024). Identification of the contextual factors influencing the successful implementation of in-service training policies for the health workforce in Iran.
BMC Medical Education
,
24
(1), 1365.
https://link.springer.com/article/10.1186/s12909-024-06336-8
Introduction – MHA FPX 5006 Operating Budget Proposal – Budget Reduction Proposal
Note: The assessments in this course build upon each other, so you are strongly encouraged to complete them in sequence.
In this assessment, you will put your newly acquired skills to work as you dissect an actual budget and make decisions on where cuts can and must be made. You will use the information that you’ve gathered over the previously to make informed and empathetic decisions about how your limited resources will be spent. You will take into account the information you have from your department heads as well as the information your gathered about current wage scales in your area in an attempt to bring your budget back into line while not sacrificing quality, regulatory compliance, or the welfare of your staff both personally and professionally. This will be a challenging assessment, but one that healthcare leaders are facing every day and one that you will no doubt face in your career. Try to be as realistic as possible in your recommendations, keeping in mind not only the well-being of your organization and customers, but also that most budget cuts in healthcare come from the payroll and there are real-life consequences in those decisions for everyone in your charge.
How can internal benchmarks be used to help identify best practices within an organization?
How might an organization use external benchmarks to measure and monitor performance?
What is a scorecard, and how is it used to track financial performance? MHA FPX 5006 Operating Budget Proposal – Budget Reduction Proposal
You will delve into the various financial reports that you might see in your work as a healthcare leader. You will take them apart and examine the different parts of each report and when and why it would be appropriate. You’ll also look at the different types of financial ratios that you will work with and what important information is gleaned from those ratios as you make decisions about the operations and future of the organization that you are charged with leading.
Finally, you will wrap up this course with the opportunity to learn about investments and financing in healthcare. Oftentimes, healthcare operations are financed by outside entities as our revenue cycle can be very long and accounts payable are not usually collected within 30 days. As a result, we often need to look to outside financing for short-term cash needs. Additionally, our expenses, such as radiology equipment or upgrades to buildings and plant operations, can be much more than we can carry and outside financing is needed. You will have the opportunity for a high-level look at financing those endeavors through business loans and investments.
Overview
You will develop a 10-percent budget reduction proposal for the scenario in the Staffing and Budgeting Dilemmas in Health Care media.
Preparation
Complete the Staffing and Budgeting Dilemmas in Health Care media activity using the Financial Statement [XLSX] document. The scenario in this media introduces you to your department heads and what their specific needs and concerns are regarding the budget. This should influence your decision about priorities and what you may want to avoid when cutting back. In addition, conduct individual research to see what the literature suggests to address this problem.
Instructions
Use the Budget Reduction Proposal Template [DOCX[ to complete your recommendations.
Address the following in the introductory page for this request:
Would you reduce each line item by 10 percent? Why is this the best approach? Also, how do you intend to handle fixed costs with this approach?
Would you select specific line items to reduce by 10 percent? Why is this the best approach? If so, how would you pinpoint which line items to reduce?
Would you put a freeze on all hiring, training, travel, and purchasing? Why is this the best approach?
What other ideas do you have to cut your overall budget by 10 percent without affecting the care that you provide?
Explain how the reduced operating budget aligns with an organization’s target profit margin.
Offer at least one solution to reduce the budget by 10 percent.
These recommendations may include multiple line items and may overlap but should be a separate and distinct option for senior leadership to consider.
For example, in one recommendation, you suggest cutting department heads, reducing food costs, and eliminating bonuses to get you to the magic number. In a separate recommendation, you may suggest reducing overall staffing, eliminating bonuses, and reducing food costs.
Prior to making your recommendations, be sure to review the Staffing and Budgeting Dilemmas in Health Care media, introducing you to your department heads and what their specific needs and concerns are regarding the budget. This should influence your decision about priorities and what you may want to avoid when cutting back.
Do some research to see what the literature is suggesting to address this problem.
Be sure to include references to at least two scholarly and/or authoritative sources in your operating budget proposal. Follow current APA guidelines for in-text citations and references.
Additional Requirements
Your assessment should also meet the following requirements:
Written communication: Writing is clear, logical, succinct, and free of errors that detract from the overall message.
Length: 3–4 pages including introduction and summary. Provide 1–2 pages for each recommendation, plus a title page and reference pages.
Font and font size: Times New Roman, 12 point.
Title page: Include a title page in APA format as part of your operating budget proposal.
Citations and references: Include references to a minimum of two current scholarly and/or authoritative sources. Current means no more than five years old.
APA format: Use APA format for the title page, proposal, citations, and references. For an APA refresher, review the Evidence and APA section of the Writing Center.
Competencies Measured
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and rubric criteria:
Competency 1: Develop financial strategies to address dynamic environmental forces.
Explain reducing each line item by 10 percent.
Explain selecting specific line items to reduce by 10 percent.
Recommend three strategies to reduce operating budget due to shortfalls in an organization’s financial performance.
Competency 3: Develop a budget that integrates organizational improvements with sound financial analysis.
Explain putting a freeze on all hiring, training, travel, and purchasing.
Explain how the reduced operating budget aligns with an organization’s target profit margin.
Competency 4: Communicate in a manner that is scholarly, professional, and consistent with expectations for professionals in health care administration.
Write a clear, logical, and succinct operating budget proposal that is free of errors in grammar, punctuation, and spelling.
Format citations and references using the APA style.
Actual
Monthly
Variance
Month 1
Month 2
Month 3
Budget
Mo 3 to budget
Medicare-Revenue
Medicare A
67,861
40,297
21,315
89,300
(67,985)
Contr-Medicare A
(47,784)
(28,570)
(15,124)
–
(15,124)
Contractual PT-Medicare A
18,304
10,311
4,976
–
4,976
Contractual OT-Medicare A
17,289
9,680
4,715
–
4,715
Contractual SLP-Medicare A
11,809
6,451
3,540
–
3,540
Contractual NTA-Medicare A
21,692
11,065
5,968
–
5,968
Contractual NUR-Medicare A
51,045
22,433
11,188
–
11,188
Contractual Adj-Sequestration Part A
–
–
(308)
(797)
489
Contractual Adj-Part A Crossover/MXA
(2,865)
(1,895)
(2,161)
(3,600)
1,439
VBP Withhold-Medicare
–
–
–
(1,786)
1,786
VBP Incentive-Medicare
–
–
–
1,072
(1,072)
–
Total Medicare-Revenue
137,351
69,772
34,109
84,189
(50,080)
–
Managed Care-Revenue
–
Managed Care
67,341
48,031
48,793
64,991
(16,198)
Managed Care-Capitation
15,600
10,800
10,800
4,695
6,105
Contr-Managed Care
8,417
(980)
(6,719)
–
(6,719)
Contractual PT-Managed Care
3,090
4,700
4,623
–
4,623
Contractual OT-Managed Care
2,886
4,357
4,236
–
4,236
Contractual SLP-Managed Care
1,445
1,489
1,495
–
1,495
Contractual NTA-Managed Care
5,063
7,005
3,094
–
3,094
Contractual NUR-Managed Care
5,301
7,545
5,679
–
5,679
Contractual Adj-Sequestration Mgd Care
–
–
(247)
–
(247)
–
Total Managed Care-Revenue
109,143
82,947
71,754
89,686
(17,932)
–
Medicaid Revenue
–
Medicaid
578,814
723,362
654,314
863,341
(209,027)
Contr-Medicaid
(22,794)
(27,917)
(26,901)
–
(26,901)
–
Total Medicaid-Revenue
556,020
695,445
627,413
863,341
(235,928)
–
–
–
Medicaid Mgd Skilled-Revenue
–
Managed Medicaid Skilled
8,148
9,021
8,730
12,653
(3,923)
Contractual-Managed Medicaid Skilled
(309)
(342)
(331)
(351)
20
–
Total Medicaid Mgd Skl-Revenue
7,839
8,679
8,399
12,302
(3,903)
–
Hospice-Revenue
–
Hospice
15,423
32,010
44,760
17,821
26,939
Contr-Hospice
(2,057)
(1,213)
(2,765)
–
(2,765)
–
Total Hospice-Revenue
13,366
30,797
41,995
17,821
24,174
–
Prior Year Revenue Adjust
(2,298)
(514)
(2,481)
–
(2,481)
Implicit price concessions
(2,529)
800
(3,456)
(10,131)
6,675
–
Total Other Revenue
16,491
11,903
5,667
(10,131)
15,798
–
Total Revenue
840,210
899,543
789,337
1,057,208
(267,871)
–
–
Nursing Admin
–
Salaries & Wages
22,183
16,663
19,007
24,266
5,259
Salaries & Wages OT
4,105
2,863
2,784
–
(2,784)
Bonus-Vacant Shift
4,635
5,103
5,279
–
(5,279)
Bonus-Sign-on
987
1,356
2,365
–
(2,365)
Bonus-Other
1,507
1,643
1,473
–
(1,473)
Employee Time Off – Vacation
294
534
863
1,462
599
Medical Director
5,000
5,000
5,000
5,000
–
Pharmacy Consultant
1,467
1,531
1,368
1,117
(251)
Travel – Auto Expenses
21
1,016
462
79
(383)
–
Total Nursing Admin
40,199
35,709
38,601
31,924
(6,677)
–
Nursing
–
Salaries & Wages-Registered Nurse
26,558
28,607
33,011
34,068
1,057
Salaries & Wages-Licensed Practical Nurses
22,192
28,816
21,343
40,967
19,624
Salaries & Wages-Certified Nurses Assistant
64,324
80,383
69,369
94,150
24,781
Salaries & Wages-Certified Medical Aides
7,796
7,060
17,193
13,965
(3,228)
Salaries & Wages-Nurse Aide in Training
324
1,856
7,548
–
(7,548)
Salaries & Wages-Nurse Unit Manager
9,652
10,417
11,415
11,493
78
Salaries & Wages OT-Registered Nurse
14,779
17,812
15,632
9,194
(6,438)
Salaries & Wages OT-Licensed Practical Nurses
16,669
30,318
14,765
17,631
2,866
Salaries & Wages OT-Certified Nurses Assistant
16,106
31,265
12,638
4,509
(8,129)
Salaries & Wages OT-Certified Medical Aides
1,192
3,576
3,345
–
(3,345)
Salaries & Wages OT-Nurse Aide in Training
1
–
–
–
–
Salaries & Wages OT-Nurse Unit Manager
2,290
2,432
3,074
–
(3,074)
Bonus-Vacant Shift
40,244
86,060
54,588
–
(54,588)
Bonus-Referral
–
1,571
286
–
(286)
.
Bonus-Sign-on
2,357
4,178
7,714
–
(7,714)
Bonus-Other
4,589
(245)
9
–
(9)
Employee Time Off – Vacation
4,896
3,230
5,901
14,667
8,766
Contracted Pool Nursing Services
47,954
53,789
57,359
–
(57,359)
Equipment Repairs/Maintenance
–
–
–
42
42
Minor Equipment
457
911
776
1,197
421
Waste Disposal Services (Medical)
232
349
340
200
(140)
Recruiting Expense
246
256
236
27
(209)
Other Contracted Services
18
18
18
5
(13)
Forms
269
157
74
29
(45)
Supplies
405
240
398
285
(113)
–
Total Nursing Expense
283,550
393,056
337,032
242,429
(94,603)
–
–
Administrative
–
Salaries & Wages
27,952
35,039
27,810
25,768
(2,042)
Salaries & Wages OT
4,192
5,255
4,171
350
(3,821)
Bonus-Vacant Shift
1,000
250
475
–
(475)
Bonus-Other
1,200
2,500
750
–
(750)
Employee Time Off – PTO
652
674
490
1,524
1,034
Equipment Rental
355
355
355
246
(109)
Equipment Repairs/Maintenance
–
–
–
63
63
Minor Equipment
425
–
–
75
75
Telephone
2,098
2,924
1,793
2,068
275
Auditing Fees
–
720
720
420
(300)
Legal Fees
3
61
6
1,062
1,056
Marketing and Promotion
209
141
(12)
352
364
Recruiting Expense
3
–
129
225
96
Other Contracted Services
1,768
1,543
1,757
2,087
330
Payroll Processing Fees
461
92
99
141
42
Postage and Freight
258
344
97
120
23
Supplies
1,199
605
256
428
172
Licenses and Fees
2,797
2,797
3,348
4,368
1,020
Sales and Use Tax
835
886
219
1,140
921
Travel – Lodging
–
582
–
115
115
Travel – Meals & Entertainment
–
158
337
7
(330)
Auto Repairs and Expense
8
8
8
667
659
Continuing Education/Seminars
–
–
–
133
133
Dues and Subscriptions
1,145
1,150
1,183
1,027
(156)
Employee Benefits – Other
–
–
124
133
9
Employee Recognition
157
77
171
46
(125)
Pay Card Rebates
–
–
–
–
–
Uniforms
743
–
–
–
–
Auto Insurance
299
299
299
299
–
Insurance – Other
–
720
–
159
159
–
Total Administrative Expense
47,759
57,180
44,585
43,023
(1,562)
–
Dietary
–
Salaries & Wages
23,017
25,271
24,213
22,638
(1,575)
Salaries & Wages OT
5,702
6,040
5,881
332
(5,549)
Bonus-Vacant Shift
1,061
(232)
–
–
–
Bonus-Other
–
(2)
152
–
(152)
Employee Time Off – PTO
602
647
409
1,516
1,107
Dishes and Utensils
2,257
44
254
86
(168)
Food Cost
15,000
15,000
15,000
15,000
–
Equipment Rental
243
243
250
241
(9)
Equipment Repairs/Maintenance
594
–
–
208
208
Minor Equipment
557
1,149
455
143
(312)
Supplies
1,476
195
242
86
(156)
–
Total Dietary
50,509
48,355
46,856
40,250
(6,606)
–
Laundry & Housekeeping
–
–
Laundry
–
Salaries & Wages
8,377
8,656
8,377
8,100
(277)
Salaries & Wages OT
1,256
1,298
1,256
332
(924)
Bonus-Vacant Shift
1,061
(232)
–
–
–
Bonus-Other
–
(2)
152
–
(152)
Employee Time Off – PTO
602
647
409
1,516
1,107
Supplies
26
32
45
38
(7)
–
Total Laundry
11,322
10,399
10,239
9,986
(253)
–
Housekeeping
–
Salaries & Wages
12,566
12,984
12,566
11,850
(716)
Salaries & Wages OT
1,885
1,947
3,029
1,777
(1,252)
Bonus-Vacant Shift
1,061
(232)
–
–
–
Bonus-Other
–
(2)
152
–
(152)
Employee Time Off – PTO
602
647
409
1,516
1,107
Linens and Bedding
–
244
–
86
86
Minor Equipment
74
56
60
35
(25)
Supplies
123
178
165
143
(22)
–
Total Housekeeping
16,311
15,822
16,381
15,407
(974)
–
–
Plant Operations & Maintenance
–
Salaries & Wages
5,201
5,997
6,952
5,252
(1,700)
Salaries & Wages OT
609
328
1,602
550
(1,052)
Employee Time Off – PTO
176
165
180
470
290
–
–
Equipment Rental
76
143
198
83
(115)
Equipment Repairs/Maintenance
77
373
77
422
345
Minor Equipment
281
477
1,041
308
(733)
Building Repairs & Maintenance
2,569
5,357
3,053
729
(2,324)
Grounds Repairs & Maintenance
553
553
1,340
643
(697)
Supplies
565
134
386
703
317
Travel – Auto Expenses
20
25
17
2
(15)
Electricity
5,408
5,142
3,858
4,017
159
Natural Gas/Heating Oil
2,354
2,300
2,305
1,725
(580)
Pest Control
1,329
546
577
573
(4)
Waste Disposal Services (Routine)
691
567
567
557
(10)
Water and Sewage
5,107
8,622
7,384
4,813
(2,571)
Other Contracted Services
2,404
18
18
826
808
–
Total Plant Operations
21,434
24,257
29,537
21,673
(7,864)
–
Rehab
–
Salaries & Wages
15,812
17,168
15,142
13,963
(1,179)
Salaries & Wages OT
1,312
848
2,247
75
(2,172)
Bonus-Vacant Shift
1,357
357
1,276
–
(1,276)
Bonus-Referral
775
–
–
–
–
Bonus-Other
1,357
347
875
–
(875)
Employee Time Off – PTO
495
491
1,502
1,166
(336)
Travel – Auto Expenses
45
29
67
57
(10)
–
Total Social Services
21,153
19,240
21,109
15,261
(5,848)
–
–
Pharmacy
–
Pharmacy-IV
1,100
764
1,357
462
(895)
Drugs Non-Chargeable OTC
2,309
1,630
1,758
1,608
(150)
Legend Drugs
19,571
14,579
18,764
11,358
(7,406)
–
Total Pharmacy
22,980
16,973
39,953
13,428
(26,525)
–
–
–
Ancillary Services
–
–
Rehab
–
Minor Equipment
112
91
125
57
(68)
Supplies
1,047
194
436
143
(293)
–
Total Rehab
1,159
285
561
200
(361)
–
Medical Supplies
–
–
Total Medical Supplies
1,188
1,335
1,426
570
(856)
–
Laboratory
–
–
Total Laboratory
370
479
596
399
(197)
–
Respiratory Therapy
–
Equipment Rental
1,304
1,565
1,169
884
(285)
Other Contracted Services
1,204
1,456
970
855
(115)
–
Total Respiratory
2,508
3,021
2,139
1,739
(400)
–
–
Radiology
–
–
Total Radiology
294
792
1,561
1,140
(421)
–
–
–
–
Other Ancillaries
–
Blood Glucose Testing Exp
313
578
47
285
238
Oxygen and Oxygen Supplies
3,883
2,375
818
1,283
465
Transportation Services
1,057
16,557
6,400
2,565
(3,835)
–
Total Other Ancillaries
5,373
19,510
7,265
4,133
(3,132)
–
–
Medical Records
–
Salaries & Wages
2,936
3,282
3,154
2,821
(333)
Salaries & Wages OT
353
534
229
56
(173)
Bonus-Vacant Shift
75
450
275
–
(275)
Employee Time Off – PTO
120
125
120
257
137
Forms
35
65
78
43
(35)
Supplies
27
43
76
54
(22)
–
Total Medical Records
3,546
4,499
3,932
3,231
(701)
–
Central Supply
–
Salaries & Wages
2,253
2,269
2,467
3,130
663
Salaries & Wages OT
338
340
370
469
99
Employee Time Off – PTO
122
176
198
286
88
Disposable Briefs Expense
2,883
5,325
4,414
3,278
(1,136)
Supplies
6,377
10,005
4,460
2,850
(1,610)
Total Central Supply
11,973
18,115
11,909
10,013
(1,896)
–
–
Property Taxes
–
Personal Property Tax
367
367
367
367
–
Real Property Tax
3,708
3,708
3,708
3,708
–
–
Total Property Taxes
4,075
4,075
4,075
4,075
–
–
Other Expense
–
Cable TV
2,557
2,558
2,663
2,048
(615)
Total Other Expense
2,557
2,558
2,663
2,048
(615)
–
Workers Comp Expense
4,200
4,199
4,199
4,197
(2)
Group Health Expense
9,192
2,971
9,689
9,452
(237)
–
Total Expenses
560,493
254,065
622,399
474,578
(147,821)
–
EBITDA
279,717
645,478
166,938
582,630
(415,692)
MHA FPX 5006 Operating Budget Proposal – Budget Reduction Proposal
–
–
–
10% reduction goal is $58,000 per month
Leave a Reply