NHS FPX6216 Assessment 4 Capital Budget Healthcare
Assessment 4: Capital Budget Healthcare
Month Date, Year
Capital Budget Healthcare
In today’s health care environment, the purchase of captain equipment is crucial for meeting needs. Organizational require better technologies to improve their outcomes and the need for a capital budget also increases because investing in capital budget and technology is anon ongoing process to create a safe and pleasant work environment. In this report, focus is given on the development of a capital budget to improve financial outcomes to benefit patients, nurses, and the organization (Amasova, 2019). Since many leaderships nurses work with operating budgets, but will also have input into capital budgets. There is a difference between the nature of capital budget and the operating budget. It does not relate to the purchase items that are often referred to as big-ticket items. For instance, the capital budget plays a crucial role in the organization in terms of purchasing land for the future site of a new outpatient surgical center. The formation of a new building or build-out for renovation of an already existing building also comprises the capital budget (Gyasi, 2018).
The organization wants to replace the old equipment and it is vital for the nurses and financially-savvy managers to for a capital budget. While for health care providers, patient care and safety are priorities, the organization should work from a business standpoint to follow a model to thrive financially.
Capital Acquisition of the Organization
Being a nursing leader in the healthcare organization is both challenging and rewarding. Leading nurses have to play role to play in developing a capital budget to improve care at some level. Moreover, the healthcare environment in the 21st century is changing quickly day by day with more nursing leaders require building financial management skills and budgeting skills (White, 2021). This will make sure that they are able to handle large capital expenditures further the mission and goals of the organization. This will enhance the staff productivity by improving the positive environment of the organization. This means that requesting a renovation of the nurses’ lounge as the major purchase of the capital budget is necessary in these post-COVID-19 days. The current plan is being shared with the other fellow learners and workers in the nursing and management department. The collaboration with other staff members and executive is vital to develop criteria for the healthcare organization to measure the return of the capital investment. The capital budget will be created for the renovation in the current month to help the management get better financial insights.
For example, capital investments of the firm include expansion of the already offered services at the medical healthcare facility. For instance, our organization offers imaging services to the patients and that includes providing radiology services to many patients. More patients have been served lately by offering MRI (Medical Resonance Imaging) services and ultrasound. This means that the hospital is expanding its radiology services to include more sophisticated kinds of imaging lately in order for the customers to wait less and avail more health benefits.
Moreover, some mandatory replacements are also needed in the hospital. More often than not, the leaders have top priorities for our organization that are necessary replacement projects and they need replacement of existing systems and facilities (White, 2021). The purpose of this kind of replacement is due to the fact that a service may or may not be fully functional or safe to use in the current time. The evidence-based research also shows that it is not up to date or in compliance (Gyasi, 2018). The hospital is in dire need of replacing its existing electronic medical record system. The reason is that the system is not significantly in compliance with or according to the standards of brand-new state guidelines. This means that technology is a vital component of healthcare and must be updated regularly or replaced that comprises the capital budget for the tech-related equipment. Therefore, the hospital needs a substantial investment in the technology to immediately prioritize it over other lower cost items.
Moreover, the hospital also has to make decision to expand into new kinds of services that were not offered in the past. The supervisors have found that more referrals outside the hospital have been made lately for behavioral health. Patients revealed that they like to get primary care in our hospital to improve their mental health. Therefore, Dr. John and the hospital management slowly need to make a capital investment by expanding into the realm of behavioral health.
The Need for Capital Acquisition Justification
According to Amasova (2019), the capital acquisition is crucial for a healthcare organization for competing the projects related to improving healthcare organization. This will increase the vital amount of capital investment. This is why understanding and discussing capital expenditures is crucial here (Amasova, 2019). This will make the capital investment more meaningful and crucial and beneficial for the healthcare organization. As Dr. John has been the director of finance as well in our organization, he plays a pivotal role along with leading nurses to make the capital decisions to improve financial spending and investments. Dr. John recalls that these capital projects look more like business ventures. This means that these capital expenditures can play a role in the quality enhancement and the extent of quality care that our nurses and physicians are able to offer to the customers. As John learns, there are different categories of capital projects in our organization described above.
Moreover, capital budgeting analysis is also crucial to address the predicament of strategic long-standing investment decisions (David, 2018). The capital acquisition is necessary that will be supported by the budget that will analyze and evaluate the resources allocated to the venture. This task will help to carry out an appropriate capital budget for $1 million for the new research on cancer.
Capital Budget of the Organization
The healthcare organization has been considering investing a new $ 1million cancer research wing for the next five years; this means that the company will have to make the initial investment of more than one million that will be invested at the start of the first year. This amount is purchased to buy the machinery and equipment for the new facility and that will also help to meet other operational expenses. The project can have a useful life of 10 years as other cash outflows in the next one to five years are expected to be $19,000 per year.
In the next five years, that company’s expected cash flow is $40,000 per annum and the company is assuming that these cash flows are after deducting the tax. Moreover, it is also assumed that the customers. residue value for the machinery can amount to 0 and the required rate of return can become 7%. The company is expected to make the capital investments and can generate a positive net present value of $654,980.32. Hence, the viable strategy is to provide the computation of the net present value for the new center.
The Process of Costs Calculation
The following table shows that calculations of costs according to the above-mentioned budget for the first year.
Discounting factor a10%
Present Value of Net Cash flows
The net present value for the new care center is provided in the table that remains almost stable over the years. The data reveals that the discounted payback period approach will be viable in this period because it will help to compute the time required to recover the initial cash outflows (Beredugo, 2019). These cash flows will come from the discounted future cash inflows and the professionals will cumulate the present value of cash inflows till they become equal to the starting investment. Therefore, following this method is good that takes into account the time value of money.
Plan for Budget Management
Sound financial and budget planning is the most important and imperative for the healthcare organization. The organization needs to follow the best practice for a capital budgeting process. Since the goal is to stop wasting funds in the future to make more investments in the research center, the company has developed a does good financial planning for them to make the best decisions. The company must conduct an ongoing hospital capital analysis and the officers and financial experts must play a critical part in ensuring the positive rates of return on investment. For example, the current trends in modern healthcare are for shifting the focus of professionals and nurses on monetary allocation of resources and otter budget categories (Alok, 2022). This means that the organization must conduct a fine-tuned examination of all finance and budget-related areas to ensure the operational efficiency.
Moreover, the company must also focus on using the stand-by electric power generators to enhance the operation levels of the hospital and to reduce power expenses. Splitting the shifts of nurses and orderly staff will help to reduce hiring many more workers. This way, the hospital can save more funds and use them to invest in technology upgrades and staff trainings.
How a capital acquisition will affect the financial health of an organization
According to Alleyne (2918), the quality of finance and capital matters significantly because the organization needs to enhance the governance and the delivery of healthcare services to align them better with the mission of their organization. Instead of having a wasteful fragmentation, there is a need for creating more healthy partnerships to harness the power of monetary policy. This will ensure that the organization will have better chances of improving its bank ratings… Since after the COVID-19, the particular era represents that enough money is not going to be enough and the cost of inaction or not strategizing is more than taking a solid action towards improving the financial health of the organization. The hospital found a wakeup call after the COVID-19 pandemic to change and improve its current financial strategies. The cumulative financial costs of the pandemic have impacted the firm negatively because it has lost outputs and also lost valuable employees’ lives. Therefore, without a radical redirection, achieving the goal of financial stability and investment cannot create a fiscal space for the hospital.
Alleyne, P., Armstrong, S., & Chandler, M. (2018). A survey of capital budgeting practices used by firms in Barbados. Journal of Financial Reporting and Accounting.
Amasova, N., & Mikesell, J. L. (2019). PUBLIC CAPITAL BUDGETING AND MANAGEMENT: THE CONCEPT AND ITS APPLICATION IN THREE IMPORTANT FEDERATIONS. Public Finance & Management, 19(3).
Beredugo, S. B., Azubuike, J. U., & Okon, E. E. (2019). Comparative analysis of zero-based budgeting and incremental budgeting techniques of government performance in Nigeria. International Journal of Research and Innovation in Social Science, 3(6), 238-243.
David, Y., & Jahnke, E. G. (2018). Planning medical technology management in a hospital. Global Clinical Engineering Journal, (1), 23-32.
Gyasi, M. (2018). Performance assessment and capital budgeting based on performance. Benchmarking: An International Journal.
White, W. D. (2021). The “Corporatization” of US Hospitals: What Can We Learn from the Nineteenth Century Industrial Experience? In The Corporate Transformation of Health Care 2 (pp. 33-61). Routledge.