The Expense Budget The expense budget consists of salary and nonsalary items.
Expenses should reflect patient care objectives and activity parameters established for the nursing unit. The expense budget should be comprehensive and thorough; it should also take into consideration all available information regarding the next year’s expectations. Described in the next section are several concepts and definitions related to the budgetary process in a health care setting.
Cost Centers In health care organizations, nursing units are typically considered cost centers. A cost center is described as the smallest area of activity within an organization for which costs are accumu- lated. Cost centers may be revenue producing, such as laboratory and radiology, or non–revenue producing, such as environmental services and administration. Nursing managers are com- monly given the responsibility for costs incurred by their department, but they have no revenue responsibilities.
In contrast, if managers are responsible for controlling both costs and revenues and if their financial performance is measured in terms of profit (the difference between revenues and expenses), then the manager is responsible for a profit center. Customarily, nursing is not directly reimbursed for its services. As stated previously, nursing costs today are included in the room charge although that may change as methods to match nurses’ skills to patient needs improve.