HOSPITALS TURN TO FLEXIBLE BUDGETS
Mary Wilkes, a senior managing director with Phase 2 Consulting, says that hospitals may have to pay as much as $300,000 to install a flexible budgeting system, but the investment should readily pay for itself by enabling “more efficient use of hospital resources, particularly when it comes to labor.” One of the keys to creating an effective flexible budgeting system is to recognize the existence of multiple cost drivers. Many hospitals frequently use patient volume as a cost driver when preparing flexible budgets; however, other variables can influence revenues and costs. For example, the percentage of patients covered by private insurance, Medicaid, or Medicare, as well as the proportion of uninsured patients all influence revenues and costs. A flexible budgeting system that incorporates patient volume and these other variables will be more accurate than one based solely on patient volume.