NR 630 Budget and variance calculation
Calculating a Salary Budget
1. The salary budget is established by determining the number of full-time-equivalent (FTE) staff needed for the fiscal year. To prepare a salary budget, the first step is to figure out the volume of work for the coming year...
nr 630 budget and variance calculation calculating a salary budget 1 the salary budget is established by determining the number of full time equivalent fte staff needed for the fiscal year to p
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NR 630 Budget and variance calculation
Calculating a Salary Budget
1. The salary budget is established by determining the number of full-time-equivalent (FTE) staff
needed for the fiscal year. To prepare a salary budget, the first step is to figure out the volume
of work for the coming year.
2. Workload: The amount of work performed by a unit/department is referred to as the workload. It
can be measured in a variety of ways, such as the number of patient days, number of
outpatient visits, and number of operations per day. Each cost center determines the measure
that is most appropriate for its unit of service.
3. Units of service that will be provided the coming year. This is usually based on the past year’s
number of units, plus a predicted incremental increase for the coming year, based on
population increases and needs.
4. Hours-per-patient-day (HPPD) is the number of hours of nursing care delivered per patient. To
calculate HPPD, the total-care-hours required for the year is divided by the number of
patient days.
Budgeting is based on a patient-classification system, which is the amount of resources used
related to different levels or categories of patient acuity. For example, let’s say that a certain
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,cardiac-observation unit is forecasting 12,500 patient-days for the coming year. Assume that
this unit classifies these 12,500 patients into one of four categories: category one being fewest
resources used or lowest acuity; and category four being most resources used or highest acuity
patients. Assume that, for category one, the average-patient-care-hours equals 1.5 hours of
nursing care provided to these patients during a 24-hour period; for category two, 5.0 care
hours; for category three, 8.0 care hours; and, for category four, 12.0 hours of nursing care is
provided to these patients during a 24-hour period.
2
, Calculating Hours Per-patient-day (HPPD)
1. Calculate the total-care-hours required for the year:
# of Patient Days X Average Care Hours/24 Hours = Total Care
Hours Cat 1 1,000 pts 1.5 = 1,500
Cat 2 2,500 pts 5.0 = 12,500
Cat 3 4,000 pts 8.0 = 32,000
Cat 4 5,000 pts 12.0 = 60,000
12,500 106,000 total-care-hours needed
2. Total-Care-Hours Required for the Year / Number of
Patient Days 106,,500 = 8.48 care hours
Thus, for this cardiac observation unit, an average of 8.48 nursing-care hours are provided to patients
per a 24-hour period. Once the manager has the workload forecasted, the next step is to determine
the
Staff requirements for the unit. Staff mix varies from hospital to hospital and may consist of RNs, LPNs,
and aides. The manager needs to determine how many full-time equivalents (FTEs) will be required to
provide patient care.
One FTE is equivalent to 2,080 hours per year (40 hours per week times 52 weeks). A 0.9 FTE is
equivalent to 36 hours per week; a 0.6 FTE is equal to 24 hours per week. If the manager calculated
FTE requirements by dividing total-care-hours by 2,080 to determine the number of FTEs for the
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