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Operating Budget

by | Mar 26

All files are attached, including instructions

NOTE:  You will be performing this assignment in Excel.  See attached file to get you started.  Let Excel do the work for you.    

Each of the budget reports (2017 and 2018) are worth 65 points each.  Points are awarded on the accuracy of the calculations and the appropriate use of the information provided.  

You are the financial manager at Savalife Physician Group.  It is budget time.  You have to create the operating budget for the Board meeting in two weeks.  You have the following information:

In 2017 you had the following breakdown of office visits.  

Category

# of visits

New Patients

Level 1

100

Level 2

200

Level 3

150

Established Patients

Level 1

10440

Level 2

1950

Level 3

660

Initial Inpatient Consult

20 minutes

900

40 minutes

400

55 minutes

200

Office Consult

30 minutes (level 2)

2000

40 minutes

1500

60 minutes

1800

Savalife bases their operating income on the Price List of Rumford Hospital.  See materials in Week 6 materials.  

You are to create an operating budget for 2017 based on the following information (revenues and expenses).  Use the Excel file provided to create the budget.

Information for 2017

  1. Calculate the gross revenue that was generated by Savalife Physician Group in 2017. 
  2. Assume that 9% of the revenue was uncollected due to bad debt.
  3. Calculate the net revenue for Savalife for 2017.  
  4. There are 4 physicians on staff.  
    1. Two make a salary of 198,000 per year
    2. Two make a salary of 220,000 per year
  5. There are 7 staff members
    1. 1 office manager makes a salary of 60,000 per year
    2. 4 RNs make a salary of 55,000 per year
    3. 3 clerical staff make a salary of 37,000 per year
  6. Supplies are based on office visits only (new and established patients).  The supply cost per visit is $23.50.
  7. You pay professional dues for the nurses and the physicians.
    1. Nurses:  $180 per year
    2. Physicians:  $250 per year
  8. Rent for the building and furniture is 15,600 per month
  9. Utilities, phone and the internet cost 5000 per month
  10. Payroll taxes are 20% of the total salaries.

Now that you know the activity for 2017, you must prepare a proposed budget (revenues and expenses) for 2018.  Here are the assumptions for 2018.

  1. Your number of visits and consults will remain the same
  2. 35% of your total revenue comes from Medicare
  3. Because you met your value based goals, Medicare will increase your payment by 1% for Medicare patients.
  4. You have improved your collections and therefore, your allowance for doubtful accounts has decreased to 7.5%
  5. The physicians will receive a 5% raise
  6. Your manager will receive a 2% raise
  7. Your nurses will receive a 3% raise
  8. Your Clerical staff will receive a 3.5% raise
  9. Rent will increase to 16000 per month
  10. Payroll taxes are still 20%, but are based on the new total salaries (based on the raises).
  11. All other numbers remain the same.

Make sure to use the attached Excel file to enter in your formulas and results.  Let Excel do the work for you.  

Additional Questions:

  1. How does the 2017 operating budget compare to the 2018 budget?  (10)
  2. If you are the business manager, what areas do you feel you are doing well in?  What areas need to be monitored for improvement? (10)
  

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