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Budgeting in Health Care Organizations - Essay Example
Finance & Accounting
Pages 3 (753 words)
BUDGETING IN HEALTHCARE ORGANIZATIONS According to Penner (2004), budgets are descriptions of the amount and sources of volume, or the number of clients or units of a good or service representing outputs as well as the amount and sources of expenses otherwise known as inputs or costs incurred in the process by which the organization produces goods and services (p.65)…
There are numerous other types of budgets such as annual statistics budget and revenue budget and they vary according to their purposes (Gapenski). These budgets can vary across different health care institutions. The reason for this is the diversity of the financial structures, organizational culture and reporting systems of organizations (Finkler and McHugh, 2008, p.171). The process by which health care organizations design and implement budget based on such organizational structure, culture and reporting system determines whether they will achieve budgeted operating margin targets. This is demonstrated in the experience of University of Utah Hospitals and Clinics (UUHC). It was found that the institution's personnel are not knowledgeable on budgeting and finance and that there is no organizational mechanism or aspect of the organizational culture that encourage the education of the staff. As a result, expenses always exceed the budget and what is worse, the extra expenditures are found to be unnecessary (Clark, 2005, p.79). Budgeting, or correct budgeting, is important because it supports the operation of the health care organization. ...