Running head: PREPARING AND MANAGING A CAPITAL 1

Preparing and Managing a Capital Budget

Kathy Forsyth

Capella University

MSN-FP6216 Advanced Finance and Operations Management

Preparing and Managing a Capital Budget

August, 2020

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Preparing and Managing a Capital Budget

Healthcare organizations need to prepare for ongoing changes with delivery of

healthcare, increasing quality care, reducing costs, and developing ways to increase revenue

while reimbursement rates are being decreased. Healthcare organizations need to identify

problem, address the source of the problem, and then create plan to address the problem.

Healthcare systems need to closely monitor the costs of labor, expected labor shortages,

purchasing physician practices, implementing new technology, and decreasing reimbursements

rates (Brown & Hansmann, 2018). The clinical manager needs to provide what new equipment is

needed or why building updates are needed and why to be able to prepare a capital budget

proposal. The proposal should include possible funding sources and note the benefits requested

changes. The 35-bed unit at Kershaw has recently went under a buy out and many nurses have

left the facility. This high turn over rate has resulted in decreased patient satisfaction with care,

low staff morale, unsatisfactory work environment and has impacted the operating budget. The

clinical manager of the unit has created a proposal to address quality improvements to improve

the staff lounge area and improve the staff work areas. This is one step towards improving staff

job satisfaction. Providing clean and concise communicate while working the with finance

department, administration, and key stakeholders the manager is allowing time for feedback and

approval.

Capital Acquisition
Using a multi-step approval for capital acquisitions is needed to identifying the issues,

determine available funding, decide on an approach, and how this is beneficial for the unit

(Guidance for Capital Strategies on Mergers & Acquisitions, 2015). A collaborative meeting

between the manager, financial advisers, administrators, and other staff will determine the best

approach for the proposal and provide decision on budget of the proposed refurbishment of the

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staff lounge and work area. The clinical manger will present the project to leadership to gain

their support, create timeframe and goals for the project, monitor progress, and maintain

effective communication to ensure leadership buy-in and provide updates on the project

(Rice, Ward, & Burnett, 2015). Additional factor will need to be considered on future expected

unit needs to improve working conditions and staff morale which will result in higher patient

satisfaction rates.

Justification of Capital Acquisition

Capital purchase are used to improve the financial outcomes during the process or

merging or purchasing a new facility. The proposed capital plan to update the staff lounge and

work areas is justified as this will lead to improved employee satisfaction and performance,

thereby improving patient care and satisfaction. There are pros and cons to any capital plan

which should be addressed as well. The benefit of the renovation of the lounge and workers will

improve staff performance, morale, and satisfaction. This will in turn improve employee

retention, improved patient care, outcomes, and satisfaction. This is a win-win for the facility.

One con of this project is this the best use of allocated resources and funds for the facility. An

alternative plan would be a pay increase for staff however this is a short-term fix as there will

still be issues with the staff lounge and workstations.

Capital Budget
Creating a capital proposal can be difficult as the plan will require close attention to

details, budget limitations, and unexpected expenses. The clinical manager will need to plan a

meeting with the finance manager, review the previous and proposed next years budget to

address the expected need for new equipment or other renovations. Before creating the proposal,

the manager will need to collect and review data relevant to the proposal. Then the manager

would plan the services needed, obtain plan approval, start date of the project, monitor the

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 PREPARING AND MANAGING A CAPITAL
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budget, and adjust as needed (Rundio, 2016). Some areas that will remain uncertain is the costs

of unexpected renovations, such as mold, water damage, termites, etc. The manager will have to

work closely with the renovation team to address any unexpected issues that arise.

Procedures for Capital Costs

The budge will include determining the cost of the proposed renovations by creating a

plan to determine funding, integrate and prioritize other possible current and future needs

(McGrath, 2019). Clinical managers should have a list of materials, equipment, and expected

labor costs for the budget. The manager will be informed on the projects and anticipate possible

questions administration may have and be ready to answer the questions. The budget should have

an allowance for unexpected expenses, this provides a cushion in the event there is unexpected

issues that will impact the budget and expected timeframe negatively (Rundio, 2016).

Plan for Budget and Management

The proposal to renovate the staff lounge and workstations on this 35-bed unit will

improve working conditions for the staff, this having a positive impact on staff morale, and

improve patient care and outcomes by December 31, 2020. The plan includes time and attention

to obtain the goal of improving job satisfaction, retention rate, provide a quality and safe

workspace, and ultimately improve patient satisfaction with care being provided. The proposal

will have all relevant date, address costs that may impact current patient care, develop a budge

for the proposal as well as an estimation of ongoing possible expenses related to the project over

the next 5 years (Arduino, 2014).

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Impact of Capital Acquisition on the Financial Health Organization

The proposal to renovate the staff lounge and workstations will improve job satisfaction,

employee retention, which will lead to improved patient care and outcomes. By improving these

spaces and employee morale the expectation will be employee productivity will increase which

will have a positive impact on the budget. There is limited research on how capital acquisitions

may impact the unit’s work environment and how this may impact the organization overall.

Conclusion

By creating a safe place for staff to relax and work the organization will benefit from

happier staff members, higher morale, improved staff retention, and improved patient care.

Capital acquisitions can be challenging to determine what is the best use of the facilities funds

and resources however investing into the unit can and will improve staff morale which ultimately

will reflect in patient care and improved staff productivity.

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References

Arduino, K. (2014). Ripple effects of reform on capital financing. Healthcare Financial

Management, 68(5), 62–67. Retrieved from https://search-proquest-

com.library.capella.edu/docview/1528474846?https://library.capella.edu/login?

url=accountid=27965&pq-origsite=summon

Brown, B. & Hansmann, J. (2018). Five solutions to controlling healthcare’s cost problems.

Financial Alignment and ROI. Retrieved from

https://www.healthcatalyst.com/healthcare-cost-problem-how-to-control-it

Guidance for capital strategies on mergers & acquisitions. (2015). Healthcare Financial

Management, 69(10), SS1. Retrieved from earch-proquest-

com.library.capella.edu/docview/1726463486?pq-

origsite=summon&http://library.capella.edu/login?url=accountid=27965

McGrath, R., & IG Publishing. (2019). Capital project management: Capital project strategy.

New York: Business Expert Press. Retrieved from https://a-cloud-igpublish-

com.library.capella.edu/iglibrary/search/BEPB0000919.html?0

Rice, T., Ward, J., & Burnett, L. (2015). Transforming operational throughput lessons and

successes. Healthcare Financial Management, 69(12), 38-41. Retrieved from

http://library.capella.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview

%2F1752059281%3Faccountid%3D27965

Rundio, A. (2016). Budget development for nurse managers. Reflections on Nursing

Leadership, 42(3), 1–8. Retrieved from https://ebookcentral-proquest-

com.library.capella.edu/lib/capella/detail.action?docID=4862193

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