Budgeting for Effective Hospital Resource Management. - book reviews

Healthcare Financial Management, April, 1991 by Shahram Heshmat

Budgeting for Effective Hospital Resource Management

A budget is a plan expressed in quantitiative, usually monetary, terms covering a specified period, typically one year. In a budget formulation process, a program is translated into terms that correspond to the responsibilities of those who are charged with executing them.

The result of these negotiations between department managers and supervisors is a statement of outputs expected during the budget year and the resources to be used to achieve these outputs.

Managers new to the budget process tend to focus on the mechanics of budgeting and overlook the fact that budgeting is an extension of the planning process. This book demonstrates that preparing a budget really is a fine-tuning of long-range planning. The budget formulation process enables healthcare financial managers to quantify their strategic objectives.

The book's first three chapters emphasize that budgeting is a means to an end and a prerequisite to effective management control. The rest of the text identifies information requirements for the budget preparation process. These chapters illustrate how the agreed upon budget is a bilateral commitment: department managers commit themselves to produce the planned output with the agreed amount of resources and their supervisors commit themselves to agreeing that such performance is satisfactory.

The author places budgeting in its proper perspective by emphasizing its five purposes: * To motivate managers to make

plans; * To inform managers what they

are expected to do; * To obtain a commitment from

managers; * To coordinate the separate activities

of an organization; and * To provide a standard to be used

in judging actual performance.

This book is a revision of the third edition of Budgeting Procedures for Hospitals, first published in 1982. It is highly recommended for healthcare department managers, executives, and board members who are involved in budget preparation or oversight.