It is important to find out what the capital threshold is for your facility. Because


the capital approval process is time-consuming and involves many approval layers, some hospitals find it cost-effective to set the capital budget threshold at the high end. It is important to understand how your institution determines what is or is not a capital expense. Capital budgeting typically involves a 3-year cycle. Thus, for any given budget year, managers will be thinking ahead and planning for the next 3 years.2-4


The


capital budgeting process may occur at a different time of the year than the oper- ating budget process, and purchasing capital equipment generally takes longer and requires more layers of approval than purchasing items in the operating budget. If you need to make a capital request, be sure to gather sufficient data to justify the expenditure and plan for the potential of a long approval process. Because the capital budget typically is ranked by priority, take care to indicate the priority of your request when you submit it—for example, note whether the expenditure is critical to continued or future operations (sometimes called emergency capital), necessary if funds are available, or desirable but nonessential.2-4


Also be ready to


justify cost savings or revenue generation that are likely if the capital budget re- quest is approved. When you purchase capital equipment, you will probably use a bidding or


comparison process where you work with the facility’s supply chain, materials man- agement, or purchasing department to obtain price estimates. During the estimation process, bear in mind that items that cost more to acquire may be less expensive in the long run if they have a lower operating cost, longer life expectancy, or slower rate of depreciation or are more compatible with other equipment that your department uses. To ensure you get the equipment that best meets your department’s needs, be sure to specify to the supply chain department why a particular model or brand of equipment has been selected (eg, compatibility with existing equipment, guar- anteed service contracts, availability, durability, ability to handle projected usage, or safety features). If you are purchasing foodservice equipment, you also need to consider the total cost of ownership. Things to consider in the total cost of ownership are the cost of preventive maintenance, repairs, and the cost of service contracts, any or all of which may add costs to your budget.


Statistics Budget


In smaller organizations, the statistics budget may be embedded in the operating budget process. In a large health care system, it’s important that all departments use the same assumptions when building their individual unit budgets. The statis- tics budget sets the base volume and resource assumption that all units within the organization will use in this process. The primary statistic most clinical nutrition managers will use is patient days; outpatient visits may be another. When looking at the statistics budget, managers should think about how in-


creases or decreases in the number of patient days will affect their operations and how they might be spread over the year. Reviewing previous fiscal years to under- stand seasonal patterns is important.


CHAPTER 9: Budgeting and Managing Finances


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