› Understand your institution’s approach to budgeting for payroll taxes and fringe benefits. Some hospitals include the cost of payroll taxes and benefits in


the average rate of pay. Fringe benefits typically include health insurance, group term life insurance coverage, tuition reimbursement, childcare reimbursement, cafeteria plans, employee discounts, and other similar benefits. Other hospitals define these expenses separately as a direct cost to the department. Still others include benefits as an indirect cost to the department.


› Know the standard salary increase (if any) built into your facility’s overall salary budget and its effect on your department’s salary expenses. For example, if the


hospital budget allows for a 2% to 3% salary increase, how does implementing that increase affect your department’s budget?


When you anticipate salary increases beyond the facility’s standard range for raises, you will also need to account for that expenditure in your budget and be prepared to justify the variance. If you anticipate no changes to your business, look at your past history and the impact of performance increases to determine your salary expense for the upcoming fiscal year. However, if your business is likely to change in ways that will affect staffing needs, you must make additional calculations. For example, suppose the facility is adding another patient tower. How many and what types of positions will you need to include in your budget to meet the patient and clin- ical services needs of those units? If the tower is farther away from food services, how will that impact your delivery time? Will you need additional delivery staff to ensure patients receive food in a timely manner? Other factors that could affect staffing include the implementation of a new menu model, such as room service, or the adoption of an electronic health record (EHR) system that will require additional staff training hours and possibly overtime during implementation.


Food or Tray Costs


Food or tray costs may or may not be in your scope of budgetary responsibility. Even if they are not, you should understand how to budget for changes in this cat- egory. Tray cost is affected by several factors, including an inflation factor for the cost of food and paper products, and projected patient days for the upcoming fiscal year. Also, remember that fuel costs, environmental conditions, and other factors can substantially affect food cost, as has been the case in recent years for many commodities including meat, milk, corn, and wheat (and the products made from them). Staying abreast of current trends in food cost can help you more accurately estimate costs for the coming fiscal year. Also, many health care systems are part of group purchasing organizations, which can provide data regarding projected per- centage increases in ingredients for the coming budget year.


Nourishment Costs


Nourishment costs include the costs for juice, milk, gelatin, and other between-meal snacks for patients. Whether your department incurs nourishment costs or transfers them to the nursing units, you will need to estimate the cost for the next fiscal year’s budget. The factors to consider are the same as for food and tray costs: the inflation factor for food; projected patient days; and any factors that could potentially affect labor, such as the relocation of nursing units or facility expansion.


CHAPTER 9: Budgeting and Managing Finances 177


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