11 Hospital Budgeting Best Practices to Help You Maximize Efficiency

Hospitals face unique challenges with budgeting today. There is an increasing emphasis on lean healthcare, which according to the Lean Enterprise Institute, “maximize[s] customer value while minimizing waste.” Putting that practice into action isn’t simple.

To help you create a competitive advantage, we’ve paraphrased and rounded up hospital budgeting tips from around the web. Each tip cites one of the four articles we pulled it from.

11 Hospital Budgeting Best Practices

Budgeting shapes a hospital’s annual performance. Hospitals generally budget once a year, so getting it right sets the standard for the year ahead. There are many ways to approach it; these are the 11 tips we believe matter most to maintain and grow your hospital.

1. Always look at the bigger picture.

Understand that the budget concerns the needs and performance of all departments and facilities. Concerns that directly affect the patient experience should be given higher priority than those that do not. (“6 Critical Tips For Hospital Facilities Management Budgeting,” Hepacart)

2. Remove and reduce lighting.

Eliminating unnecessary lights and installing light switches in areas where lights can be turned off during certain hours can both be huge cost savers. And going from regular bulbs to energy-efficient bulbs can save large hospitals a lot of money (sometimes in the hundreds of thousands of dollars), given that lighting accounts for 16% of a hospital’s total energy consumption. (“9 Ingenious Ways to Cut Costs at Your Hospital,” Becker’s Hospital Review)

3. Examine service contracts and coverage levels.

You may be paying more for certain services than necessary. Reviewing your contracts for equipment and service providers, and identifying the right level of coverage for your hospital, is a key cost-saving step. (“5 Tips for Controlling Costs in Hospitals and Biomed Shops,” 24x7 Magazine)

4. Provide thorough explanations for expenditures.

The budgetary demands of your department will ultimately be subject to the approval or disapproval of the finance department. Providing clear explanations of why you’re making a particular budgetary decision and how it will impact overall performance may improve your chances of approval. (“6 Critical Tips For Hospital Facilities Management Budgeting,” Hepacart)

5. Design ways to reduce readmissions.

Cutting readmission rates helps the budget. Readmissions can be costly due to the high costs associated with private health insurers and patients. You can work to reduce readmission rates by making sure patients attend post-acute office visits after being discharged and providing resources to patients to ensure they’re taking the correct steps for their care after discharge. (“10 Ways for Hospitals and Health Systems to Increase Profitability in 2012,” Becker’s Hospital Review)

6. Rework your shipping strategies.

Shipping costs are commonly overlooked in hospital budgeting, yet they could cost large hospitals hundreds of thousands of dollars per year. Reducing these costs will require paying close attention to what the hospital is spending on inbound and outbound delivery services and negotiating costs with vendors. (“9 Ingenious Ways to Cut Costs at Your Hospital,” Becker’s Hospital Review)

7. Improve deficiencies in the emergency room.

ERs and trauma centers face many budgeting issues, one of the biggest being that uninsured patients walk in, receive treatment, and aren’t able to pay for the care. However, the Foundation for Health Coverage Education (as quoted by Becker’s Hospital Review) claims that about 80% of “uninsured patients who come into the ER are eligible for some type of publicly funded program.” Therefore, hospitals should consider helping trauma patients complete these publicly funded health coverage applications, which may subsequently prevent a patient from relying on last-minute emergency care. (“10 Ways for Hospitals and Health Systems to Increase Profitability in 2012,” Becker’s Hospital Review)

8. Maintain a warranty database.

The repair of hospital equipment can be very costly. To ensure that covered equipment is not unintentionally repaired at a high cost, your department should keep track of what is under warranty and have that information readily available. (“6 Critical Tips For Hospital Facilities Management Budgeting,” Hepacart)

9. Implement a wellness and disease management program for employees.

Hospitals should encourage employees to take care of themselves, for the budget as well as for health. Hospitals that engage in some form of wellness initiatives that provide financial incentives, such as lower health insurance premiums, could potentially save a lot of money each year. (“9 Ingenious Ways to Cut Costs at Your Hospital,” Becker’s Hospital Review)

10. Establish pricing agreements with vendors.

Writing out what you are willing to spend on the life of a piece of equipment and having an agreement over it with a vendor will protect you from unexpected charges or maintenance costs in the future. (“6 Critical Tips For Hospital Facilities Management Budgeting,” Hepacart)

11. Track down inventory to improve productivity.

You need a way to see where your inventory is located or stored in real time. Many companies today that can track the location of anything from patients, to staff, to capital equipment. For example, if equipment around the hospital isn’t easily located, finding the particular piece of equipment needed for an emergency procedure could be time-consuming and dangerous. (“5 Tips for Controlling Costs in Hospitals and Biomed Shops,” 24x7 Magazine)

A Final Tip

Use key performance indicators (KPIs) to track successes with hospital budgeting. Without KPIs, you won’t know whether or not you’re on track with your hospital’s goals.