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Uptown Clinic Budget and Cost Cutting

Dr. Stephanie White, the Chief Administrator of Uptown Clinic, a community mental health agency, is concerned about the dilemma of coping with reduced budgets next year and into the foreseeable future, but increasing demand for services. In order to plan for reduced budgets, she must first identify where costs can be cut or reduced and still keep the agency functioning. Below are some data from the past year.

Program Area Costs
Administration
Salaries:
*Administrator $60,000
*Assistant $35,000
*Two Secretaries $42,000
Supplies $35,000
Advertising and promotion $9,000
Professional meetings/dues $14,000

Purchased Services:
*Accounting and billing $15,000
*Custodial $13,000
*Security $12,000
*Consulting $10,000

Community Mental Health Services:
Salaries (two social workers) $46,000
Transportation $10,000

Outpatient mental health treatment
Salaries:
*Psychiatrist $86,000
*Two Social Workers $70,000

Give a dollar range of costs to reduce budgets (worst and best case analysis).

You need to cut $94,000 in cost. Prioritize those cuts that can be made without impacting the operation or quality care of the organization.

How would you advise Dr. White to prepare for reduced budgets?

Solution Preview

In the worst case situation, it means that the budgets have been cut to the extent that Dr. White could keep only the necessary and most critical services as follows: -

Administration
Salaries:
*Administrator $60,000
*Assistant 0
*One Secretary $21,000
Supplies $17,500
Advertising and promotion 0
Professional meetings/dues 0

Purchased Services:
*Accounting and billing $15,000
*Custodial $13,000
*Security $12,000
*Consulting 0

Community Mental Health Services:
Salary (one social worker) $23,000
Transportation $10,000

Outpatient mental health treatment
Salaries:
*Psychiatrist $86,000
*One Social Worker $35,000
Total $282,500

In the best case analysis, we expect that there would be only some costs of the services, which will not affect the qualities of the services provided by the clinic to the community will be cut as follows: -
Administration
Salaries:
*Administrator $60,000
*Assistant $35,000
*One Secretary $21,000
Supplies ...

Solution Summary

This solution is comprised of a detailed explanation to answer how would you advise Dr. White to prepare for reduced budgets.

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