Departmental and Total Facilities Budget

Scenario:

Fullhealth is one of the largest healthcare organizations in Helena, Montana. Fullhealth owns multiple lines of healthcare businesses including a health plan, three long-term care assisted living facilities, and two home healthcare agencies.

There are three types of healthcare enrollee plans with the following number of enrollees: 8500 Medicaid enrollees, 6200 Medicare enrollees, and 15,000 employer sponsored health plan enrollees. Within the last two to four years, all plans have consistently earned a profit. The Board of Directors, however, wants to raise the target profit for future years.

Local competitors with similar facilities have either earned marginal profits or reported a net loss. If profit losses continue, two of your company's competitors may be forced to go out of business by the end of the year. You are a staff member in the Finance Department of Fullhealth whose sole responsibility is to advance the success of the organization through assisting in the planning, forecasting, and managing of the organization's finances.

- It has been brought to the attention of Fullhealth's executive management team that the department managers have not been held accountable for their individual department's budget, which has contributed to increased costs and reduced profits.

You need to:

Evaluate the relationships between departmental and total facilities budgets.
Explain the business transactions that occur in an organization budget.
Describe the budget cycle, the decision problems, and decision rules that may affect the relationships between the department and total facility.
Emphasize the role that each department's input plays into the budget and how it relates to their use of the budget in managing costs.
Explain what factors you used in making your decisions and the purpose of each selection.