Managing Financial Budgets

Managing costs and revenues in the health care industry is a complex, and often, technical process that involves understanding of the interrelatedness of the processes involved, the interplay of many departments and managers within the organization, and the importance of influences external to the organization (Buchbinder & Shanks, 2011). Administrators have tremendous power when deciding what procedures are medically necessary for each patient, as well as how much will be paid. Prospective forms of payment are really a type of managed care, it is a system in which the payer lays out what is necessary for each patient and informs the provider as to which costs will be paid for and which ones will not be paid for. This form of prospective reimbursement has the advantage of being comprehensive, whereas retrospective payments, or fee-for-service reimbursements, maximize the freedom of patients and providers to decide what procedures are best for each individual. The basic difference between prospective and retrospective reimbursement is the level of comprehensiveness versus the freedom of patients.
Cash budget is a term sometimes used interchangeably with operating budget, but it is specifically distinguished from the latter by some organizations. Capital budget may be defined as the process of selecting long-term assets, whose useful life is greater than one year according to financial decision rules. The capital budget determines funding amounts, what capital equipment will be acquired, what buildings will be built or renovated, depreciation expenses, and the estimated useful life to be assigned to each asset(Buchbinder & Shanks, 2011). The budget must include data relevant to the organization. Budgeting is vital to health care organizations, without it an organization cannot survive.
References
Buchbinder, S.B. & Shanks, N.H. (2011). Introduction to health care management (2nd ed). Sudbury, MA: Jones and Bartlett Publishers. ISBN:

References: Buchbinder, S.B. & Shanks, N.H. (2011). Introduction to health care management (2nd ed). Sudbury, MA: Jones and Bartlett Publishers. ISBN: 9780763790868.