Expert: Dr. Joseph de Beauchamp - 10/11/2006

Question
What are the advantages of Flexible Budgeting.

Answer
Budgeting – Fixed and Flexible   Print   
Despite management’s best intentions, hospitals still spend hundreds of hours developing their budgets. Most agree they spend too much time on administrative and process issues. It would save time and money if the annual preparation and review of operating budgets were not such a cumbersome and time-consuming exercise and one that provided the analytic capabilities necessary for effective management action.

Healthcare professionals also speak to the difficulty and expense involved in the pursuit of accurate cost accounting. Many even forgo these efforts, knowing full well that cost information is crucial to the decision making process and that without accurate cost information, they are at financial risk when making decisions in both current and long term operations. They operate in the absence of cost data necessary to making fully informed management decisions that avoid negative implications.

Existing approaches designed to solve these problems are burdensome and often supported by obsolete technology that requires intensive resources to operate and provides little if any real return on investment.

PMMC FlexCost PRO is a straightforward yet comprehensive budget preparation, maintenance, cost accounting and analysis solution.  As experts in hospital finance and reimbursement for more than 17 years, PMMC continues to offer its clients functionally rich, affordable applications and services that are easy to implement, operate and deploy at pricing that is considerably lower than less robust applications.

Healthcare organizations need a more intuitive, robust solution that requires dramatically less time and effort, while giving management access to more comprehensive information and supporting informed team-based decision-making.  PMMC offers such a solution, PMMC FlexCost PRO.  

PMMC’s is both a unique and more simplistic, automated solution for budget preparation, budget maintenance, cost accounting and analysis.
PMMC FlexCost PRO’s exclusive, built in efficiency features significantly reduce the budget preparation cycle, improves accuracy and encourages participation and management responsibility. Users are freed from old fashion spreadsheet mechanisms, resulting in more time for value added analysis and management reaction.
Unique to PMMC FlexCost PRO is that the budgeting process itself, with little or no extra effort generates standard and actual costs at the charge unit level detail. For most hospitals, the budgeting and cost accounting efforts remain completely independent of one another, and are most often extremely labor intensive. PMMC FlexCost PRO consolidates budgeting or cost accounting processes while emphasizing more strategic and efficient reporting and decision-making.
When the calculated cost data is combined with reimbursement, patient experience and charge detail, this approach also provides the foundation for detailed profit and loss reporting and full financial decision support at a fraction of the cost and effort generally associated with most currently available solutions.
Variance reporting in traditional hospital fixed and flexible budgets seldom, if ever provides both meaningful and useful information upon which appropriate management decisions can be based.  PMMC’s approach to flexible budgeting and cost variance analysis is designed to overcome this problem by measuring results against budget with greater accuracy and more detail.
While most healthcare providers have similar financial planning issues, each has its own unique approach to budgeting, cost development and reporting. PMMC systems are broad enough to allow maximum flexibility to meet those diverse needs yet able to offer unique approaches to understanding the value of cost or managerial accounting in relationship to budgets and make the budget and costs become more relevant and in the planning and control process in relation to both.
Designed to ease the pain of both preparing budgets and calculating costs, PMMC FlexCost PRO is an essential tool that optimizes the use of resources, people and materials. It is an integrated solution permitting providers to understand their operations, monitor and control their costs, improve efficiency and respond appropriately to a dynamic environment.
Value/Advantage of Flexible Budgets and Standard Costs

Consistent point of reference
Identifies all cost deviations, categorized in a meaningful way to assist management in controlling costs:
-Spending (and salary rate)    -Productivity
-Supply / Mix    -Volume/Mix  

Provides costs per unit of service to support profitability reports/resource consumption analyses by DRG, physician, or outpatient APC's
Provides an excellent foundation for special studies and business plans, with unit costs broken down into four major categories
Enables everyone to better understand cost behavior and the influence of "cost drivers" – including  the financial impact of volume and mix deviations from plan
Shows all cost deviations between actual and standard by area of responsibility
Monthly variances provide a clear indicator of the accuracy of the standard costs