Scenario
One year ago, Metropolitan Memorial expanded its operations into a rural community located approximated a hundred miles from its main facility. The clinic offers a wide array of outpatient services. As the Senior Accountant, you are reviewing the clinic’s operating budget from the previous year. You have been asked by the hospital’s chief administrator to create a new six-month operations budget for the clinic.
Instructions
Using an Excel spreadsheet, create a new six-month budget for the clinic that includes the following revenue and expense projections:
- The clinic’s revenue is projected to grow by approximately 3% as a result of a new managed care contract.
- The cost of expenses is expected to increase to 1.5%.
- The clinic will also be adding a new roof to the facility at a projected cost of $50,000.
Then prepare a memo for the chief administrator. The memo should include a review of the previous year’s budget, an analysis of the upcoming changes (figures above), and a discussion about the impacts that these changes will have on the budget for the upcoming year.
See attachment!
Budget
| Budget C | ||
| REVENUES | ||
| Description | Detail | Yearly Budgeted Amount |
| Clinic Revenue Lab | 325 clients per month, 3,900 total visits | 163,800.00 |
| Revenue Medications | 195 of billable labs per month, 2340 labs per year | 58,500.00 |
| Revenue Procedures | 162 meds per month, 1,950 per year | 39,000.00 |
| Revenue Less | # of billable procedures done per year | 26,000.00 |
| Contractuals | Percentage negotiated with payer | 114,920.00 |
| TOTAL CLINIC REVENUE | 402,220.00 | |
| EXPENSES | ||
| Description | Detail | Yearly Budgeted Amount |
| PAYROLL | ||
| Provider salary | Total salary | 60,000.00 |
| Receptionist salary | 13,395.00 | |
| LPN salary | 28,182.00 | |
| Total Salary & Wages: | 101,577.00 | |
| Provider FICA | Salary x 0.0765 | 4,590.00 |
| Receptionist FICA | Salary x 0.0765 | 1,024.68 |
| LPN FICA | Salary x 0.0765 | 2,155.92 |
| Total FICA | 7,770.60 | |
| Unemployment | ||
| Health Insurance | 10,222.08 | |
| Life Insurance | 2,216.00 | |
| Long Term Disability | 666.00 | |
| 401K Employer Contribution | ||
| Total Additional Benefits: | 13,104.08 | |
| TOTAL PAYROLL: | 122,451.68 | |
| OPERATING EXPENSES | ||
| Supplies Food | 100 | |
| Misc. Supplies | 1,000.00 | |
| Medications | 5,000.00 | |
| Medical Supplies | 4,500.00 | |
| Office Supplies | 500.00 | |
| Printing | 500.00 | |
| Postage | UPS, Fed Ex, Postage | 500.00 |
| Professional Fees | ||
| Consulting | Accountants fees | 1,000.00 |
| Audit Fee | 1,500.00 | |
| Legal Fees | 1,500.00 | |
| Licensing Fees | Clinic | 300.00 |
| Bank Fees | 250.00 | |
| Advertising | 5,000.00 | |
| Insurance | ||
| Worker's Compensation | 1,575.00 | |
| Gen/Pro/Med Mal | liability, professional liability, employment, practice liability, property insturance, etc. | 15,000.00 |
| Umbrella Ins. | 830.00 | |
| D&O Ins. | 1,000.00 | |
| Professional Development Meetings | Continuing education for provider and staff | 1,000.00 |
| Cont. Memberships etc. | Exp. Rural Health Association | 300.00 |
| Travel & Entertainment | Monies for getting to conference | 1,000.00 |
| Facility | ||
| Telephone | Regular Service | 1,800.00 |
| Internet Access | 300.00 | |
| Utilities | Water, Electric, Garbage | 5,000.00 |
| Small Equipment & Tools | 300.00 | |
| Equipment Rental | 1,200.00 | |
| Capital Equipment | 10,000.00 | |
| Rent or mortgage | 7,200.00 | |
| Maintenance | cleaning service, building & grounds upkeep | 1,600.00 |
| TOTAL OPERATING EXPENSES | 69,755.00 | |
| TOTAL EXPENSES | 192,206.68 | |
| Yearly Budgeted Amount | ||
| NET INCOME (Loss) | [Revenue – Expenses] | 210,013.32 |