FISCAL PLANNING (BUDGETING)

Introduction

Budgeting is the heart of administrative management. It serves as a powerful tool

of co- ordination and negatively an effective device of eliminating duplication and the
wastage. These are served by devices such as justification of estimates, supervision of the
use of appropriate funds, timing of the rate of expenditure and the like.

Definition:

A budget may be a simple plan of ones personal finances, or it may be a complex

document used by large organization.

According to TN Chhabra ―a budget is an estimation of future needs

arranged according to orderly basis covering some or all activities of an enterprise for a
definite period of time‖

According to Dimock ―Budget is a balance estimated expenditure and receipts

for a given period of time. In the hands of the administrator the budget is the record of the
past performance, a method of current control and projection of future pans‖.

Feature of budget

 Budget should be simple in design and oriented to those who use it

 It should be flexible. It should be adjust various needs and conditions of the institution
 It should be synthesis of past, present and future
 It should be product of joint venture and co-operation of executives/ department
heads at different levels of management.
 Budget is composed of two segments; that are income and expenditure. Income
limits expenditure; hence income should be estimated prior to the estimation
expenditure.
 A budget reflects the goals and aspirations of the faculty
 Budget making involves the whole situation
 Budget is forward planning. Planned activities are vital for efficient and successful
functioning
 A budget gives direction- it is more than the list of the desired and approved
expenditure. It is also the instrument of administration and management.
 It should have support of top management throughout the period of its planning
and supplementation.
 Budget has a time period usually annual. It is important to secure the maximum
participation of organization in preparation on of budget.

1
 Purposes of budget

1. To provide definite targets for income and expenditure of the department

2. To co-ordinate the activities of the different functional heads in the working of
these departmental budget
3. To enable a cash flow statement prepared month by month
4. To aid management in formulating future policy decision to promote the growth
and welfare of the organizations
5. To provide useful tool for the control of costs
6. To provide a tool for communication and co ordination within the organization.
7. To improve financial planning and decision making.
8. To identify controllable and uncontrollable cost area.

Importance of budget

Budget is a numerical description of expected income and planned expenditure for

an organization for a specified period of time. It is a concrete, picture of the total
operation of an enterprise/ organization/ institution in monetary term, i.e., finance

The following point serves the importance of budget:

 Budget is needed for planning for future course of action and to have a control
over all activities in the organization
 Budget facilities co coordinating operation of various departments and sections for
realizing organizational objectives.
 Budget serves as a guide for action in the organization
 Budget helps one to weigh the values and to make decision when necessary on
whether one is of a greater value in the programme than the other

Principles of Budget

Budget is an operational plan for a definite period, usually a year, expressed in

financial terms and based on expected income and expenditure.

1. Budget should provide sound financial management by focusing on requirement of

the organization

2. Budget should focus on objectives and policies of the organization. It must flow from
objectives and give realistic expression to the way of realizing such objectives.

3. Budget should ensure the most effective use of scarce financial and non financial resources.

4. Budget requires that programme activities planned in advance

5. Budgetary process requires consistent delegation for which fixed duties and
responsibilities are required to be allocated to managers at different level for framing and
executing budget.
6. Budgeting should include coordinating efforts of various departments establishing
frame of reference for managerial decisions, and providing a criterion for evaluating
managerial performance.

7. Setting budget target requires an adequate checks and balance against the adoption of
too high or too low estimate. Utmost care is a must for fixing targets.

8. Budget period must be appropriate to the nature of business or service and to the type
of budget.

9. Budget is prepared under the direction and supervision of the administrator or finance officer.

10. Budget is to be prepared and interpreted consistently throughout the organization in

the communication of planning process.

11. Budget necessitates a review of the performance of the previous year and an evaluation
of its adequacy both in quantity and quality.

12. While developing a budget, the provision should be made for its flexibility.

STEPS IN BUDGETING

COLLECTION OF PAST DATA

ASSESS SUCCESS AND FAILURES OF

PAST SETTING OBJECTIVES FOR

FORECAST YEAR

OBJECTIVES ARRANGED IN TERMS OF

INDICATED UNITS PREPARATION OF REPORTS ON

EXPENSES PREPARATION OF BUDGET REPORT

REVIEW OF BUDGET REPORT

EVALUATION FOR MODIFICATION OR

CHANGRS

FINAL PRESENATION BEFORE BOARD OF TRUSTEES FOR DECISION

GENRAL BUDGET: How to make your self

Step 1 : Determine your monthly income

Take into consideration your payroll deductions (health insurance or other group
benefits, income taxes, union dues, pension) and other sources of income.

– Add together all income, less deductions. On a piece of paper record the
resulting figure as VALUE A.

Step 2: List your “fixed” and “variable” monthly expenses

Such as housing, utilities, food and transportation. Remember to allocate funds for
clothing, medical care, child care, personal expenses, recreation and emergencies/repairs.

– Add all of your expenses–this is

VALUE B. Step 3: Find your “discretionary

income”

– By subtracting your total expenses (B) from your total net income (A).

– Write this number down on a piece of paper as

VALUE C. Step 4: List all unsecured debts

• The monthly payments and the balances. If you don‘t know your exact debt
amount, now is the time to determine it.

– Write this number down on a piece of paper as

VALUE C. Step 5: Determine if you have any remaining

discretionary income

• After making these installment payments by subtracting your total monthly

payments to creditors (D) from your discretionary income (C).

• If this figure is a negative number, you are not ready for Step 6 – setting
goals. Consult a personal financial counsellor and work on getting this
figure into the positive numbers

Step 6 to establish short- and long-term goals

• Make a list of these goals

 Long-Term – Real Estate Purchases, Future Education, Retirement

 Short-Term – Home Improvements, New Car, Travel
 Other Desired Investments – Stocks, Bonds, CDs, Mutual Funds
• Determine how much you need to save monthly
Steps in effective budgeting process

• Determine the requirements: inputs from all levels of hierarchy must be obtained

• Develop plan: Budget for 12months is set. Zero-Based budget

• Analyze and control the operation: continuous monitoring is essential

• Review the plan: Periodic revision and modification

Steps in budgeting for college of nursing

• Request for the needs of various departments

• Review the budget appropriation and actual expenditure for the current year

• Contemplated changes

• Salary fixation

• Requirement estimation

• Summary of new needs

The steps of planning budget for nursing unit

• Assistance of his/her subordinates

• Review of budget

• Ascertain changes

• Preparing requirements

• Summary of new needs

• Submitting to institutional administrator

Roles and Responsibilities of the Nurse Administrator/Principal in Budgeting

– Participation in planning budget

– Consult an take assistance of his/her subordinates
– Request sufficient finds
– Submit budget request
– Support the budget when it is allotted.
– Cover the routine budget control
 Audit in nursing management is the professional evaluation of the quality of the
patient care, by analysing through all the facilities , services rendered, measures involved
in diagnosis, treatment and other conditions and activities that affect the patients.
Definition
Nursing audit refers to the assessment of the quality of clinical nursing.
Elison
Nursing audit is the means by which nurses themselves can define standards
from their point of view and describe the actual practice of nursing.
Goster Walfer
Characteristics
 It improve the quality of nursing care
 It compares actual practice with agreed standards of practice.
 It is formal and systemic.
 It involves peer review.
 It requires the identification of variations between practice and standards followed
by the analysis of causes of such variations.
 It provides feedback for those whose records are audited.
 It includes follow- up or repeating an audit sometimes later to find out if the
practice is fulfilling the agreed standards.
Objectives
 To evaluate the quality of nursing care given.
 To achieve the desired and feasible quality of care.
 To provide a way for better records.
 To focus on care provided and care provider.
 To provide rationalized care thereby maintaining uniform standards worldwide.
 To contribute to research.
Methods of Audit
There are mainly two methods;
 Retrospective view- It refers to the detail quality care assessment after the patient
has been discharged. The records can be reviewed for completeness of records,
diagnosis, treatment, lab investigations, consultations, nursing care plan,
complications, and end results.
 Concurrent view- It is achieved by reviewing patient care during the time of
hospital stay by the patient. It includes assessing the patient at the bed- side in
relation to predetermined criteria like errors, omissions, deficiencies, as well as
efficiencies and also excess in the care of patients under them. It involves
direct and indirect observation,
 interviewing the staff responsible for care, and reviewing the patients‘ records and
care plan.
It can be also done to identify the job satisfaction of staff nurses in accordance with
their work performance.
Audit cycle
According to Payne, the steps in audit or utilization review include;
 Criteria development
 Selection of cases
 Work sheet preparation
 Case evaluation
 Tabulation of evaluation
 Presentation of reports
In general, the stages of audit cycle are;
 Identify the need for change
 Setting criteria and standards
 Collecting data on performance
 Assess criteria against criteria and standards
 Identify need for change (re- evaluation)
Advantages
 Patient is assured of good service.
 Better planning of quality improvement can be done.
 It develops openness to change.
 It provides assurance, by meeting evidence based practice.
 It increases understanding of client‘s expectations.
 It minimizes error or harm to patients.
 It reduces complaints or claims.

Disadvantages
 It may be considered as a punishment to professional group.
 Medico- legal importance- They feel that they will be used in court of law as any
document can be called for in a court law.
 Many components may make analysis difficult.
 It is time consuming
 It requires a team of trained auditors.
COST ACCOUNTING AND COST ANALYSIS

Introduction

Cost effectiveness and cost accounting are important aspects in the managerial
level. If these factors are not being monitored properly the profit of the organization may
be drastically affected. So each administrator should be aware of this. Thus it forms an
important aspect in the part of administration.

Origin of cost accounting

Cost accounting has long been used to help managers understand the costs of
running a business. Modern cost accounting originated during the industrial revolution,
when the complexities of running a large scale business led to the development of systems
for recording and tracking costs to help business owners and managers make decisions.

In the early industrial age, most of the costs incurred by a business were what
modern accountants call "variable costs" because they varied directly with the amount of
production. Money was spent on labor, raw materials, power to run a factory, etc. in direct
proportion to production. Managers could simply total the variable costs for a product and
use this as a rough guide for decision-making processes.

Some costs tend to remain the same even during busy periods, unlike variable
costs, which rise and fall with volume of work. Over time, the importance of these "fixed
costs" has become more important to managers. Examples of fixed costs include the
depreciation of plant and equipment, and the cost of departments such as maintenance,
tooling, production control,
purchasing, quality control, storage and handling, plant supervision and engineering. In
the early twentieth century, these costs were of little importance to most businesses.
However, in the twenty-first century, these costs are often more important than the
variable cost of a product, and allocating them to a broad range of products can lead to
bad decision making. Managers must understand fixed costs in order to make decisions
about products and pricing.

Definition
Cost accounting
Cost accounting is the process that supports the budget reporting system and the
agency efforts for cost containment.
Cost accounting is a set of techniques for associating costs with the purpose for
which obtained.

Classical cost elements are:

1. Raw materials
2. Labor
3. Indirect expenses/overhead

Elements of cost

1. Material (Material is a very important part of business)

A. Direct material
2. Labor
A. Direct labor
3. Overhead
A. Indirect material
B. Indirect labor
Standard cost accounting

In modern cost accounting, the concept of recording historical costs was taken
further, by allocating the company's fixed costs over a given period of time to the items
produced during that period, and recording the result as the total cost of production. This
allowed the full cost of products that were not sold in the period they were produced to
be recorded in inventory using
variety of complex accounting methods, which was consistent with the principles of
GAAP (Generally Accepted Accounting Principles). It also essentially enabled managers
to ignore the fixed costs, and look at the results of each period in relation to the "standard
cost" for any given product.

An important part of standard cost accounting is a variance analysis,, which breaks

down the variation between actual cost and standard costs into various components
(volume variation, material cost variation, labor cost variation, etc.) so managers can
understand why costs were different from what was planned and take appropriate action
to correct the situation.

Classification of costs
Classification of cost means, the grouping of costs according to their common characteristics.
The important ways of classification of costs are:

 By nature or element: materials, labor, expenses

 By functions: production, selling, distribution, administration, R&D, development,
 As direct and indirect
 By variability: fixed, variable, semi-variable
 By controllability: controllable, uncontrollable
 By normality: normal, abnormal

There are various managerial accounting approaches:

 Standardized or standard cost accounting

 Lean accounting
 Activity-based costing
 Resource consumption accounting
 Throughput accounting
 Marginal costing/cost-volume-profit analysis
Activity-based costing

Activity-based costing (ABC) is a system for assigning costs to products based on

the activities they require. In this case, activities are those regular actions performed inside
a company. "Talking with customer regarding invoice questions" is an example of an
activity inside most companies.

Accountants assign 100% of each employee's time to the different activities

performed inside a company (many will use surveys to have the workers themselves assign
their time to the different activities). The accountant then can determine the total cost spent
on each activity by summing up the percentage of each worker's salary spent on that
activity.

A company can use the resulting activity cost data to determine where to focus
their operational improvements. For example, a job-based manufacturer may find that a
high percentage of its workers are spending their time trying to figure out a hastily written
customer order. Via ABC, the accountants now have a currency amount pegged to the
activity of "Researching Customer Work Order Specifications". Senior management can
now decide how much focus or money to budget for resolving this process deficiency.
Activity-based management includes (but is not restricted to) the use of activity-based
costing to manage a business.

While ABC may be able to pinpoint the cost of each activity and resources into
the ultimate product, the process could be tedious, costly and subject to errors.

As it is a tool for a more accurate way of allocating fixed costs into product, these
fixed costs do not vary according to each month's production volume. For example, an
elimination of one product would not eliminate the overhead or even direct labor cost
assigned to it. ABC better identifies product costing in the long run, but may not be too
helpful in day-to-day decision- making.
Lean accounting

Lean accounting has developed in recent years to provide the accounting, control,
and measurement methods supporting lean manufacturing and other applications of lean
thinking such as healthcare, construction, insurance, banking, education, government, and
other industries.

There are two main thrusts for Lean Accounting. The first is the application of lean
methods to the company's accounting, control, and measurement processes. This is not
different from applying lean methods to any other processes. The objective is to eliminate
waste, free up capacity, speed up the process, eliminate errors & defects, and make the
process clear and understandable. The second (and more important) thrust of Lean
Accounting is to fundamentally change the accounting, control, and measurement
processes so they motivate lean change & improvement, provide information that is
suitable for control and decision-making, provide an understanding of customer value,
correctly assess the financial impact of lean improvement, and are themselves simple,
visual, and low-waste. Lean Accounting does not require the traditional management
accounting methods like standard costing, activity-based costing, variance reporting, cost-
plus pricing, complex transactional control systems, and untimely & confusing financial
reports. These are replaced by:

 lean-focused performance measurements

 simple summary direct costing of the value streams
 decision-making and reporting using a box score
 financial reports that are timely and presented in "plain English" that everyone can
understand
 radical simplification and elimination of transactional control systems by
eliminating the need for them
 driving lean changes from a deep understanding of the value created for the customers
 eliminating traditional budgeting through monthly sales, operations, and financial
planning processes (SOFP)
 value-based pricing
 correct understanding of the financial impact of lean change
As an organization becomes more mature with lean thinking and methods, they recognize
that the combined methods of lean accounting in fact creates a lean management system
(LMS) designed to provide the planning, the operational and financial reporting, and the
motivation for change required to prosper the company's on-going lean transformation.
Marginal costing

This method is used particularly for short-term decision-making. Its principal tenets are:

 Revenue (per product) − variable costs (per product) = contribution (per product)
 Total contribution − total fixed costs = (total profit or total loss)

Thus, it does not attempt to allocate fixed costs in an arbitrary manner to different
products. The short-term objective is to maximize contribution per unit. If constraints exist
on resources, then Managerial Accounting dictates that marginal cost analysis be
employed to maximize contribution per unit of the constrained resource

Throughput Accounting

Throughput Accounting (TA) is a dynamic, integrated, principle-based, and

comprehensive management accounting approach that provides managers with decision
support information for enterprise optimization.

Advantages

The accumulated data enable a head nurse to assess the cost

It enables a nurse manager to identify the interaction between different

expenditure. It enables a manager to identify popular services.

Disadvantages

It is difficult to associate some costs with particular programme

It is the fact that it is difficult for a manager to justify the cost of a nursing care programme.
Cost effectiveness

Cost-effectiveness analysis

Cost-effectiveness analysis is a form of economic analysis that compares the

relative costs and outcomes (effects) of two or more courses of action. Cost-effectiveness
analysis is distinct from cost-benefit analysis, which assigns a monetary value to the
measure of effect. Cost-effectiveness analysis is often used in the field of health services,
where it may be inappropriate to monetize health effect. Typically the CEA is expressed
in terms of a ratio where the denominator is a gain in health from a measure (years of life,
premature births averted, sight- years gained) and the numerator is the cost associated with
the health gain.[

Cost benefit analysis

It is a tool with great potential for the decision maker so long as he or she
recognises the difficulty in determining the true costs and benefits of various alternatives.
This tool can be especially useful when trying to decide between alternative expenditure
of money.

A cost benefit ratio (z) is defined as the ratio of the value of benefits of an
alternative to the value of alternative cost.

Z= Present value of economic benefits/ present value of economic costs

Cost benefit analysis is designed to consider the social costs and benefit
attributable to the project. The benefits are expressed in monetary terms to determine
whether a given programme is economically sound and to select the best out of several
programmes.
 CRITICAL PATHWAY

Clinical Pathways: multidisciplinary plans of best clinical practice. Many

synonyms exist for the term Clinical Pathways including: Integrated Care Pathways,
Multidisciplinary pathways of care, Pathways of Care, Care Maps, and Collaborative Care
Pathways.

Clinical Pathways were introduced in the early 1990s in the UK and the USA, and
are being increasingly used throughout the developed world. Clinical Pathways are
structured, multidisplinary plans of care designed to support the implementation of clinical
guidelines and protocols. They are designed to support clinical management, clinical and
non-clinical resource management, clinical audit and also financial management. They
provide detailed guidance for each stage in the management of a patient (treatments,
interventions etc.) with a specific condition over a given time period, and include progress
and outcomes details.
Clinical Pathways have four main components (Hill, 1994, Hill 1998):

1. A timeline

2. The categories of care or activities and their interventions

3. Inter-mediate and long term outcome criteria

4. The variance record (to allow deviations to be documented and analysed).

Critical Pathway Development

 Select a Topic .

Topic selection in general should concentrate on high-volume, high-cost diagnoses

and procedures. Critical pathway development has focused on several cardiovascular
diseases and procedures because of volume and costs. These include bypass surgery,
diagnostic catheterization, coronary angioplasty, acute myocardial infarction, and
unstable angina. These diagnoses and procedures tend to be more suitable for critical
pathway development because of the predictable course of events that occur during the
hospitalization. In addition, marked variation in care has been observed in these
conditions, which makes the goal of decreased variation and reduction in resource
utilization possible. Furthermore, there has been evidence of noncompliance with
guideline recommendations. In this case, the pathways might improve guideline
compliance and potentially improve quality of care.

 Select a Team .

It is important to develop a multidisciplinary team for critical pathway

development. Historically, critical pathway development has been a nursing initiative.
Although this has been a successful model in some institutions, one fault of this process
is lack of physician commitment to the pathway. Active physician participation and
leadership is crucial to the development and implementation of the pathway. In addition,
it is important to include representatives from all groups that would be affected by the
pathway, for example, house staff, physical therapy personnel, and dietary personnel. The
lack of involvement of physicians has been cited as a reason for failure of a pathway.

 Evaluate the Current Process of Care .

In this step, data, rather than anecdotal reports, are key to understanding current
variation. For systems with electronic medical records, this process may be more
automated. For other systems, a careful review of medical records is necessary to identify
the critical intermediate outcomes, rate-limiting steps, and high-cost areas on which to
focus.
  Evaluate Medical Evidence and External Practices .

After key rate-limiting steps have been identified, the critical pathway team must
evaluate the literature to identify evidence of best practices. For most rate-limiting steps,
there are few data available to define optimal processes of care. The critical pathway
development team will often lack answers to specific questions such as appropriate
observation period or length of stay. In the absence of evidence, comparison with other
institutions, or "benchmarking," is the most reasonable method to use.

 Determine the Critical Pathway Format .

The format of the pathway may vary widely. Important features include a task-
time matrix in which specific tasks are specified along a timeline. There is a spectrum of
pathways that range from a form that takes the place of the medical record to a simple
checklist. A reduction in charting that may occur with more complicated pathways is a
benefit. However, if the pathway format is too difficult to follow, it will not be used.
Critical pathways have become widely available in electronic format, where electronic
charting and pathway compliance are obtained simultaneously. One disadvantage to this
method is the absence of a standard medical record. This may result in duplication of
efforts and possible noncompliance with the pathway. This is particularly true among
physicians who are likely to be resistant to novel charting methods. For some systems, a
simple checklist at the front of the paper chart may be an optimal method for implementing
the pathway. These checklists would have areas to be filled in by different staff members
active in patient care.

 Document and Analyze Variance .

Variances are patient outcomes or staff actions that do not meet the expectation of
the pathway. In general, variance in clinical pathways is a result of the omission of an
action or the performance of an action at an inappropriate (often, a late) time period.
Because the critical pathway is a series of time-associated actions, this analysis of variance
can be overwhelmed by multiple data points. Computer-assisted pathway analysis can
help with this issue. Another approach is for the pathway team to concentrate on a few
critical items in the pathway that have been identified in advance, such as extubation time
after cardiac surgery or length of stay in the intensive care unit. These are critical
intermediate outcomes that may have a substantial number of important contributory
factors. Arguably, the selection of areas to analyze and the analysis of variance are among
the most important processes in the critical pathway. Identification of factors that
contribute to variance and interventions to improve those factors are the key features in
process improvement.
 Critical Path Analysis and PERT Chart

Critical Path Analysis and PERT are powerful tools that help you to schedule and
manage complex projects. They were developed in the 1950s to control large defense
projects, and have been used routinely since then.

As with Gantt Charts, Critical Path Analysis (CPA) or the Critical Path Method
(CPM) helps you to plan all tasks that must be completed as part of a project. They act as
the basis both for preparation of a schedule, and of resource planning. During management
of a project, they allow you to monitor achievement of project goals. They help you to see
where remedial action needs to be taken to get a project back on course.

Within a project it is likely that you will display your final project plan as a Gantt
Chart (using Microsoft Project or other software for projects of medium complexity or an
excel spreadsheet for projects of low complexity).The benefit of using CPA within the
planning process is to help you develop and test your plan to ensure that it is robust.
Critical Path Analysis formally identifies tasks which must be completed on time for the
whole project to be completed on time. It also identifies which tasks can be delayed if
resource needs to be reallocated to catch up on missed or overrunning tasks. The
disadvantage of CPA, if you use it as the technique by which your project plans are
communicated and managed against, is that the relation of tasks to time is not as
immediately obvious as with Gantt Charts. This can make them more difficult to
understand.

A further benefit of Critical Path Analysis is that it helps you to identify the
minimum length of time needed to complete a project. Where you need to run an
accelerated project, it helps you to identify which project steps you should accelerate to
complete the project within the available time. .

PERT (Program Evaluation and Review Technique)

PERT is a variation on Critical Path Analysis that takes a slightly more skeptical
view of time estimates made for each project stage. To use it, estimate the shortest possible
time each activity will take, the most likely length of time, and the longest time that might
be taken if the activity takes longer than expected.

Use the formula below to calculate the time to use for each project

stage: Shortest time + 4 x likely time + longest time

-----------------------------------------------------------

6
Importance

Critical Path Analysis is an effective and powerful method of assessing:

• What tasks must be carried out.

• Where parallel activity can be performed.

• The shortest time in which you can complete a project.

• Resources needed to execute a project.

• The sequence of activities, scheduling and timings involved.

• Task priorities.

• The most efficient way of shortening time on urgent projects.

CPM - Critical Path Method

In 1957, DuPont developed a project management method designed to address the

challenge of shutting down chemical plants for maintenance and then restarting the plants
once the maintenance had been completed. Given the complexity of the process, they
developed the Critical Path Method (CPM) for managing such projects.

CPM provides the following benefits:

 Provides a graphical view of the project.

 Predicts the time required to complete the project.
 Shows which activities are critical to maintaining the schedule and which are not.

CPM models the activities and events of a project as a network. Activities are depicted as
nodes on the network and events that signify the beginning or ending of activities are
depicted as arcs or lines between the nodes. The following is an example of a CPM
network diagram:
CPM Diagram

Steps in CPM Project Planning

1. Specify the individual activities.

2. Determine the sequence of those activities.

3. Draw a network diagram.

4. Estimate the completion time for each activity.

5. Identify the critical path (longest path through the network)

6. Update the CPM diagram as the project progresses.

1. Specify the Individual Activities

From the work breakdown structure, a listing can be made of all the activities in the project.
This listing can be used as the basis for adding sequence and duration information in later
steps.

2. Determine the Sequence of the Activities

Some activities are dependent on the completion of others. A listing of the

immediate predecessors of each activity is useful for constructing the CPM
network diagram.

3. Draw the Network Diagram

Once the activities and their sequencing have been defined, the CPM diagram can be
drawn. CPM originally was developed as an activity on node (AON) network, but some
project planners prefer to specify the activities on the arcs.

4. Estimate Activity Completion Time

The time required to complete each activity can be estimated using past experience or the
estimates of knowledgeable persons. CPM is a deterministic model that does not take into
account variation in the completion time, so only one number is used for an activity's time
estimate.

5. Identify the Critical Path

The critical path is the longest-duration path through the network. The significance of the
critical path is that the activities that lie on it cannot be delayed without delaying the
project. Because of its impact on the entire project, critical path analysis is an important
aspect of project planning.

The critical path can be identified by determining the following four parameters for
each activity:

• ES - earliest start time: the earliest time at which the activity can start given that
its precedent activities must be completed first.

• EF - earliest finish time, equal to the earliest start time for the activity plus the time
required to complete the activity.

• LF - latest finish time: the latest time at which the activity can be completed
without delaying the project.

• LS - latest start time, equal to the latest finish time minus the time required to
complete the activity.

The slack time for an activity is the time between its earliest and latest start time,
or between its earliest and latest finish time. Slack is the amount of time that an activity
can be delayed past its earliest start or earliest finish without delaying the project.

The critical path is the path through the project network in which none of the
activities have slack, that is, the path for which ES=LS and EF=LF for all activities in the
path. A delay in the critical path delays the project. Similarly, to accelerate the project it
is necessary to reduce the total time required for the activities in the critical path.

6. Update CPM Diagram

As the project progresses, the actual task completion times will be known and the
network diagram can be updated to include this information. A new critical path may
emerge, and structural changes may be made in the network if project requirements
change.
CPM Limitations

CPM was developed for complex but fairly routine projects with minimal uncertainty in
the project completion times. For less routine projects there is more uncertainty in the
completion times, and this uncertainty limits the usefulness of the deterministic CPM
model. An alternative to CPM is the PERT project planning model, which allows a range
of durations to be specified for each activity.

Benefits

 Support the introduction of evidence-based medicine and use of clinical guidelines

 Support clinical effectiveness, risk management and clinical audit
 Improve multidisciplinary communication, teamwork and care planning
 Can support continuity and co-ordination of care across different clinical
disciplines and sectors;
 Provide explicit and well-defined standards for care;
 Help reduce variations in patient care (by promoting standardisation);
 Help improve clinical outcomes;
 Help improve and even reduce patient documentation
 Support training;
 Optimise the management of resources;
 Can help ensure quality of care and provide a means of continuous quality improvement;
 Support the implementation of continuous clinical audit in clinical practice
 Support the use of guidelines in clinical practice;
 Help empower patients;
 Help manage clinical risk;
 Help improve communications between different care sectors;
 Disseminate accepted standards of care;
 Provide a baseline for future initiatives;
 Not prescriptive: don't override clinical judgement;
 Expected to help reduce risk;
 Expected to help reduce costs by shortening hospital stays

Issues with Critical Pathways

There are many issues in critical pathway development and implementation that are of
concern to practitioners who care for patients with cardiovascular disease.
 The first issue is that critical pathways address processes in the "ideal" patient and
in some cases do not address issues in the majority of patients who enter the path.
Identification of appropriate patients to enter the pathway is an important issue in
implementation. In general, critical pathways are more applicable to patients with
uncomplicated illnesses who are undergoing procedures or surgery. For patients
treated with medical conditions such as acute coronary syndromes, it is difficult to
define "appropriate" treatment for the majority of patients. Therefore, critical
pathways will tend to identify a great deal of variance in the care of these patients
that may or may not wasteful or potentially harmful. The goal of placing most
 patients within pathways may not benefit the individual patient.
 A second issue is how to evaluate critical pathways as an effective tool in
improving patient care. As we have mentioned, little controlled research has been
performed on the effectiveness of pathways. One reason for this is that at any one
medical center, "pathway" care cannot be easily differentiated from "usual" care
because of contamination from the pathway intervention. Randomized trials with
the unit of randomization at the medical center would be the optimal evaluation
method.
 The real impact of critical pathways and appropriateness protocols is their use as
tools for collection of information. Pathways can serve as a screening test for
inefficient care. The danger is that a pathway with too many critical areas under
review will be too sensitive, resulting in the review of a large number of marginally
appropriate cases.Review of critical pathway data should be focused on the
highest-impact areas in terms of either cost, quality of care, or, preferably, both.

Issues - potential problems and barriers to the introduction of CPs

 May appear to discourage personalised care

 Risk increasing litigation
 Don't respond well to unexpected changes in a patient's condition
 Suit standard conditions better than unusual or unpredictable ones
 Require commitment from staff and establishement of an adequate organisational
structure
 Problems of introduction of new technology
 May take time to be accepted in the workplace
 Need to ensure variance and outcomes are properly recorded.
 HEALTH CARE REFORM

Health care reform is a general rubric used for discussing major health policy
creation or changes—for the most part, governmental policy that affects health care
delivery in a given place. Health care reform typically attempts to:

 Broaden the population that receives health care coverage through either public
sector insurance programs or private sector insurance companies
 Expand the array of health care providers consumers may choose among
 Improve the access to health care specialists
 Improve the quality of health care
 Give more care to citizens
 Decrease the cost of health care
 We need a different approach to healthcare reforms in India
 Goal

The goal of healthcare reform is to make healthcare more accessible and available
to all citizens. Currently, millions remain uninsured due to job loss, or because healthcare
premiums would simply be too costly. Ideally, healthcare reform would enable more, to
become insured, and also decrease the cost of healthcare. However, this is a goal that is not
so easily obtained, due to the complexities of the healthcare system , and the quality of care
provided here.

The primary objectives of health care reform include:

 Provide healthcare coverage for all.

 Decrease the costs of health care services and coverage

Health care reforms in India

The Ministry of Health and Family Welfare is the Indian government ministry
charged with health policy in India. It is also responsible for all government programs
relating to family planning in India.

The Minister of Health and Family Welfare holds cabinet rank as a member of the
Council of Ministers. The current minister is Shri. Ghulam Nabi Azad, who is assisted by
a Minister of States for Health and Family Welfare, Shri. Dinesh Trivedi & Shri. S.
Gandhiselvan.

The ministry is composed of three

departments:

1 Department of Health
2 Department of Family
Welfare
3 Department of AYUSH
\
1. Department of Health

The Department of Health deals with health care, including awareness campaigns,
immunization campaigns, preventive medicine, and public health. Bodies under the
administrative control of this department are:

1) National AIDS Control Programme (AIDS)

2) National Cancer Control Programme (cancer)

3) National Filaria Control Programme (filariasis)

4) National Iodine Deficiency Disorders Control Programme (iodine deficiency)

5) National Leprosy Eradication Programme (leprosy

6) National Mental Health Programme (mental health)

7) National Programme for Control of Blindness (blindness)

8) National Programme for Prevention and Control of Deafness (deafness)

9) National Tobacco Control Programme (tobacco control)

10) National Vector Borne Disease Control Programme (NVBDCP) (vector-born disease)

11) Pilot Programme on Prevention and Control of Diabetes, CVD and Stroke (diabetes,
cardiovascular disease, stroke)

12) Revised National TB Control Programme (tuberculosis)

13) Universal Immunization Programme

14) Medical Council of India

15) Dental Council of India

16) Pharmacy Council of India

17) Indian Nursing Council

18) All India Institute of Speech and Hearing (AIISH), Mysore

19) All India Institute of Physical Medicine and Rehabilitation (AIIPMR), Mumbai

20) Hospital Services Consultancy Corporation Limited (HSCC)

21) National Mental Health Programme (mental health)

22) National Programme for Control of Blindness (blindness)

23) National Programme for Prevention and Control of Deafness (deafness)

24) National Tobacco Control Programme (tobacco control)

25) National Vector Borne Disease Control Programme (NVBDCP) (vector-born disease)

26) Pilot Programme on Prevention and Control of Diabetes, CVD and Stroke
(diabetes, cardiovascular disease, stroke)

27) Revised National TB Control Programme (tuberculosis)

28) Universal Immunization Programme

29) Medical Council of India

30) Dental Council of India

31) Pharmacy Council of India

32) Indian Nursing Council

33) All India Institute of Speech and Hearing (AIISH), Mysore

34) All India Institute of Physical Medicine and Rehabilitation (AIIPMR), Mumbai

35) Hospital Services Consultancy Corporation Limited (HSCC)

2. Department of Family Welfare

The Department of Family Welfare (FW) is responsible for aspects relating to family
welfare, especially in reproductive health, maternal health, pediatrics, information,
education and communications; cooperation with NGOs and international aid groups; and
rural health services. The Department of Family Welfare is responsible for:

• 18 Population Research Centres (PRCs) at six universities and six other

institutions across 17 states

• National Institute of Health and Family Welfare (NIHFW), South Delhi

• International Institute for Population Sciences (IIPS), Mumbai

• Central Drug Research Institute (CDRI), Lucknow

• Indian Council of Medical Research (ICMR), New Delhi - founded in 1991, it is
one of the oldest medical research bodies in the world

3. Department of AYUSH

The Department of Ayurveda, Yoga and Naturopathy, Unani, Siddha and

Homoeopathy (AYUSH) deals with ayurveda (Indian traditional medicine), and other
yoga, naturopathy, unani, siddha, and homoeopathy, and other alternative medicine
systems.

The department was established in March 1995 as the Department of Indian

Systems of Medicines and Homoeopathy (ISM&H).The department is charged with
upholding educational standards in the Indian Systems of Medicines and Homoeopathy
colleges, strengthening research, promoting the cultivation of medicinal plants used, and
working on Pharmacopoeia standards. Bodies under the control of the Department of
AYUSH are:

Various research councils

1) Central Council for Research in Ayurveda and Siddha (CCRAS)

2) Central Council for Research in Unani Medicine (CCRUM)

3) Central Council for Research in Homoeopathy (CCRH)

4) Central Council for Research in Yoga and Naturopathy (CCRYN)

5) Several educational institutions:

6) National Institute of Ayurveda, Jaipur (NIA)

7) National Institute of Siddha, Chennai (NIS)

8) National Institute of Homoeopathy, Kolkata (NIH)

9) National Institute of Naturopathy, Pune (NIN)

10) National Institute of Unani Medicine, Bangalore (NIUM)

11) Institute of Post Graduate Teaching and Research in Ayurveda, Jamnagar,Gujarat

(IPGTR)

12) Rashtriya Ayurveda Vidyapeeth, New Delhi (RAV)

13) Morarji Desai National Institute of Yoga, New Delhi (MDNIY)

14) Indian Medicine Pharmaceutical Corporation Limited (IMPCL), Mohan,

Uttaranchal (a public sector undertaking)
15) Professional councils

16) Central Council of Homoeopathy (CCH)

17) Central Council of Indian Medicine (CCIM)

Healthcare in India

India has a universal health care system run by the local (state or territorial)
governments. Government hospitals, some of which are among the best hospitals in India,
provide treatment at taxpayer expense. Most essential drugs are offered free of charge in
these hospitals. However, the fact that the government sector is understaffed,
underfinanced and that these hospitals maintain very poor standards of hygiene forces
many people to visit private medical practitioners.

The charges for basic in-hospital treatment and investigations are much less
compared to the private sector. The cost for these subsidies comes from annual allocations
from the central and state governments. For example, an outpatient card at AIIMS (one of
the best hospitals in India) costs a one-time fee of 10 rupees (around 20 cents U.S.) and
thereafter outpatient medical advice is free. In-hospital treatment costs depend on financial
condition of the patient and facilities utilized, but are usually much less than the private
sector. For instance, a patient is waived treatment costs if their income is below the poverty
line. Another patient may seek an air-conditioned room for an additional fee.

Primary health care is provided by city and district hospitals and rural primary
health centres (PHCs). These hospitals provide treatment free of cost. Primary care is
focused on immunization, prevention of malnutrition, pregnancy, child birth, postnatal
care, and treatment of common illnesses.[citation needed] Patients who receive
specialized care or have complicated illnesses are referred to secondary (often located in
district and taluk headquarters) and tertiary care hospitals (located in district and state
headquarters or those that are teaching hospitals).

Now organizations like Hindustan Latex Family Planning Promotional Trust and
other private organizations have started creating hospitals and clinics in India, which also
provide free or subsidized health care and subsidized insurance plans.

Indian healthcare reforms

In India, reforms can develop on sound principles on the basis of the learning of all
available systems, our strengths and needs. To make the common man healthy in the
Indian scenario, we need a different approach.

37 percent of Indian population is undernourished. They have difficulty in meeting

even basic needs. 55 percent of the population have a diet which is calorie
sufficient but nutrient deficient whereas eight percent of the population is over-
nourished. Hence, there
is a total imbalance of nutrition which leads to anaemia, TB and many other
diseases which increases the disease burden of India.
Statistics tells us that arthritis, hypertension, diabetes, CVD, cancer patients and
elderly patients are major part of our disease burden. Besides acute diseases,
almost all of them trace their origin to (a lack of) nutrition.
As Indian population is getting increasingly health conscious, almost 64 percent
of out- of-pocket expenditure in India constitutes healthcare expenditure as
compared to 18 percent globally. This population can be called as 'Healthy
Boomers'. They need to be properly directed towards maintaining their health, in
the same way as they have career and financial plans.
All nations have a significant role of Health Insurance in healthcare. In India, both
the patient and the payer is almost same. Here, a sharing model between Health
Insurance and patient can be adopted. 70 to 75 percent of the burden can be still
borne by patient or medical consumer, depending on the nature of disease.
Therefore, I am of the opinion that this sharing ratio should even be reversed as
the severity of the disease increases, for example in the case of cancer, where the
institution should bear 70 percent of the expenses otherwise the patient will die of
the cost before the disease kills him.
65 percent of Indian population lives in rural areas while only two percent qualified
medical doctors are available in these areas. Indian healthcare today is urban
centric. It needs to be reformed through medical infrastructure inclusive of doctors,
nurses, paramedicos, etc.
Indian healthcare system should start from preventive care through nutrition.
Reforms must provide impetus to lift the population which is at the bottom of the
pyramid.
'Health is Wealth' is an old paradigm of India, as people were in 'scarcity thinking'
mode, as they were completely dependent on their livelihood to provide for their
family's health and well being. Resources were earlier scarce and people were
driven to planning. This mentality has given way to the 'abundant mentality' as
today's generation has not seen these scaricity of resources. Demographics are
changing as well, and today 60 percent of population does not have the
responsibilities of a family to look after. For them this paradigm needs to be
inculcated through education. This new paradigm should originate from nutrition
to exercises to preventive healthcare to healthcare. It should be proactive rather
than reactive in terms of its reforms.
As quickly as possible, health must become a priority issue for the Government of
India. Though the Department of Pharmaceuticals today comes under the Ministry
of Chemicals and Fertilizers Food, it deals with issues concerning our health like
Food Safety & Standards (FSS), Ayush and related bodies. Therefore, it should be
appropriately part of Ministry of Health and Family Welfare or in any other
suitable ministry. Government has taken up health issues like HIV, TB and tobacco
through massive government programs.
 Overall, India needs to reform its healthcare system through policies, medical
infrastructure, education and realization of right nutrition to lifestyle management.
Acute diseases over time will be at reactive end of the reforms

HEALTH CARE ECONOMICS

Funding models

Universal health care in most countries has been achieved by a mixed model of
funding. General taxation revenue is the primary source of funding, but in many countries
it is supplemented by specific levies (which may be charged to the individual and/or an
employer) or with the option of private payments (either direct or via optional insurance)
for services beyond that covered by the public system.

Almost all European systems are financed through a mix of public and private
contributions. The majority of universal health care systems are funded primarily by tax
revenue (e.g. Portugal, Spain, Denmark and Sweden). Some nations, such as Germany,
France and Japan employ a multi-payer system in which health care is funded by private
and public contributions. However, much of the non-government funding is by defined
contributions by employers and employees to regulated non-profit sickness funds. These
contributions are compulsory and vary according to a person's salary, and are effectively
a form of hypothecated taxation.

A distinction is also made between municipal and national healthcare funding. For
example, one model is that the bulk of the healthcare is funded by the municipality,
speciality healthcare is provided and possibly funded by a larger entity, such as a
municipal co-operation board or the state, and the medications are paid by a state agency.

Universal health care systems are modestly redistributive. Progressivity of health

care financing has limited implications for overall income inequality.

Single payer

The term single-payer health care is used in the United States to describe a funding
mechanism meeting the costs of medical care from a single fund. Although the fund holder
is usually the government, some forms of single-payer employ a public-private system.

Public

Some countries (notably the United Kingdom, Italy, Spain and the Nordic
countries) choose to fund health care directly from taxation alone. Other countries with
insurance-based systems effectively meet the cost of insuring those unable to insure
themselves via social security arrangements funded from taxation, either by directly
paying their medical bills or by paying for insurance premiums for those affected.
Compulsory insurance

This is usually enforced via legislation requiring residents to purchase insurance,

though sometimes, in effect, the government provides the insurance. Sometimes there may
be a choice of multiple public and private funds providing a standard service (e.g. as in
Germany) or sometimes just a single public fund (as in Canada). The U.S. Patient
Protection and Affordable Care Act is a law based on compulsory insurance.

Private insurance

In some countries with universal coverage, private insurance often excludes many
health conditions which are expensive and which the state health care system can provide.
For example in the UK, one of the largest private health care providers is BUPA which
has a long list of general exclusions even in its highest coverage policy. In the USA (which
tried to transition towards universal health care, but is being challenged through the court
systems as unconstitutional, because of the mandatory purchasing requirement) dialysis
treatment for end stage renal failure is generally paid for by government and not by the
insurance industry. Persons with privatized Medicare (Medicare Advantage) are the
exception and must get their dialysis paid through their insurance company, but persons
with end stage renal failure generally cannot buy Medicare Advantage plans.
 HEALTH INSURANCE
Health insurance is insurance against the risk of incurring medical expenses. By
estimating the overall risk of health care expenses, an insurer can develop a routine finance
structure, such as a monthly premium or payroll tax, to ensure that money is available to
pay for the health care benefits specified in the insurance agreement. The benefit is
administered by a central organization such as a government agency, private business, or
not-for-profit entity.

BUDGETING FOR VARIOUS UNITS.

How to Make a Hospital Budget

Making a hospital budget is only second to medical delivery systems in for a

hospital. In fact, if a budget is not properly written, the hospital may be unable to deliver
medical services at all. So many expenses and sources of revenue must be taken into
consideration, so the budget process takes an expert to get through it successfully. Let's
find out how to start.

Difficulty:

Challenging

Instructions

1. Determine hospital revenue.

 Revenue can come from patient payments, tax dollars, donations, insurance credits.
 Be sure to deduct a percentage of the patient bills that will remain
uncollected, the charity work expected by the hospital and the pro bono
work it does.

2. Figure out expenses.

 Start with the physical facility.

 How much does it cost to keep up the building or buildings.
  What is the maintenance cost of each department, engineering, air-
conditioning, heat, water, other utilities.
 Know what equipment costs, how much must be replaced per patient day,
and if any can be recycled.
 Include the non-medical cost of each bed in the hospital. Include advertising.

3. Know the cost of

 Personnel, all employees and ancillary staff, including consultants,

outsourced contracts, perhaps laundry or nurse staffing services.
 For all employees of the hospital, from janitorial to hospitalists, figure
the fringe benefits the hospital must pay for each.

4. Add all medical equipment costs, ongoing and expected expansion or replacement
of new diagnostic equipment.

5. Know the medical costs of each bed.

 How many staff hours are spent on each bed, occupied or not.
 Use this figure as an average to get a cost per patient year.
 Add to that the non medical costs per bed.
 Include every possible cost that keeps that bed in the hospital.
 Don't forget replacement costs per annum for any and all patient needs.

6. What about expansion?

 Are you planning a new wing, or the renovation of an old one?

 Are you expanding into a new specialty that could bring in extra revenue?
 Estimate that revenue when planning your budget.

7. Don't forget parking garages, lots, landscaping, groundskeeping or window washing.

8. Include all insurance for the facility and personnel.

9. Write in an emergency expense fund. Disasters occur and the hospital must be
prepared for them when they arrive.

10. To do the budget, use a spreadsheet

BUDGET FOR EDUCATIONAL INSTITUTION.

School should have a separate budget, i.e. principal in charge of the school of
nursing should be the drawing and disbursing officer and empowered to plan for
operating the funds in all different heads (as per government rules and regulations and as
seemed necessary for running an educational institutions).

Both the school/college and hospital should have separate budget. The budget for
the school or college is annually planned by the nursing director, principal and general
manager and approved by the managing director.

The budget is classified into 3 heads as

1. Revenue 2. Expenditure 3. Capital

1. Revenue: It includes assets, fixed deposits, investments, loan, advances and income.
2. Expenditure: It includes capital, recurring annual mandatory and non recurring.

The recurring annual mandatory expenditure includes:

- University Administration Fees – Rs. 50,000/

- Affliation Fees – Rs.3,00,000/ - and
every year Rs 50,000/- per course

- Inspection Fees Rs 25,000/-

- State council – Rs 7000/ every year for recognition.
- INC recognition fees Rs 50,000/ per course.
- INC inspection or affliation fees is 7,500/
- Reinspection fees 7000/
- Affliation fees to other institution.

The recurring monthly expenditure also include

- Rent
- Salary
- Stationary items
- Contingency
- Guest relation
- House keeping indent
- Pharmacy indent
- AV aids
- Journals
- Books
- Maintenance: Repair, Replacement, Electricity, Phone, Drinking Water, Sewage
Disposal.
Non recurring expenditure includes:

- DME endowment
Endowment Fund (property or income left to someone like insurance) Rs
20,00,000/- in two installments (before one year 10,00,000/ and second year
Rs.10,00,000/) which is paid to the DME office.

- Security fixed deposit Rs.10,00,000/ with the joint account of registrar of the
university and trustees.
- Solvency certificate(state of having more money than one owes) for Rs. 30,00,000/
from nationalized bank for a period of 5 years.
- University endowment

Approximately the Revenue is Rs. 21,24,000/ and where as the Expenditure is Rs. 20,52,859/

Annual auditing is done to plan for the next year budget and to evaluate the current
year budget.