Module 1 - Lecture 3

Question 1

What are the steps of the budget preparation process?

Answer 1

1) Issuance of guidelines
2) Initial budget proposal
3) Negotiation
4) Approval

This process typically takes about 4 months.

Question 2

What are the advantages and disadvantages of top-down/bottom-up budgeting?

Answer 2

Pros:

1) The budget is involved in the planning process so they may feel more valued
2) Lead to better acceptance of budget and greater commitment
3) Effective way of sharing information

Cons:

1) Conservatism by employees
2) Employees may lack budgeting experience

Question 3

Why would budgetees not play it straight in setting budget targets?

Answer 3

1) To create slack for unforeseen circumstances
2) To allow themselves to meet targets easily for bigger bonuses
3) To free up resources to use for other purposes, thus increasing their autonomy

Question 4

Why would you set challenging but achievable targets?

Answer 4

• To minimise behavioural displacement
• To minimise over-commitment of resources
• To create a positive atmosphere
• To increase manager’s commitment

Question 5

How achievable should good targets be?

Answer 5

Around 25-40% achievable

Question 6

How achievable are targets in practice?

Answer 6

Around 80-90% achievable

Question 7

Why is costing in healthcare complex?

Answer 7

• Heterogenous products make it difficult as each product has its own processes
• Costs in hospitals require coding, calculating and counting

Question 8

What is the Casemix strategy?

Answer 8

This is looking at the ‘mix of cases’ or variation in the composition of cases, for instance in terms of severity of illness or difficulty of treatment.

It seeks to measure a hospital’s output in a defined period in terms of the number and type of treatments.

Question 9

What is diagnosis-related grouping?

Answer 9

This is the agglomeration of patients into groups with a common “resource consumption profile”. This allows for looking at how many of a specific type of patient is treated.

Question 10

What is reference costing in the UK?

Answer 10

This is using the average unit cost to the NHS of providing defined services to patients as a means of comparing hospitals to each other. These average costs are calculated using full absorption costs.

Question 11

How can you go about setting prices in hospitals?

Answer 11

• Diagnostic-related groups

- Payment-by-Results = Healthcare providers are paid for each patient seen or treated