Every healthcare organization wants to operate at their maximum potential. Performance-based budgeting can help by directing funds to the department operations that produce the most profitable results. A performance budget provides an opportunity for your hospital or healthcare facility to tie financial planning to operational results, and enables your departments to save money and improve performance. If your healthcare facility is in need of a budgeting overhaul, here’s why you should consider performance-based budgeting.
An introduction to performance-based budgeting for healthcare
According to the International Monetary Fund (IMF): “Performance-based budgeting aims to improve the efficiency and effectiveness of public expenditure by linking the funding of public sector organizations to the results they deliver, making systematic use of performance information.” Performance-based budgeting requires preparing the budget based on the productivity of each department in your hospital from one budget period to the next. Evaluating the results of each department’s operations will help you set performance objectives and develop a strategy to observe, monitor and adjust over the budget period.
With a clear strategy in place, managers will be able to make decisions that contribute to the success of the department’s performance objectives. For example, if a performance objective is to decrease hospital readmissions by 20%, the manager could introduce a program where family members and caregivers are involved in the discharge planning to improve the patient’s transition from hospital to home.
The difference between performance based budgeting and traditional line-item budgeting is the focus on achieving operational goals, as opposed to concentrating on how money is being spent over the budget period. A line-item budget will show the amounts spent on department expenditures, such as salaries, benefits, office supplies and equipment. In contrast, performance-based budgeting will show what each dollar will achieve by way of a measurable result, such as reduced waiting times or an increase in patient satisfaction.
A performance based budget has the advantage of allowing a department to optimize the use of finances, staff, resources and equipment, resulting in greater efficiency and accountability. Departments in your healthcare facility can better estimate for costs, cut unnecessary expenses and find areas for improvement. In addition, performance based budgeting brings greater transparency to your hospital’s budgeting process by revealing your performance objectives and results to stakeholders.
How to implement performance-based budgeting
Setting goals
To implement a performance-based budgeting process, your hospital or healthcare facility will need to evaluate each department to determine the performance objectives for the budgeting period. Once the department goals have been determined, it is important to clearly communicate the strategy to staff, as it will be their work that is compared to the performance objectives.
KPIs
KPIs — or key performance indicators — are a staple of performance based budgeting because they track the operational effectiveness of your healthcare organization. KPIs contain the performance objectives you set for each department and can be used to measure whether or not the department is on track. However, to be effective staff need to be able understand the KPIs and how their work can positively contribute to a successful outcome.
Balanced scorecard
One popular methodology for communicating KPIs and tracking their success is a Balanced Scorecard (“scorecard”). The scorecard is a performance management tool that combines performance objectives with finance metrics to give you a ‘balanced’ view of how your KPIs are performing. In addition, the scorecard aligns staff work with your KPIs and provides direction on how the KPIs can be accomplished.
Performance software
Another option is to use a software solution designed to unify your healthcare organization’s performance budget with your performance objectives in one system. Questica Performance is a module of the Questica Budget suite that can summarize all of your critical data in a visually rich and interactive interface. The scorecards contained in Questica Performance provide a built-in method for the ongoing monitoring of performance objectives, making use of green/yellow/red thresholds via an at-a-glance dashboard that provides a complete picture of performance across your organization.
Performance based budgeting is an excellent way to both improve efficiency and accountability in your healthcare organization. A performance budget directs funding to targeted programs and services to tie financial planning to operational results. Accordingly, your hospital or healthcare facility will be able to optimize the use of finances, staff and resources, as well as increase transparency with stakeholders. Integrating seamlessly with Questica Budget, using a software solution like Questica’s Performance module makes monitoring performance objectives easy and puts you on track to budgeting success.
About Questica
Questica Budget is a powerful, multi-user budget preparation and management software suite that helps your public sector organization run operating, salary (and position planning) and capital budgets with accuracy and efficiency. Integrating with dozens of financial systems, Questica Budget has everything you need in one place to develop, track, monitor and adjust your budget, plus generate custom reports and create what-if scenarios. Imagine no longer having to enter data into error-prone Excel spreadsheets, and having time to analyze and plan for the budget. Questica’s Performance module give you a complete view of performance across your organization. By leveraging financial and statistical data from any number of sources you can effectively measure performance by tracking your organization’s progress and achieving set goals. To learn more about Questica’s products and how our software solutions can help you manage the budget with confidence – watch a product video, read one of our case studies or request a demo today!
