DOS 752 - Week 5 Discussion
Budgeting is a critical task for organizations of any size. A large hospital with a large radiation oncology department will need to have complex budget planning and tracking processes in place to manage incoming cash flows and outgoing capital and operating expenses. In a conversation with Teresita McCoo (December 2, 2015) I learned a bit about how the Department of Radiation Oncology at Loyola University Medical Center creates and updates its budget. The department uses a combination of trend budgeting and projection budgeting using a 6 month rolling period going forwards. Projections include forecasts of incomes and expenses associated with departmental factors such as new physicians, local factors such as new program initiatives in the hospital that might refer patients, and outside factors such as changes in the regulatory environment on the horizon.
Capital budgeting is done with a continuously updated 5 year wishlist, and capital budgeting is allocated from Loyola's parent organization, Trinity Health. Capital funds are allocated to each hospital in the system according to need and justification, and those funds are then allocated to each department as needed. In recent years, Loyola built a new research facility on campus, so that used up the entire capital budget, but in other years, Radiation Oncology can use up a large portion of the capital budget. This year, we are decommissioning a Novalis stereotactic linear accelerator and replacing it with a Varian Edge linear accelerator. The new machine will be able to deliver the same stereotactic plans, but it will also be able to treat regular plans because of its larger treatment field size. This will increase the patient capacity of the department because the Novalis sat idle for quite a lot of time between stereotactic treatments, and the Edge will be able to treat conventional patients.
Teresita explained that every major expenditure must be carefully justified. Even though the Edge will be very expensive for the organization, she anticipates a breakeven time of 18 months because of the additional revenues that the machine will be able to generate. She also explained that the department looks for other ways to improve revenues that don't require capital expenditures. She pointed out that even though staff salaries account for about half of the operating budget of the department, they are considering hiring more staff to allow them to run a second shift. This would let the existing machines be utilized more fully, and may be more convenient for some patients who would rather not be treated during daytime hours.