Read the case study below titled “Managing Costs and Revenues at Happy Town Neurology” and
thoroughly answer the questions listed below:
1. Describe the department or clinic personnel that you might utilize to help you with this
process? Why would you choose these people?
2. What is the third-party payer, and why do you care about their forecasted
3. Define a cash budget as you understand it.
4. What type of historical data will you consider? How far back should you look?
5. Explain what is meant by outflows and inflows–provide examples.
6. How do local and federal legislation, policy, and the economy affect your cash budget
decisions? How do you think healthcare organizations plan for these changes?
7. If you followed the steps outlined in the case, would you accomplish the goals of the
organization? What might you add or delete to streamline the process as you understand
8. Once you are finished putting the information in Part IV together, is the process
complete? Do you believe that budgeting is used daily, weekly, monthly or annually?
Submit case in APA 6th edition format with no less than 3 peer reviewed references. The Write
should include the following headings:
Major Problems and Secondary Issues
Major characters and their roles
Organizational Strengths and Weaknesses
Alternatives and Recommended Solutions
EvaluationManaging Costs and Revenues at Happy Town Neurology
You have been working as an assistant to the financial manage a Happy Town Neurology for the
past three and a half years, and there is finally an opportunity for you to advance to a lead
position within the finance department. You are excited about this new position, but first, you
must be able to accomplish a task that the current CFO is assigning to you. He is going to
evaluate you on your ability to understand a cash budget and provide the neurology center with
the necessary information to obtain the operating loans that they will need for the next calendar
year. This process in more important than ever before because new federal legislation is putting a
pinch on lending institutions by restricting their lending practices, and therefore, the new
legislation will impact most. It is your goal to use sound financial management principles, utilize
the department employees as time allows, fully calculate third-party reimbursement, and
ultimately determine Happy Town’s borrowing requirements.
You feel prepared because of the experience you have within the finance department, but you
also know that cash budgets are never certain, and that financial forecasting can help the
organization to be prepared. First, you fully understand that you need to budget for the next 12-
month period, so you decide to look at the historical data from the last several years. Also, you
determine that you must also look at what cash is on hand today and what need to be paid.
Finally, you must consider each and every inflow and outflow that may affect your budget and,
ultimately, your organization.
After looking at the available data, you realize that the neurology center is in an envious positon
because the patient revenues are extremely consistent throughout the year. This makes preparing
your budget very easy, as you will be able to more readily break down the numbers and manage
them on a monthly basis. As you continue your research, you find that more than 60% of your
collections are from third-party payers. This is also something that is beneficial to you, as you
will be able to compute the amount of income that the clinic will make on a per-procedure basis.
Also, you have found that about 20% of your collections come from private pay and the final
20% comes from other sources such as government programs, local charities, and so on. It is in
this arena that you find numerous inconsistencies, so you are uncertain how this may affect your
final financial forecast. To fully understand and present this data, you will develop a revenue
Through your coursework, you understand that finance by definition is forecasting, and as such,
it is not going to provide 100% accuracy all the time. You must consider this when you are
preparing a cash budge, especially a cash budget that is 12 months in duration. As you know,
there are several factors that you and your organization cannot control, and this makes this type
of forecasting all the more difficult. Also, you will have to ensure that you consider loans that
may be paid off during the term of the cash budget. Both inflows and outflows must be carefully
considered to allow for consistent and accurate accounting practices. Taxes, both local and
federal, and other items such as insurance, licenses, and so on, must also be in the mix. It is key
to fully account for all items that affect your organization.
We can now return to the opening paragraph and look at your goals for this project. As
you look at the issues presented by your CFO, you will need to ensure that you accomplished
what you set out to do. Were you thorough? Did you consider all inflows and outflows? By
understanding the limits of finance, you are in a great position to complete what is required to
benefit the organization and its cash needs.