NUR5113 Module 6 executive financial proposal example

Narrowing a Loss the Hospital Chooses to Carry: A Financial Proposal to the Executive Team for a 20-Bed Behavioral Health Unit

Student Name

American College of Education

NUR5113: Management of Financial Resources in Nursing

Module 6 Assignment

Instructor Name

June 8, 2027

The Request in Brief

The nursing director asks the executive team to approve five actions for the adult behavioral health unit: one-time operating funds of $79,047, a capital allocation of $486,000 and two posted registered nurse positions with sign-on incentives. In the base case these actions improve the unit's annual operating result by about $198,000 in the first year and add about $70,600 a year in savings once the capital project is complete. In a conservative case, the first-year improvement is about $59,000. Under either case the unit will still lose money, and the proposal explains why that is acceptable and why the current loss is larger than it needs to be.

Where the Unit Stands

The unit had 6,424 patient days last year. Medicaid managed care plans pay for two in five of those days and Medicare for just over a quarter, with commercial insurers and self-pay patients making up the rest, a mix that produces blended net revenue of about $895 for each paid day, against a full cost of $968 per day. After 5% of days were denied by insurers, the unit's loss, including its share of hospital overhead, was about $109 per patient day, or roughly $700,000 a year.

Part of that loss is structural. Psychiatric care is paid by the day at rates that, for the largest payers on this unit, do not cover its cost, and a unit that admits mostly through the emergency department cannot choose its payer mix. Part of it is not structural. The analyses completed this year found three avoidable sources of cost: one-to-one observation that was never budgeted and was bought at overtime rates, overtime and agency premiums caused by two registered nurse vacancies, and days denied because nursing documentation did not describe the risk that justified continued stay. The proposal does not try to make the unit profitable; it tries to stop the hospital paying for problems it can fix.

The Five Actions

First, budget observation honestly. The operating budget for next year plans 8,000 observation hours at straight time rather than leaving them to overtime, adding about 4.4 technician FTEs and saving about $84,000 a year in overtime premium. This requires no new money, only approval of the budget as written.

Second, fill the two registered nurse vacancies. In October alone, overtime and agency premiums on the registered nurse line cost about $12,600. If two-thirds of that premium is eliminated by permanent hires, the unit saves about $100,000 a year. Sign-on incentives of $5,000 per position cost $10,000. Long overtime hours also harm nurses themselves, which a systematic review found strong evidence for (Bae & Fabry, 2014), so this action protects retention as well as the budget.

Third, train charge nurses in documentation that supports medically necessary days. A one-time investment of $11,520 in training time aims to reduce denied days from 5% to 3.5%, which would add about $88,200 a year in revenue.

Fourth, adopt Safewards. The cost analysis in Module 5 estimated first-year costs of $57,527 and savings of $88,548 in observation hours, restraint episodes and staff injury claims, based on the effects found in a cluster randomized trial (Bowers et al., 2015).

Fifth, retrofit the six older rooms to be ligature-resistant. The $486,000 capital project would end observation ordered for environmental reasons, saving about $70,560 a year with a net present value of about $58,800 over ten years, and would close a gap against accreditation expectations. Environmental correction has been associated with a sustained fall in inpatient suicide in the Veterans Health Administration (Watts et al., 2017).

Combined Effect and the Conservative Case

In the base case, the operating actions produce a first-year improvement of about $197,700: $88,200 in recovered revenue, $100,000 in reduced premiums and $31,000 in net Safewards savings, less $21,520 in one-time training and incentive costs. The observation budget change is a reallocation within the budget and is not counted again. The capital project adds about $70,600 a year once complete.

In a conservative case that assumes denial reductions and premium savings reach only half their targets and Safewards achieves half the trial's effects, the first-year improvement falls to about $59,300. The actions remain worth taking under the conservative case, because none of them requires ongoing spending that exceeds its likely return after the first year, and the Safewards and retrofit decisions also carry safety benefits that the figures do not include.

Why Keep a Unit That Loses Money

Executives will ask why the hospital should invest in a unit that will still lose about $430,000 a year after these changes. There are three reasons. The emergency department already holds psychiatric patients for days while beds are sought; closing or shrinking the unit would move that cost to the emergency department, where it would be paid in lost capacity for medical patients. The hospital's community health needs assessment names access to mental health care as a top priority, and its tax-exempt status depends in part on meeting such needs. And patients admitted to the medical floors with psychiatric illness benefit from psychiatric nurses and physicians on site. The loss is a price the hospital has chosen to pay for those benefits. This proposal makes that price smaller and easier to defend.

Risks to the Plan

Four risks could reduce the return, and each has a planned response. Recruitment may take longer than expected in a tight market for psychiatric nurses; if the positions are not filled within 90 days, the director will propose converting one to a pair of part-time positions, which have drawn more applicants in the past. Denial rates depend partly on insurers, and a payer that tightens its review criteria could erase the documentation gains; the utilization review nurse will track denials by payer so that a change in one insurer's behavior is not mistaken for a failure of the training. Safewards depends on fidelity, and units that adopt only some of its ten interventions tend to see smaller effects, so the champions will audit fidelity each quarter using the model's own checklist. Finally, construction costs for the retrofit may rise before the project starts; the facilities department's estimate includes a 10% contingency, and any increase beyond that will come back to the capital committee before work begins. None of these risks changes the recommendation, but each is a reason to report results quarterly rather than once a year.

Decisions Requested and Reporting

The decisions sought are approval of the operating budget with the observation line, authority to post the two positions with incentives, release of $79,047 in one-time operating funds for training, Safewards implementation and incentives, and a place for the $486,000 retrofit on next year's capital list. The nursing director will report quarterly on observation hours, overtime and agency premiums, the denial rate, containment events and staff injuries against the baseline, with the dollar effect of each, so that the team can see which actions delivered and adjust the ones that did not.

References

Bae, S.-H., & Fabry, D. (2014). Assessing the relationships between nurse work hours/overtime and nurse and patient outcomes: Systematic literature review. Nursing Outlook, 62(2), 138-156. https://doi.org/10.1016/j.outlook.2013.10.009

Bowers, L., James, K., Quirk, A., Simpson, A., Stewart, D., & Hodsoll, J. (2015). Reducing conflict and containment rates on acute psychiatric wards: The Safewards cluster randomised controlled trial. International Journal of Nursing Studies, 52(9), 1412-1422. https://doi.org/10.1016/j.ijnurstu.2015.05.001

Watts, B. V., Shiner, B., Young-Xu, Y., & Mills, P. D. (2017). Sustained effectiveness of the mental health environment of care checklist to decrease inpatient suicide. Psychiatric Services, 68(4), 405-407. https://doi.org/10.1176/appi.ps.201600080