The document discusses flexible and static budgets. It explains that a flexible budget adjusts for changes in volume, while a static budget remains the same regardless of volume. Flexible budgets are more useful for operational budgets in healthcare since patient volume can vary. The document also provides an example of how flexible budgets allow for more accurate variance analysis compared to static budgets when evaluating specific expense metrics and determining areas for improvement.

1. Write a brief response to each discussion
Winterstien_6.1
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According to Baker and Baker (2014), forecasting is a method
of using data to plan for future budgeting needs. There are three
common types of forecasting done in healthcare such as
revenue, staffing and operating expense (Baker & Baker, 2014).
One of the forecasting methods that I am more accustomed to is
the staffing forecasts. As a staff nurse lead or house supervisor,
I must work in conjunction with other nurses to ensure that
patient to staff ratios are maintained. For example, the unit that
I am employed on (ICU) requires one nurse to two patients if
they are in critical condition. If the patients are med/surg
overflow, then one nurse can take up to four patients. In our
eight bed unit, we attempt to have ideally four nurses scheduled
everyday, however, this is not always possible. If there aren’t
enough nurses to care for the patients on the unit, then a float
nurse from another floor or the main hospital’s float pool helps
out. If our unit is overstaffed, then nurses will float or be put on
call to help manage the budget.
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Mazanec 6.1
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Forecasting is major element in predicting future results in our
hospital. Managers are asked to forecast new service line
additions and what the impact will be on revenue, expenses,
volumes, and staffing. Our annual budget basically is one big
forecasting picture. What will the next year bring in patient
volumes and how will that impact our bottom line? Just as such
historic trending plays a role, but forecasting is our crystal

2. ball. As Baker and Baker (2014) state, “the ultimate accuracy
of a forecast rests on the strength of its assumptions.”
The one example that comes to mind is a major forecasting
project that was completed prior to our recent addition and
renovation project. To help the former CEO decide to push
forward with this magnitude of a project, the CFO and I had to
forecast five-year financial statements with the help from our
external audit firm, considering the price of the proposed
project, principal and interest payments, depreciation, staffing,
revenue, and expense. Part of the forecast even included using
the new square footage to forecast increased utility costs. It
also showed the impact of adding a larger annual principal and
interest obligation. This forecast was a great tool to determine
what a new project would look like with our Critical Access
Hospital reimbursement model by considering what portions of
the project would be allowable and non-allowable and how it
would impact our financial strength.
Pick 6.1
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Different types of companies use forecasting for different
situations. In healthcare, analysts use forecasting to predict
revenue, staffing needs and operating expenses (Baker & Baker,
2014). Hospitals need to forecast staffing needs as to stay
within budget but also have enough staff to meet the demands of
patients. There are three considerations when preparing staffing
forecasts: controllable versus no controllable expenses, required
minimum staff levels, and labor market issues in staffing
forecasts (Baker & Baker, 2014). It is important to have a
master staffing plan to include all times and days needed.
According to Baker & Baker (2014), the accuracy of a forecasts
rests on the strength of its assumptions.
Juan Casas 6.1
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An example I can think of when working in the billing

3. office, we had to come up with a forecast for the billed claims
per all the hospitals that belong to the health system I work for.
When forecasting, we looked at a couple years of fiscal data and
we also annualized the present fiscal year to come up with an
estimate of billed claims for the rest of the year. My director
always insisted that for budgeting purposes, it was necessary to
have at least 3 fiscal years to identify trends. Ideally, it would
be better to have at least 5 years in total.
In addition, when forecasting and benchmarking, it was
necessary to clean the raw data to only count unique claims and
avoid counting duplicate claims. For Benchmarking, it was also
important to include resubmissions of claims when denials
occurred, since that required worked hours in the billing office.
Even though the bulling office was not a real profit center, it
was more like a cost center since we want to minimize the cost
per claim.
Muhlecke 6.2
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What is the difference between a flexible and a static budget?
If you reviewed a budget at your work place, do you think you
could explain the major variances?
According to Baker and Baker (2014) the static budget is based
on a single level of operations. After a static budget, has been
approved and finalized, that single level of operations is never
adjusted. Because budgets are measured by how they are
different for the actual results a variance is the difference
between an actual result and a budget amount when the budget
amount is a financial variable reported by the accounting
system.
I would explain to my workplace that the computation
of the static budget variance only requires one
calculation: Actual Results minus Static Budget Amount equals
Static Budget Variance.
According to Baker and Baker (2014) a flexible budget is one
that is created using budget revenue and/or budget cost

4. amounts. Unlike static budget, flexible budgets are adjusted or
flexed to the actual level of the output achieved during the
budget period. Thus, a flexible budget looks towards a range of
activity or volume unlike the one level in a static budget.
6.2_Buda
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Flexible budgets adjust for changes in volume where static
budgets do not; static budgets stay the same regardless of the
volume (Baker & Baker, 2014). In healthcare, static budgets
are helpful for planning, but they are not as useful for an
operational budget since volume is variable. When a static
budget is used, less data is available when evaluating variance
in specific areas. With a flexible budget, the variable costs are
increased proportionately but fixed costs remain the same
(Rachita, Diaconescu, & Mazga, 2016). If a specific metric is
not met even when the activity level was,
managers are better able to determine exactly where deviation
from plan occurred, and they are better able to determine areas
where improvements can be made. For example, if a static
budget includes supply expense at $100,000, if the actual was
$95,000, the expense would be under budget, so the cost would
never be evaluated. If the same budget was done as a flexible
budget and supply expense was budgeted at $100,000 for a
volume of 10,000 patient days and the actual expense was
$95,000 with 8,000 patient days, even though the dollar amount
is under the budget, the volume was significantly less and it
would be an area to evaluate as part of cost containment
measures.
Flexible budget variances are the differences between the actual
result and the flexible budget amount, and they reflect how
actual results deviate from expected results at a certain activity
level
(Rachita, Diaconescu, & Mazga, 2016).

5. At my work, if I was asked to review a budget, I could explain
the major variances, but I prefer not to just explain but to
analyze, determine root causes, and implement process
improvements.
DB 6.2 Randolph
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According to our text book a flexible budget is one that is
adjustable for change such as an increase in volume of activity.
This simply means that there is room in the budget to increase
to volume of activity or work. For a static budget there is a
fixed amount regardless of the volume of activity. The
difference in the two is pretty obvious, one has the ability to be
flexible and the other is not. In my organization we are
currently sharing a budget between our athletic training
department and our strength and conditioning department. I
believe if I were to review our budget it would be very easy to
see a variance. This year our budget took a hit due to a new
weight room facility but on a typical year in the past there
hasn’t been too much variance. We manage to stay within our
budget every year, and we hope to soon have independent
budgets for each department.
Taylor 6.2
COLLAPSE
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The text states a flexible budget is a budget that adjusts or
flexes for changes in the volume of activity. While a static
budget remains at one amount regardless of the volume of
activity (Baker & Baker, 2014). So, per the text the difference
between two is as stated in the previous sentence one budget
adjust or flexes (flexible), and the other budget remains at one
amount (static). If I reviewed a budget at my work place, I do
you think I could explain the major variances between the two
budgets since the flexible budget offers changes based upon
volume, provides a greater level of control, and accomplishes

6. the forecast in one step., which would be easy to recognize and
explain if I had the task to do so. Static budgets offer the
variance analysis. The variance analysis tells the owner how
much she's over or under the original budget, via percentage and
dollars and that you can adjust the budget up or down depending
upon the variance percentages. The negatives of the two are that
the flexible budget is a more sophisticated method which means
you may not have time to make the necessary changes to it. And
lastly with the Static budget it’s down fall could be attributed to
the lack of actual data upon which to build a budget if actual
data were to differ significantly from the static budget, it would
be impossible to change the budget or to determine if the costs
to produce the revenue were properly controlled.
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