Purpose / rationale of budgeting in hospital
The traditional purpose of budget have a diagnostic role in measuring and monitoring accounting and hospital performance. Budget also has an interactive role as learning and innovative model to drive strategic changes (Abernethy & Brownell 1999). Hospital create budgets to monitor it's actual performance compare to the estimated performance incorporates the revenue, health expenditures include operation cost, medications cost, administration cost, cash flows and other associated factors include funding adjustments and growth factors (Bragg 2014).
Financial budget transform the activities of individual units into a number value within the health care system. From the value of previous activities, financial budgeting will enable management to forecast and put activities into a plan (Abernethy & Brownell 1999). Government will allocated the money as funding to the hospitals, where hospitals will generate activities as a return on the funding begin given and train the capitals (Department of Health 2016). Administration and hospital employees will contribution to spend the funding and to achieve the goals and plans. Every unit within the hospital will require resource in order to operate and deliver services. The purpose of budgeting in the hospital is to ensure its performance and goals and objectives are achieved at the district and state levels.
The strategic plan is the basis of the budgeting, the strategic role of budgeting in health care include driving strategic changes to make suitable with the budget set in order to generate high performance (Abernethy & Brownell 1999).
In Department of Health (2016) Budget 2016-17 stated that the strategic role for the budget is to ensure the health care is both accessible, affordable and the level of health care quality is also sustainable into the future. IHPA (2011) suggested that hospital funding and budgeting is based on the calculation of weighted population and on activity volume performed in an expression of National weighted activity unit (NWAU). Budgeting in the hospital context taken account the activity volume, the budget and funding received is pre-determined fee that reimbursed per activity based on the diagnosis related group (DRGs) (IHPA 2011).
Commonalities between Activity Based Funding (ABF) principles and Strategic role of budgeting is the revenue and funding generate is link to patient activity. ABF principles help to create the strategic plan that reflects the hospital's de