Calculation of Full-Time Equivalents
The case under consideration implies a new person on a position of the assistant administrator for the department of nursing. St. Joseph Hospital where the new administrator is employed faces current financial and personnel problems, partially due to many new staff members in management. One of the major tasks of managers is to develop cost centers’ personnel budgets, which can be supported by data from the calculation of full-time equivalents (FTEs) for nursing units.
To make calculations, patient data, staff data, skill mix, and average salary per employee category are necessary (Mason, Leavitt, & Chaffe, 2014). Careful calculations are important to provide high-quality care because the unit is customer-service oriented. Moreover, data about FTEs is needed to plan staff growth, which is demand due to a trend to an increase in patient population services by the unit (Penner, 2013).
The calculations for FTE are as follows:
To calculate hours per-patient-day (HPPD), it is necessary to estimate the total-care-hours required for the year:
The HPPD is given: Average HPPD = 8.8
as Total Care Hours: Total Care Hours = 96,360
Total Care Hours = 96,360
Productive hours/employee/year is given: Productive hours/employee/year = 1,780
Total Hours/employee/year is given: Total Hours/employee/year = 2,080
Analogously 1,780 = 85,6% of 2,080; 40 hours per week X 52 weeks per year = 2,080; less vacation, sick, education time
96,360 / 1,780 = 54.13 FTEs = 54 FTEs
Staff Requirements
96,360 / 365 = 264 hours of care per day
Assuming employees work 12 hour shifts:
264 / 12 = 22 shifts per 24-hours period
Staff Requirements
Assign staff by type
RNs
80%
LVNs
10%
Nurse aides 10%
80 X 22 = 17.6 RN shifts → 18 RN shifts
10 X 22 = 2.2 LVN shifts → 2 LVN shifts
10 X 22 = 2.2 aide shifts → 2 aide shifts
22 22
Assign staff by shift
Day Shift Night Shift Total
Day Shift Night Shift Total
50% 50%
RNs 8.8 → 9 8.8 → 9 17.6 → 18
LVNs 1.1 → 1 1.1 → 1 2.2 → 2
Aides 1.1 → 1 1.1 → 1 2.2 → 2
22 → 22
Divide total FTEs required by the 22 daily staff shifts:
54.13 / 22 = 2.46
Each person-shift calls for employing 2.45 FTEs. An adequate number of FTEs are needed to provide coverage for the other 3–4 days out of the week, vacation, sick time, and education time.
Multiply 2.46 by the staff type needed per shift.
RNs days = 2.46 X 9 = 22.14
RNs nights = 2.46 X 9 = 22.14 (44 RNs)
LVNs days = 2.46 X 1 = 2.46
LVNs nights = 2.46 X 1 = 2.46 (5 LVNs)
Aides days = 2.46 X 1 = 2.46
Aides nights = 2.46 X 1 = 2.46 (5 aides)
22.14 + 22.14 + 2.46 + 2.46 + 2.46 + 2.46 = 54.12
54.12 FTEs = 54 FTEs
Variance Analysis
The case under analysis is dedicated to the problem of unfavorable variance, which is a concern of the director of an outpatient surgery clinic.
BPi = budgeted price—$40.00 per-hour budgeted nursing rate
BQi 5.0 hours per care per patient
BQo = 340 visits
APi = $45.00
AQi = 5.6 hours per care per patient
AQo = 400 visits
Actual Budget Variance
Nursing Labor $100,800 $68,000 $32,800 U
Original Budget
BPi X BQi X BQo
$40 X 5.0 X 340
$68,000
Flexible Budget
BPi X BQi X AQo
$40 X 5.0 X 400
$80,000
Flexible Budget Original Budget
BPi X BQi X AQo BPi X BQi X BQo
$40 X 5.0 X 400 $40 X 5.0 X 340
$80,000 $68,000
Volume Variance
$12,000 U
Actual Budget Flexible Budget
APi X AQi X AQo BPi X BQi X AQo
$45 X 5.6 X 400 $40 X 5.0 X 400
$100,800 $80,000
Flexible Budget
Variance
$20,800 U
Actual Budget Flexible Budget Original Budget
APi X AQi X AQo BPi X BQi X AQo BPi X BQi X BQo
$45 X 5.6 X 400 $40 X 5.0 X 400 $40 X 5.0 X 340
$100,800 $80,000 $68,000
Flexible Budget Volume
Variance Variance
$20,800 U $12,000 U
Total Variance
$32,800 U
Subcategory Flexible Budget
BPi X AQi X AQo BPi X BQi X AQo
$40 X 5.6 X 400 $40 X 5.0 X 400
$89,600 $80,000
Quantity Variance
$9,600
Actual Budget Subcategory
APi X AQi X AQo BPi X AQi X AQo
$45 X 5.6 X 400 $40 X 5.6 X 400
$100,800 $89,600
Price Variance
$11,200
Actual Budget Subcategory Flexible Budget
APi X AQi X AQo BPi X AQi X AQo BPi X BQi X AQo
$45 X 5.6 X 400 $40 X 5.6 X 400 $40 X 5.0 X 400
$100,800 $89,600 $80,000
Price Variance Quantity Variance
$11,200 $9,600
Flexible Budget
Variance
$20,800 U
Actual Subcategory Flexible Budget Original Budget
APi X AQi X AQo BPi X AQi X AQo BPi X BQi X AQo BPi X BQi X BQo
$45 X 5.6 X 400 $40 X 5.6 X 400 $40 X 5.0 X 400 $40 X 5.0 X 340
$100,800 $89,600 $80,000 $68,000
Price Variance Quantity Variance
$11,200 $9,600
Flexible Budget Variance Volume Variance
$20,800 U $12,000 U
Total Variance
$32,800 U
The budget variances can result from its ineffectiveness (Cleverley, & Cleverley, 2018). The budget variances experienced by the clinic can have some reasons. First of all, they can be caused by labor factor, which includes labor costs. The cost of materials utilized in the clinic can also lead to the budget variance, mainly due to waste of materials. Also, ineffective flexible budget can result in budget variance while a well-developed one is expected to eliminate variances. Finally, cost and efficiency should be considered as possible factors for budget variance.
References
Cleverley, W., & Cleverley, J. (2018). Essentials of health care finance (8th ed.). Burlington, MA: John & Barret Learning.
Mason, D. J., Leavitt, J. K., & Chaffe, M. W. (2014). Policy & politics in nursing and health care (6th ed.). St. Louis, MR: Elsevier.
Penner, S. (2013). Economics and financial management for nurses and nurse leaders (2nd ed.). New York, NY: Springer.