Introduction
The North Shore University Hospital encounters issues with extensive employee turnover and deteriorated motivation from staff members. Due to the constant escalation of the problems, the facility’s management seeks to renovate the nurse’s lounge to improve its comfort, thus enhancing subordinates’ morale. The medical center has a 50-bed patient capacity, and its elevated popularity has led it to record a high patient admission rate. The company’s executive wants to showcase to the nurses how they are essential to the institution’s continuous improvement by renovating the nurses’ lounge to offer ambiance (Malmmose, 2019). It is essential to pinpoint and examine the cost of accomplishing the renovation of the nurses’ lounge via capital budget estimates. Capital acquisition positively impacts health facilities by increasing their return on investment.
Capital Acquisition Description
Regarding the scope, the lounge area renovation will require hiring a contractor to manage all the activities from project initiation to its termination. A tender will be published, and four contractors will be chosen to highlight the entire task quotations and elaborate on their work experience and background integrated with the right documents and licenses to practice (Goyal & Kumar, 2021). Before the start of the operation, the nurses will be requested to select the best lounge layout. The new capacity of the lounger will accommodate 100 people, the key aesthetics will include art and decorations, and amenities, such as television, free internet, comfortable couches, ventilators, and a coffee table will be available. The contractor will be paid a down payment of $1,950, and after the completion of the renovation, they will be paid $1,000. The key deliverable will be renovating the old nurses’ lounge to avoid a high turnover rate. The expected timeline for the renovation is three months, and all the costs will be incurred internally by the hospital. The project schedule aids in determining what the contractor requires to renovate the nurses’ lounge.
Capital Budget Justification
Notably, the nurse’s lounge renovation will reduce the nurses’ work stress, increasing their job motivation. Increased morale can increase employees’ work output, resulting in improved organizational performance and productivity (Moreira, Rodrigues, Korotaev, Al-Muhtadi, & Kumar, 2019). The nurse renovation will help reduce health practitioner burnout and not attend care delivery services. As a result, the nurses will be able to offer quality patient care and safety services without delay while observing nursing ethical principles (Aoun & Alaaraj, 2019). The North Shore University Hospital’s mission is to provide exceptional quality care to patients. The company’s goals include becoming a top-notch health facility in the United States and offering nurses a conducive work environment to perform their duties. The renovation of the nurses’ lounge rhymes with the medical center’s mission and objectives as it will ensure the management does not hire new workers who might not have the much-needed experience, thus damaging the firm’s reputation. The renovation will create a serene environment, resulting in a decline in turnover rate and increased motivation, leading to escalated patient flow and improved revenue generation for the company.
Capital Budget Preparation
Table 1: Capital Budget
In the nurse’s lounge renovation project, the capital budget assists in creating financial stability. Table 1 illustrates the total budget of $1,124,060 required to renovate the nurses’ lounge at the North Shore University Hospital. The budget helps track the expenses and follow the project plan to easily pay bills (Spaulding et al., 2018). The budget line item for contingency is $660 to cover unforeseen expenses, such as product price increases due to inflation. The minimum dollar amount of the budget is the purchase of a microwave at $200, while the direct expenses include salaries and supplies and communication tools and equipment. At the same time, the indirect expenses are taxes and fees and other costs, including sewerage and water bills.
Process of Calculating Costs
In determining the expenses, the primary sources of cost information for the renovation project include the contractor with which the company has developed the contractual relationship, insurance company partners, and the cost models. For example, the contractor estimated the price of the hospital’s assets, including fittings and fixtures, fridge, television, and microwave. The cost data of the items included in the budget are current and reliable as the company management conducted extensive market feasibility of the quotes of the products to ensure they rhyme with the existing market price (Goyal & Kumar, 2021). The teams to consult in determining the costs include the nurses and the contractor. For instance, the contractors have extensive knowledge of the feedback booth installation and functionality and its current price in the market. However, the methods of cost calculation include expert judgment and parametric estimation.
Present Plan for Budget Management
The hospital’s financial department team will disintegrate the budget to the expected accomplishment date and project deliverables, thus managing it. The contractor will work closely with the budget committee to ensure the proper allocation of costs to the acquired items. For instance, the fixtures and fittings costing $450,000 and needing to be paid by December need to be disintegrated into attainable weekly deliverables. The hospital’s management will collaborate with the surrounding schools, providing art and decoration materials to the facility. The cost control methods for the renovation project include tracking the expenses using bi-weekly checkpoints and time management (Goyal & Kumar, 2021). For the prices of items that are expected to vary, including the feedback, before their purchase, there will be pre-approval from the hospital management to authorize the usage of miscellaneous capital to cover discrepancies.
How Renovation Impacts the Financial Health of the North Shore University Hospital
The renovation of the nurses’ lounge yields a higher return on investment (ROI). Investing in over $1.1 million increases revenue generation by lowering the costs related to high staff turnover and avoiding other possible expenses, including training and paying benefits to new workers (Malmmose, 2019). The estimated time to recover the cost of renovation is one year. Notably, the speculation results in the appreciation of assets, including fixtures and fittings. At the same time, the depreciation of properties reduces tax liability, which is an expense to the company, leading to escalated cash flow.
Conclusion
Capital acquisition positively impacts medical centers by escalating their return on investment through revenue generation. The low motivation and high turnover rate among nurses at the North Shore University Hospital spearhead low patient care, damaging the company’s reputation. Even though the renovation of the nurses’ lounge is costly, it will eventually result in increased cash flow to the facility contrasted to recruiting and paying benefits to new employees.
References
Aoun, M., & Alaaraj, H. (2019). Balancing hospital’s financials through implementing cost of quality models. Journal of Accounting and Finance in Emerging Economies, 5(2), 197-202. Web.
Goyal, K., & Kumar, S. (2021). Financial literacy: A systematic review and bibliometric analysis. International Journal of Consumer Studies, 45(1), 80-105. Web.
Malmmose, M. (2019). Accounting research on health care: Trends and gaps. Financial Accountability & Management, 35(1), 90-114. Web.
Moreira, M. W., Rodrigues, J. J., Korotaev, V., Al-Muhtadi, J., & Kumar, N. (2019). A comprehensive review on smart decision support systems for health care. Institute of Electrical and Electronics Engineers Systems Journal, 13(3), 3536-3545. Web.
Spaulding, A., Zhao, M., Haley, D. R., Liu, X., Xu, J., & Homier, N. (2018). Resource dependency and hospital performance in hospital value-based purchasing. The Health Care Manager, 37(4), 299-310. Web.