A Guide To Ward Staffing Budgets - Nursing Leadership
A guide to ward staffing budgets
CONTENTSIntroduction3-4SECTION 1Budgets5-10SECTION 2Managing & Controlling spend11-14SECTION 3How is the Health Service financed?15-18SECTION 4Benchmarking & sharing best practice19-20SECTION 5Preparing a Business Case &21-24Managing ChangeSECTION 6Managing the Nursing resource25-32SECTION 7Leadership Skills33-38SECTION 8Numerical Exercises39-42SECTION 9Practical Case Study & Workings43-55Answers56-58Summary592
IntroductionThe Secretary of State for Health, The Right Honourable AlanMilburn, announced at the CNO annual Conference (Harrogate)2001 that the Modernisation Agency will, over the next 12 months,lead a management programme to support the devolution ofstaffing budgets to those ward sisters and charge nurses inEngland’s hospitals who do not yet have that control.He states that “ward sisters and charge nurses are in the bestplaces to know the day to day needs of patients and the hour byhour demands on staff. It is because they understand that theyshould be in control. They should be able to decide the mix ofgrades, the mix of skills, the mix of jobs they need on the ward.Patients on a ward, particularly the elderly and most vulnerable,need caring skills alongside clinical skills. Some feel that over thelast few decades these caring skills have got lost. I believe it istime to re-emphasise them. That is why we have placed such astrong emphasis on cleaning up the wards, improving the food andintroducing new jobs such as ward housekeepers to make surethat patients day to day needs are being met. Meeting patients’needs will be enhanced by allowing ward sisters to decide thenumber and mix of nurses, care assistants and wardhousekeepers. It will be the job of matrons to support ward sistersand charge nurses to discharge these functions.”Many ward sisters/charge nurses already have control of theirward staffing budgets. This guide is aimed at both those whoalready have responsibility for managing their budgets and thosewho currently do not. It is therefore seen as a learning aid, anddevelopmental tool, for all ward sisters and charge nurses.In order to ensure that they are fully equipped with the necessaryskills and information, this guide examines fundamental aspects ofbudgeting and budgetary control. It also looks at leadership skillswhich are essential for managing the budget effectively.3
The guide is divided into nine sectionsBudgets.Managing & Controlling spend.How is the Health Service financed?Benchmarking & sharing best practice.Preparing a Business Case & Managing Change.Managing the Nursing resource.Leadership Skills.Numerical Exercises.Practical Case Study.Each section includes case studies to help practically illustrateeach subject area.4
SECTION 1BUDGETSBudgets are used to plan and control operations and finance bythe majority of organisations.Defining budgetingBudgets and budgeting can be defined in a variety of waysdepending on the individual or organisation. However, to budgetis generally to determine how much cash is available to anindividual/organisation. A budget will provide you with a costingfor both income and expenditure.Why are Budgets used?Budgets are used to plan, monitor, control and measureperformance.A budget will be set at the beginning of eachfinancial year (a financial year runs from April 1stto March 31st). Actual spend is then comparedwith the original budget allocation. Reasons willthen be identified for overspend or underspend,which are referred to as variances in the budgetstatement. Action is then taken to control anyvariances and the budgets will be reviewed onthe basis of this information.ACTION 1Think about your own personal finances i.e. outgoing –mortgage/rent/car/food and incoming – salary/interest frominvestment.5
What is a balance sheet?A balance sheet is a financial snapshot of your business and thusincludes:Assets An asset is something that yourbusiness owns:Assets can be:Current i.e. – cash, accounts, prepaid rent, or,Fixed i.e. – furniture, equipment.The statement is normally broken down into staff and non-staffcosts.Staff costs will include:SalariesOvertimeTrainingNon staff costs include:Supplies i.e. dressings, bedding etc.DrugsEquipmentEach cost will then be aligned to a cost centre, which again varyfrom Trust to Trust. The cost centre is an area of accountabilityfor expenditure i.e. Drugs will have a unique cost centre.Each department has a cost centre and each type of cost has anaccount code.For exampleCost Centre 1665Account Code 17753 OrthopaedicsNurse - Grade FIf there are cost centres within your budget which you do notunderstand or you do not know what they are aligned to, youraccountant will have this information and should provide you witha print out of all cost centres and cost codes.The statement will then have sub total costs for each section anda total cost for a given period.6
A budget statement will hold all income and expenditure within agiven period. The statement will typically be as follows, however,there will be variations on this by Trust.Budget columnsWhat do they mean?BudgetActual spendAmount available to spendMonies already spent to date. Thiswill probably be by month and a yearto date figure, which will show howmuch money has been spent out ofthe budget from the beginning of thefinancial year.Number of staff in post displayed as‘Whole Time Equivalent’.This figure relates to the amount offunds that are expected to be spentin each area for a given period.This is calculated by subtractingactualspendfromplanned/forecasted spend.This will beshown as a positive or negative.This is the amount of funds left thatare available to spend.StaffForecastVarianceAmount remainingRegular meetings with your accountant will help to explain anyareas of confusion. This will also provide an opportunity tohighlight any areas of overspend and discuss possible optionsrelated to this. Managing a budget can be quite a lonely task andat times it can feel as if you have no support. Involving allmembers of staff on your ward is beneficial for a number ofreasons:Provides another perspective.Helps to discuss matters relating to costs.Can be used to train other staff in budget management –which would be developmental for junior staff.Ward sisters/charge nurses may sometimes be seen asthe ‘bad guy’ when saying no to requests. Involving staffwould allow them to see the reality of what monies areavailable.Encourages staff to work as a team, promotes involvement.7
By also involving medics and pharmacists in these discussions, itensures that all members working on the ward have fullknowledge of the budget. Matters of importance can be raised,for example the use of drugs can be discussed. For effective useand control of funds the budget should be viewed as everyindividual's responsibility.Resource/Link peopleIt is essential to make links with key people/departments within anorganisationSuppliesLiase with supplies to look at competitive options for products.Look at stock levels which you currently hold, rather than ‘toppingup’ with each supply order, discuss with other members of staff todetermine what is needed and the amount which is required. Thiswill ensure that stocks are not wasted and misused.PharmacyStocking levels need to be determined. Check stock that you arecurrently holding, you may find that you have supplies of drugswhich will be out of date if they are not used. Rather thanordering on the basis of ‘just in case’, look at the dependency ofyour ward and what is needed. Forward planning can help in thissituation.StaffingThe greatest expenditure on a ward is staffing. In order for you todefend your staffing levels and requirements, it may be necessaryto choose a model to display why you require X amount of staff.Alternatively, you may wish to develop a model that is unique toyour department with the help of other members of staffPatient dependencyIn order to determine the patient dependency on your ward. It isnecessary to determine the patient need, planned nursing hours,available nursing hours and the cost of this nursing care for eachpatient. This will again help to defend your staffing needs, and willhelp to organise your staffing rotas.8
StaffIn order for you to manage your budget effectively, it is essentialto involve other members of staff. This will help to discuss ideasand highlight any areas which are causing concern. Budgetingmust be seen as the whole department’s responsibility and notjust the budget holder’s.AccountantA regular contact in accounts should also be identified, in order todiscuss issues regarding your budget. This contact can then beused as a point of help, for example to explain elements of thebudget.9
Case StudyPhilip, a charge nurse on a Paediatric ward is looking over his monthlybudget statements, and he seems to be consistently overspent.However, he has reduced his use of agency staff, and cannot see wherehe can possibly reduce costs further.Expenditure on drugs is consistently high, but Philip does not see thisas an expense he can control, as it is the consultants who prescribe thedrugs. He decides to look into this further. Therefore, he checks thecurrent level of supplies and discusses his concern with other wardmembers, and discovers that there are many drugs which are actuallyout of date.The method of ordering seems to be simply the submitting of a similarform every month, without checking on current supplies and changesin usage rates. Philip decides to organise a system whereby orders arecompared against supplies, and then checked when received. It isdecided that the usage of drugs should be an item on the ward meetingagenda.Philip advocates the use of competitive shopping rather than simplytopping up existing stocks, he also invites the pharmacists andconsultants to the arranged meetings to discuss the use of certaindrugs in more depth. Philip finds that in the short term his drug bill hasdecreased marginally, due to the re-examination of old stock. However,in the long term the ward’s drug bill is considerably decreased, byinvestigating other drugs available on the market, which werehighlighted by the pharmacist and consultant.ACTION 2Who would you involve in meetings in the future, think abouta time when this would have been useful?10
SECTION 2MANAGING & CONTROLLING SPENDINGControllable/non controllable costsControllable costs are due to factors within the organisation whichcan be controlled or corrected by the organisation.Non controllable costs are affected by factors outside the controlof the organisation.An example of a non-controllable cost would be a generalincrease in the cost of utilities i.e. electricity, water etc.A controllable cost would be an increase in price by a designatedsupplier. Using a less expensive supplier could control this.For example:Related to your own domestic financesYour car payments each month are 200General increase in insurance premiums –Non-Controllable. Your monthly allowancemay need to be adapted to include theseincreases.Petrol costs are high - Controllable – can lookfor a new supplier or use public transportmore often.An allocated budget may be assigned to a ward/department,however, a budget manager has control of these funds andtherefore should spend the budget on what they see asnecessary.11
For example if a ward sister is given anequivalent of 12 salaries.One month she may find that she has twovacancies. As there are no staff off sick thismonth and no staff training, the ward canoperate satisfactorily. However, the next monthShe may have 12 nurses in post, but with several staff off sickShe needs to book more cover – agency staff, overtime etc.In any budget there are items which can be controlled and itemswhich cannot. For example, staffing is a budget item which abudget manager can only have limited control over.Incircumstances such as unforeseeable absences the budgetholder does not have any control. However, it is essential to planfor changes by looking at the rate of dependency on each shiftperiod, and plan for increased activity.ACTION 1List types of costs that you have control over and thosewhich you do not.There will also be costs which can change on a day to day basisdepending on the level of activity on the ward, and those whichare not affected by change. These are referred to as fixed andvariable costs respectively.For example, a fixed cost could be building costs, electricity,water etc. These types of costs do not change depending on theactivity on the ward.12
Variable costs, however, could be drugs, dressings etc, which willrise or fall depending on the level of activity. However, there arealso stepped fixed costs which change dramatically according tochanges in demand/activity. For example, if a department wasexpanding and needed more staff/facilities/space, then therewould be a large jump in expenditure which would then plateau,once the optimum level of resources had been achieved.ACTION 2Think about the fixed and variable costs in your department,are there any which you are unsure of i.e. you think that theymay have elements of both? (Fixed and semi variable)Monitoring spendIt is important to keep a file of all budget statements received, thisway expenditure trends can be highlighted and examined. Checkthat what appears on your monthly budget statement is in linewith what you accounted for that month.OverspendWhen a budget is overspent it is important to look at the followingareas:Check your budget statement to ensure that all expenditurerelates to your department. Check that you understand allelements of the budget.Examine your statement in detail to decipher what exactly iscausing the overspend. Is it aligned to one particular area, or areyou overspent throughout the budget?Forecast what you think your spend will be at the end of the year,taking into account all considerations. It may be that your costswill average out over the year to total your allocated annualbudget.13
Look at what you have authority over. What can you change ordecrease to reduce costs?Involve your staff and look at new ways of operating. Workingwith your staff to ensure they understand the budget statementwill help you and your ward to understand the cost which appliesto each area or function.However, your overspend may be completely unavoidable. If thisis the case, then your budget may need to be reviewed. Discussthis with your manager and accountant and, by raising the issuewith them, you are keeping them informed and allowing them tohave the information to monitor spend.Case studyCaroline is a ward sister on a maternity ward and has recently takenresponsibility for her ward budget. She examines the statement andcan see that she is consistently overspent. However, she can see thatshe will have difficulty making any cuts in terms of staff costs. Theward is already understaffed and she is currently putting together abusiness case for two more qualified members of staff.Caroline understands the importance of controlling and managing theward’s expenditure and keeping within her allocated budget. Carolineis invited to the monthly stores management team meeting. She is notlooking forward to this as she thinks it will be a waste of time andsimply a cost cutting exercise.However, she is pleasantly surprised. One of the agenda items is bed linen.The management team have looked at the previous month’s supply recordsand are concerned at the amount of linen being ordered. Caroline points outthat the linen they currently use is not of good quality. The sheets are thinand, as a result, staff need to order more as patients request more than onesheet. The thin sheets also wear and tear more easily, especially when theyhave been washed at high temperatures numerous times. Caroline suggestsusing new thicker and more hard wearing linen, which she knows is used inother hospitals. The management team decides to let Caroline use the newlinen for a trial run (1 month). At the next stores meeting Caroline presentsher results to the team: ordering of linen has reduced; and patients arehappier with the increase in quality. The decrease in the amount of linenordered and used has, therefore, resulted in a reduction in cost. Thishighlighted to Caroline that her clinical knowledge and experience on theward is extremely important. She decides to continue her involvement, andto encourage other – more junior members of staff to participate.14
SECTION 3HOW IS THE HEALTH SERVICE FINANCED?The actual direction and path of the funds throughout the NHS can be see in Figure 1.TAX PAYERTREASURYDEPARTMENTDEPARTMENT l EnvironmentCommunity SettingE.g.StaffingDressingsDrugsPATIENTG GRADEWARD SISTERS.A.F.FMODERNMATRONFigure 1: Path & direction of funds in the NHSBUSINESSMANAGERNHSTRUSTSPRIMARY CAREGROUPS/PRIMARY CARETRUSTS
ACTION 1List sources of finance for the NHSSources of fundsNHS funding mainly comes directly from taxes collected by theTreasury. The Department of Health must compete with otherGovernment departments for funds (e.g. transport, education anddefence). The amount of funds allocated by the Exchequer isbased on the needs and expectations of the NHS in light ofeconomic and political priorities.The funds are then allocated to Health & Social Care regions andthen Health Authorities and PCT’s. The actual amounts allocatedare calculated by a Weighted Capitation Formula. This is themethod used to divide the funds in an effective manner thatreflects the individual needs of each area.The Formula calculates how much money an area needs, basedon Population, Age, Gender and Mortality Rates, and can alsoinvolve other special factors about the region.The Health Authorities reserve some of this funding for specialistservices e.g. transplant centres, severe mental health etc. Theremaining funds are then allocated to the Primary Care Trust.Each commissioner and provider of healthcare is linked throughservice agreements which are based on the NHS Plan, forexample:Health Improvement Programmes (HiMPs).Joint health/local authority plans (JIPs).General Government objectives and targets and developmentsof services.16
The funds are then divided up by the Health Authorities for thePrimary Care Groups or Primary Care Trusts. Once again, this isdone by using the Weighted Capitation Formula but on a morelocalised basis, based on GPs’ practice populations.The PCG/PCTs then form service agreementswith NHS Trusts in order to buy services for theirlocal population. NHS Trusts rely on this incomefor their financial support and offer a variety ofservices. Trusts are duty bound to break evenbetween the income from the PCG/PCT’s andtheir expenditure.The main budget plan is then designed by the Trust’s financedepartment, which will be based on decisions that are made in theService and Financial Framework (SaFF) negotiations. This isconstrained by the amount of money which has been assigned tothat Health Authority/PCT. SaFF negotiations are to determinethe funds available for each department and are held between theAutumn and April.The NHS Service and Financial Framework is the mechanismwhich relates demands on the service to the resources that areavailable.SaFF negotiations will include:Changes that will arise from National Service Frameworks(NSF's).What is required to deal with an increased volume of patients,and to reduce waiting times i.e. more staff, more beds, orincreasing the number of buildings.Compliance with regulatory requirements i.e. Health & Safety,HR strategy, Clinical Governance, EU regulation of workingtimes, Medical staffing training.Inflation costs.Pressures on costs i.e. increased use of agency staff, newdrugs.17
As well as ensuring that accounts are balanced, Trusts are nowaccountable for quality of care. Along with this, The Commissionfor Health Improvement's (CHI) aim is to improve the quality ofpatient care in the NHS. The patient's experience of the NHS is atthe heart of
SECTION 3 How is the Health Service financed? 15-18 SECTION 4 Benchmarking & sharing best practice 19-20 SECTION 5 Preparing a Business Case & 21-24 Managing Change SECTION 6 Managing the Nursing resource 25-32 SECTION 7 Leadership Skills 33-38 SECTION 8 Numerical Exercises 39-42 SECTION 9 Practical Case Study & Workings 43-55 Answers 56-58 Summary 59 . 3 Introduction The Secretary of State .
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