DNP 840 Module 3 Operating Budget and Narrative Example

Paying for Time at Home: A Two-Year Operating Budget for a Nurse-Led Dementia Care Program

Student Name

Doctor of Nursing Practice Program, Aspen University

DNP 840: Strategic Planning and Financial Management

Instructor Name

Month Day, Year

Paying for Time at Home: A Two-Year Operating Budget for a Nurse-Led Dementia Care Program

An operating budget translates a service plan into expected revenue and expenses for a defined period, usually a fiscal year. It rests on a chain of assumptions: how many patients the service will see, how many staff it needs to serve them, what those staff cost, and what payers will pay. Nurse leaders are responsible for making those assumptions explicit and for explaining how the budget will be monitored (Finkler et al., 2013). This paper presents a two-year operating budget for the composite health system's proposed dementia care program, with a narrative explaining each assumption and the result.

Volume Assumptions

Volume drives almost every other figure. The strategic plan calls for 400 families enrolled by month 12 and about 700 by month 24. Because enrollment builds gradually, the budget uses average monthly enrollment rather than year-end totals: an average of 220 enrolled patients in year one and 550 in year two. Enrollment is expected to begin in the four practices whose panels hold the largest numbers of diagnosed patients and spread to the others from month seven.

Staffing is tied to caseload. Each registered nurse dementia care manager carries up to 100 families, supported by care navigators who handle scheduling, resource referrals and routine check-in calls. Staffing therefore rises from four care managers in the first year to six in the second.

Expenses

Personnel costs make up about 90% of expenses, which is typical of care management services. First-year salaries total $847,000: a doctoral-prepared nurse practitioner as program director ($165,000), four registered nurse care managers ($392,000), two bilingual care navigators ($104,000), one social worker ($78,000), a geriatrician at 0.2 full-time equivalent ($60,000) and a program coordinator ($48,000). Benefits are budgeted at the health system's standard rate of 28%, or $237,160, for total personnel costs of $1,084,160.

Other expenses total $122,000: respite vouchers for families in crisis ($60,000), mileage for home visits ($24,000), telehealth and care management software ($18,000), staff training ($12,000) and supplies and caregiver education materials ($8,000). Total first-year expenses are $1,206,160. In year two, staffing rises to six care managers, three navigators, 1.5 social workers, 0.3 geriatrician and 1.5 coordinators, bringing salaries to $1,188,000 and total expenses, with benefits and $180,000 in other costs, to $1,700,640.

Revenue

Revenue comes from three sources. The largest is a monthly payment per enrolled Medicare beneficiary for dementia care navigation and caregiver support. Because rates vary with patient complexity and may change, the budget uses a planning assumption of $180 per patient per month, averaged across tiers, to be replaced with the actual rate once confirmed. In year one this yields 220 patients times 12 months times $180, or $475,200. Second, each new patient receives a comprehensive cognitive care planning visit, assumed to pay $280: 400 visits bring $112,000 in year one. Third, the program director and a supervising physician provide follow-up visits, assumed to average three per patient per year at $110, for $132,000. In year two, navigation payments rise to $1,188,000 with 550 patients enrolled on average, care planning visits to $266,000 because returning patients receive a repeat visit about every six months, for an assumed 950 visits, and follow-up visits to $181,500.

The budget counts shared savings cautiously. About 45% of enrolled patients are expected to be attributed to the health system's value-based contracts. A comprehensive dementia program in Indianapolis reported annual net savings of up to $2,856 per patient (French et al., 2014); this budget assumes only $1,000 per attributed patient-year, of which the health system keeps half. That adds $49,500 in year one and $123,750 in year two. Savings are paid after the contract year closes, so they arrive late and are not guaranteed.

The Budget

The table summarizes both years.

Interpreting the Result

The program loses $437,460 in year one, mostly because it must hire staff before enrollment reaches the level those staff can serve. In year two, with 550 enrolled patients on average, it produces a small surplus of $58,610, which meets the plan's target for year two. The two-year cumulative result is a loss of $378,850, which the health system should treat as a start-up investment.

Cost per patient offers a check on efficiency. Year-two expenses equal about $3,092 per patient per year, or about $773 per quarter. A comprehensive program at an academic health system reported program costs of $317 per patient per quarter and found that total Medicare costs, after counting the program, were about the same as for comparison patients (Jennings et al., 2019). This budget's higher figure partly reflects respite vouchers and bilingual navigators, and partly the fact that the program is still growing into its staffing. The gap is a reason to watch caseloads closely as enrollment rises.

Risks and Monitoring

The budget is most sensitive to enrollment and to the navigation payment. Each 10 fewer patients in average enrollment reduces navigation revenue by $21,600 a year, and a lower payment rate would reduce revenue across all patients. The program director will report enrollment, revenue and expenses monthly against budget, explain any variance larger than 5%, and adjust hiring if enrollment runs behind plan. The second and later care manager positions in year two will be filled only when caseloads reach 85 families per nurse. Hiring is a second risk: if care manager positions stay open longer than planned, enrollment will lag and revenue with it, although salary costs will also be lower, so the net effect on the first-year loss would be modest.

Conclusion

The two-year operating budget shows a program that loses money in its first year and covers its direct costs in its second, under cautious assumptions about payment and shared savings. Tying staffing to caseload, labeling payment rates as planning assumptions and monitoring enrollment monthly give leaders a clear picture of the investment they are making and the conditions under which it will pay for itself.

References

Finkler, S. A., Jones, C. B., & Kovner, C. T. (2013). Financial management for nurse managers and executives (4th ed.). Elsevier Saunders.

French, D. D., LaMantia, M. A., Livin, L. R., Herceg, D., Alder, C. A., & Boustani, M. A. (2014). Healthy Aging Brain Center improved care coordination and produced net savings. Health Affairs, 33(4), 613-618. https://doi.org/10.1377/hlthaff.2013.1221

Jennings, L. A., Laffan, A. M., Schlissel, A. C., Colligan, E., Tan, Z., Wenger, N. S., & Reuben, D. B. (2019). Health care utilization and cost outcomes of a comprehensive dementia care program for Medicare beneficiaries. JAMA Internal Medicine, 179(2), 161-166. https://doi.org/10.1001/jamainternmed.2018.5579