Budgeting in Health Care

Why its important for nurse managers to understand principles of capital budgeting

Nurse Manager and Capital Budgeting Knowledge

To succeed in her/his duties as a nurse manager, an individual must possess business skills mainly in three areas: financial management, strategic management, and human resources (Danna, 2017). Under the financial management discipline, the nurse manager gains knowledge of the capital budgeting principles. In his duties, the nurse will be required to make decisions on the need for investment on various health care facilities and equipment. Given the nature of these investments: commitment of a huge sum of money today for some future anticipated benefits; time lag before cash flows begin to be realized; a risky venture because the returns are to be received in the future that inherently uncertain; irreversibility of the decision; and a possibility of lack of second-hand market of the purchased equipment due to their specialized nature (Chandra, 2014).

In their study, Himmelstein, et al. (2014) noted that the reasons why administrative costs differed among the health facilities were attributed to the managers’ ability to procure and coordinate equipment , supplies and facilities as well as the personnel for the care. Zismer, Sterns and Claus (2011)stated that the US healthcare system has intensive capital assets requirements yet the hospital executives focused less on the capital assets management and efficiency. Therefore, being an expert in capital budgeting is paramount as the manager will first analyze the project for its feasibility before committing the resources.

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Proposed Investment

Working at the Veterans Hospital in primary care, the equipment I would like purchased are the ambulatory care facilities, which will include investment in imaging centers, cancer centers, surgery, neighborhood-focused community clinics as well as the medical office buildings.

An Explanation and an Outline Demonstrating the Need for Ambulatory Care Facilities

Demonstrating the rationale for this investment begins with an explanation of need existence. Today, in the US there is the need for an improved primary care owing to the changing demographics, increase in the cases of terminal ailments,  and passage of legislations such as the Affordable care Act. These changes imply that the citizens under the coverage will rise, and may strain the available facilities; thus need for more. For instance, the National Cancer Institute (2017) reported that the cancer had become a burden in the US with 1,685,210 new cases forecasted to be diagnosed in 2016, and in which 595,690 would die.

In addition, the decision makers must get informed of the benefits, and which must outweigh the costs. For example, in the well managed facilities, Zismer, Sterns and Claus (2011) reported that the return on investments were 17% and 23% in 2004 and 2009 respectively.



Chandra, P. (2014). Fundamentals of financial management. McGraw Hill Education (India).

Danna, D. (2017). Essential business skills for nurse managers. Retrieved March 31, 2017, from Strategies for Nurse Managers, Inc.: http://www.strategiesfornursemanagers.com/ce_detail/204441.cfm#

Himmelstein, D. U., Jun, M., Busse, R., Chevreul, K., Geissler, A., Jeurissen, P., et al. (2014). A comparison of hospital administrative costs in eight nations: US costs exceed all others by far. Health Affairs, Vol. 33 (9), 1586-1595.

National Cancer Institute. (2017, March 22). Cancer statistics. Retrieved March 31, 2017, from National Cancer Institute: https://www.cancer.gov/about-cancer/understanding/statistics

Zismer, D. K., Sterns, J. B., & Claus, B. (2011). Capital efficiency and integrated health system designs. Healthcare Financial Management, Vol. 65 (7), 88-90.

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