Transition Budget Blog Series

       I.   Transition Budget Overview and Approach (October 2013)

      II.     Building the Transition Budget

                 a. Gathering The necessary Information (January 2014)

                 b. Assembling and Validating the ROM Budget (February 2014)

      III.    Implementing and Managing the Transition Budget (March 2014)

      IV.    Transition Budget Best Practices and Lessons Learned (May 2014)

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      II.a.  Gathering the Necessary Information to Build a Transition Budget

MoneyAs a reminder: the development of a thorough and comprehensive transition budget is a critical component of a successful healthcare facility activation plan.  Covering the financial gap between the project budget and a hospital’s operating budget, the transition budget should be a temporary cost center established to support the one-time activities related to the activation of a new facility. These activities can typically be classified in one of the 5 budget categories described in Part 1 of this series. Although it is rarely supported by additional funding sources, a transition budget is created to provide relief to an organization’s operating budgets. Additionally, since many transition-related costs can be anticipated, this budget prevents unnecessary variances and negative impacts to a department’s productivity figures.

In the last installment, we reviewed the various approaches that an organization may take when developing a transition budget. In this entry, we will cover the steps in which key information must be collected and reviewed to develop a transition budget.

Step 1: Identify departments that will be impacted by the Transition. In order to determine the specific resources required by each department, and to estimate the total support needed to activate the facility, each department’s level of impact must be assessed. The most efficient approach is to take a department listing from the organization’s general ledger (GL) system and code each department/cost center as follows:

1-      Department will be relocating in full to the new facility

2-      Department will be expanding to/working in the new facility

3-      Department will be remotely supporting the new facility

4-      Department will not be impacted by the new facility

Step 2: Identify staff that will be impacted by the Transition. Once the departments/cost centers are coded using the above methodology, and employee listing from the organization’s payroll system should be obtained.  Since the Transition Budget is based on headcount, unlike an operating budget’s FTE basis, it is important to have an accurate quantity of staff by each position level within each department. This will not only allow for an accurate training estimate, but it will also inform the Education Team regarding the size and number of classes that will be required. Additionally, the average hourly rate information for each position will be adjusted for the various fiscal years that that hospital resources will be required to support the activation of the new facility.

Step 3: Determine what is already covered in a different budget.  Before soliciting resource requirements from department heads or obtaining quotes for third party services, it is critical to understand what, if anything, has already been allocated in one of the project’s budgets or in the hospital’s projected operating and capital budgets. The avoidance of double-counting is a critical component to eventual budget approval. Additionally, the schedule for the turnover of the building will inform when costs such as utilities or site security will become the responsibility of the hospital to be paid out of the transition budge. The figure below describes the spectrum of budget types.

Step 4: Estimate the expected training hours required for each position type for all departments that were categorized as a 1, 2 or 3 in Step 1 above. This estimate is based on an understanding of the new systems, equipment and technology that will impact staff workflows in the new facility. If this information is not yet known, work with your Transition Planner to establish baseline assumptions that can be used to develop the Rough Order of Magnitude (ROM) and which can be validate later on as more information becomes available.

The completion of these 4 preliminary data collection steps will make the development of the transition budget much more efficient and the eventual budget much more accurate. In the next part in this series, we will discuss how this data is used in conjunction with project and operational assumptions to build the actual transition budget.

– Jeff Agner, MPHc, Senior Project Manager and Director of Transition Planning, Transition Planning, HTS, Inc., JAgner@consultHTS.com.