Review of the Financial Equations Included in Transport

Budgeting is an important part of planning for a transport program's organi­zational structure and resources. The budget is probably the most fundamen­tal financial document any division of a health care organization develops and may be the first encounter that a health care manager has with account­ing information.

The budgeting process and the results of the approved budget plan serve to allocate limited organizational resources among competing users. Comparing actual results with budgeted results helps to evaluate the perfor­mance of individuals, contractual agreements, and system operations and illustrates the relative revenues and expenses and their respective variances.

When establishing a budget, managers should consider the fixed and variable costs of a transport program (Table 15.1). Fixed costs include build­ings, utilities, compensation of salaried employees (including administrative

Table 15.1: Transport Costs

Fixed Costs

1. Facility costs

• Utilities

• Maintenance

2. Personnel costs (salaried employees)

• Fringe benefits

• Wages

3. Planned and scheduled equipment maintenance

4.Durable equipment depreciation and replacement

• Transport vehicles (owned or leased by the institution)

• Monitoring equipment

5.Contract requirements

Variable Costs

1. Disposable supplies

2. New equipment and preventive maintenance

3. Nonsalaried, variable personnel costs

• Wages (hourly employees)

• Fringe benefits (hourly employees)

• Overtime wages

4.Vehicle usage costs

• Unscheduled vehicular repair

• Mileage costs

• Fuel costs personnel), physical plant maintenance, owned or leased transport vehicles, and existing equipment. Variable costs include supplies, new equipment, wages of part-time or registry employees, vehicle maintenance, mileage and fuel costs, and overtime wages.

To best understand the transport service's financial position, a compre­hensive financial analysis is necessary to evaluate the strengths and weak­nesses of the current transport team contracts. Each payer's contracted reimbursement rate needs to be evaluated and compared with the transport team's cost/charge ratio.

Transport team revenue and margins by payer class, segmented by Medicare, Medicaid, commercial, managed care, and self-paid categories, should be delineated. Transport cost/charge ratio trends and statistical comparisons with industry benchmarks should be developed. Collaboration with established experts within the institution will be important to under­stand and strategize regarding the impact of financial data.

Furthermore, transport costs per adjusted (a financial calculation and comparator that includes all of the hospital's inpatient and outpatient ser­vices) discharge and adjusted patient transport should be ascertained in addition to a statement of operations analyses and balance sheet analyses. Depending on the employee status of the transport team and the physicians at the institution, the highest reimbursement per transport may be if all charges (physician, nurse, nurse practitioner, respiratory care practitioner, supplies, and equipment) are billed to the patient and collected directly by the institution. The institution should evaluate whether the revenues will be sufficient to support the number of full-time-equivalent positions necessary to provide the coverage required for the transport team.