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Implementing a Best Practice Budgeting System for Healthcare Organizations

May 12, 2023 | 0 comments

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May 12, 2023 | Essays | 0 comments


The article provides insight into a unique budget setting strategy that is ideal for strategic planning and future analysis of financial strength in healthcare organizations. The writer begins by highlighting the need for change in the traditional budgeting systems that are the standard ways through which health care organizations budget. Traditional top-down systems of budgets are characterized by overestimates which inflate the budget making it unreasonable or difficult to maintain, low-ball expenditure techniques that force the organization to look for additional finances during the year, and a complete lack of knowledge of the market which leads to underestimates.

The best practice approach highlighted by the article, suggests bringing together the three integral parts of planning that are; laying down the plan, implementation, and monitoring through management. This allows the financial managers to apply the resources of the company wisely and in the best manner to support the strategic plans of the organization.

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Key Concepts

The first and most vital step towards the success of the strategic plan is the development of strategic and financial plans. Most organizations focus on one of the plans, ignoring or limiting resources required for the development of the other. In essence, the two plans should be tackled concurrently.

Secondly, department heads should be made aware of the plans including the objectives. In this way, they can provide insight into the resources they may need for the same. Further, it is easier to ensure that all members of the organization are on board with the plans if they are kept in the loop about the objectives of the strategic and financial plan.

Because the department heads are aware of the objectives, it is important to allow them to provide feedback. Feedback should be twp way, with planners providing feedback on the suggestions made by the departments and departments doing the same for planners.

While developing the first pass budget, the team takes into consideration suggestions made by department heads and data gathered from the feedback mechanism. Some of the data such as patient numbers can be found or calculated through the history of the organization.

Once again unlike the traditional budgeting systems where the top management makes the entire budget and only includes lower management in implementation; the budget is given to department heads. They are allowed to make suggestions and recommendations. According to Gapenski (1999), this step is crucial in allowing the managers to take responsibility and accountability for the final budget.

Finally, the planners take into consideration the recommendations and identify areas where changes need to be made. Such changes are made, a final review by the planners takes place to ensure that the budget remains in line with the strategic objectives and the final budget is released. It is important to note that the budget in this case becomes a daily management tool, driving the day to day activities. Actions of the company and managers’ decisions must be measured to ensure they remain in line with the budget daily.


For an organization to successfully input the best practice budgeting system, such an organization needs to adapt to change easily. Movement from traditional budgeting to the new approach can be paved with challenges. However, as long as the organization is willing to embrace change, this easy to use and maintenance system of budgeting can be implemented.


In conclusion, the adoption of a best practice budgeting system holds immense potential for healthcare organizations. By shifting away from traditional top-down approaches and embracing a more collaborative and strategic approach, organizations can enhance their financial strength and optimize resource allocation. The key concepts of simultaneous development of strategic and financial plans, effective communication with department heads, two-way feedback mechanisms, and accountability in budget creation empower managers to make informed decisions that align with the organization’s goals. This dynamic budgeting system becomes a daily management tool, guiding day-to-day activities and ensuring the organization stays on track. While the transition may present challenges, organizations willing to embrace change can reap the benefits of a streamlined and efficient budgeting process. By implementing best practices in budgeting, healthcare organizations can better navigate the complexities of financial planning and position themselves for long-term success in a rapidly evolving industry.


Gapenski, L. C. (1999). Healthcare finance: An introduction to accounting and financial management. Chicago, IL: Health Administration Press.

Gapenski, L. C. (2013). Fundamentals of healthcare finance. Chicago: Health Administration Press.

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