How money influences politics and the health of a nation

Can You Be President, Senator Or A House Representative?

By Melvin J. Howard

Of course, you can! But under the current system, the way it is organized, even if you were the best person for the job you would, statistically speaking, not usually stand a chance unless you could raise at least $900,000 in campaign cash to spend in a house election, $5,000,000 for a senate election, and about $100 to $200 million for presidency adjust for inflation (that is the same as raising $270,000 to $540,000 per day, everyday, for one year). To get a sense of how much money is involved consider the fact that in 1976 the candidates and parties spent $160 million on the presidential elections, $1.2 billion in the 2000 elections, and $4 billion in the 2004 elections. The only way you can come up with $300 million, better yet $500 million to assure presidency, would be to have the support of wealthy interest groups. Public finance limits you by law, to $45 million if you choose to accept public finance help. So the question then remains what is to happen to the best person for the job if they have no money and don’t see things the way the big corporations, wealthy business owners and lobby groups see them. The current system has proven that the rule of the game, rather than the exception, is that if you don’t have the support of corporations, wealthy business owners and certain lobby groups, you will not even have a chance of holding major public offices. In 2002, 98% of House incumbents (those already holding a seat) and 85% of Senate incumbent were re-elected. Through the connections and loyalties that they have formed while in office, the incumbents are also able to raise far more in campaign funds than the challengers (a major reason for the re-election rates). The U.S. House re-election rate has been at over 90% for the last two decades. In the last 20 years, it was at its lowest point in 1970, when, if you were a House member already, you would have had an 85% chance of being re-elected. Odds of beating a US House incumbent based on spending by the challenger in 2000 elections:

Spending by Challenger

Odds of Winning

0

24:1

15:1

3:1

$500,000-$1 million

$1 million - $1.5 million

Over $1.5 million

Under $500,000

Money raised in 2002 election cycle: Senate:

Type of Candidate	Total Raised	Number of Candidates	Average Raised
Incumbent	$191,520,090	33	$5,803,639
Challenger	$71, 945, 307	71	$1,013,314
Open Seat	$106,411,603	42	$2,533,610
House:

Type of Candidate	Total Raised	Number of Candidates	Average Raised
Incumbent	$379,117,215	422	$898,382
Challenger	$96,037,295	486	$197,608
Open Seat	$162,659,152	391	$416,008

Spending vs. Winning stats for 2000 election cycle:

Senate:
Average Winner Spent	$7,266,576
Average Loser Spent	$3,864,638
Number of Incumbents Seeking Reelection	29
Number of Incumbents Reelected	23
Incumbents Reelection Rate	79%
House:
Average Winner Spent	$840,300
Average Loser Spent	$307,121
Number of Incumbents Seeking Reelection	403
Number of Incumbents Reelected	394
Incumbents Reelection Rate	98%

Biggest Contributions in the 2002 Elections for Senate candidates (notice the composition of the contributors in this list):

Contributor Goldman Sachs

Total $585,870

Recipient Jon S. Corzine (D-NJ)

Emily's List	$500,389	Deborah Ann Stabenow (D                                            Mich)
Emily's List	$494,211	Jean Carnahan (D-Mo)
Emily's List	$426,645	Jeanne Shaheen (D-NH)
Goldman Sachs	$331,600	Charles E. Schumer (D-NY)
Emily's List	$297,753	Barbara Boxer (D-Calif)
Citigroup Inc	$261,416	Charles E. Schumer (D-NY)
MBNA Corp	$253,250	William V. Roth Jr. (R-Del)
MBNA Corp	$171,000	Olympia J. Snowe (R­Maine)
Robins, Kaplan et Al	$159,516	Michael V. Ciresi (D-Minn)
Bear Stearns	$157,750	Charles E. Schumer (D-NY)
Morgan Stanley Dean Witter & Co	$157,500	Charles E. Schumer (D-NY)
Microsoft Corp	$153,360	Slade Gorton (R-Wash)
Credit Suisse First Boston	$148,544	Charles E. Schumer (D-NY)
Emily's List	$147,302	Rebecca Yanisch (D-Minn)
Credit Suisse First Boston	$146,750	Rudolph W. Giuliani (R-NY)
MBNA Corp	$133,000	Alfonse M. D'Amato (R-NY)
Bear Stearns	$132,400	Chris Dodd (D-Conn)
Merrill Lynch	$127,900	Charles E. Schumer (D-NY)
Kushner Companies	$126,000	Frank R. Lautenberg (D-NJ)
Moveon.org	$124,588	Walter F. Mondale (D-Minn)

MBNA Corp	$121,500	Arlen Specter (R-Pa)
Mandalay Resort Group	$115,800	John Ensign (R-Nev)
Fidelity National Financial	$115,400	Matt Fong (R-Calif)
Blank, Rome et al	$111,600	Arlen Specter (R-Pa)
Citigroup Inc	$108,664	Alfonse M. D'Amato (R-NY)
Altheimer & Gray	$107,600	Gery J. Chico (D-Ill)
Lehman Brothers	$107,000	Charles E. Schumer (D-NY)
Equitable Companies	$105,350	Alfonse M. D'Amato (R-NY)
Citigroup Inc	$101,900	Hillary Rodham Clinton (DNY)

General public contributions for 2002 election cycle:

The big corporations and the wealthy throw in large sums of money towards their candidate’s election. It actually becomes a race of who has the most money, in a sense. Interestingly, however, the general U.S. population is very non-participative. First, often only about 12% of Americans, on average, vote. The percentage that contributes any money to the proposed candidates (notice the use of the word ‘proposed’ instead of chosen, because the public often have nothing to do with choosing the proposed candidates) is even smaller, as this data shows:

Total US Population (Nov 13, 2002)	288,491,797
Total US adult population (age 18+)	214,381,817
% of US population giving $200+	0.23%
% of US population giving $1,000+	0.09%
% of US adult population giving $200+  % of US adult population giving $1,000+ 0.12%	0.30%

Political parties: How much they collect every election:

It is not only candidates that can collect donations for elections. Political parties also collect money every election cycle - from individuals, lobby groups and corporations. Here are the amounts collected for the 2001-2002 period for the parties only (without counting the presidential candidates amounts):

Democratic Party	$463,312,470
Republican Party	$691,646,873

This is over $1 billion in total.

When a congressman or woman retires, their political campaign funds are not taxed.

The Network:

An examination of past U.S. president’s election funding reveals how the system works from a certain perspective. George Bush raised $191 million in campaign funds in his last election in 2000, followed by Al Gore with $133 million, with the remaining candidates trailing far behind. Bush was the major recipient of all campaign funds from the oil and gas industry, receiving more money from that industry in that year alone than any other federal candidate in the last decade. The biggest companies in that industries to contribute in terms of dollar value were Texas-based, the biggest being, Enron. Interestingly, other energy industries also spent heavily on Bush, beating all their election-spending records by huge leaps. The electric and coal industries all spent heavily on the elections and on Bush in particular (the coal  industry spent 3 times what it spent the last elections before that). Bush was also the top recipient of the nuclear power industry’s generous contributions. In this same election, as you may expect, the alternative energy industry (wind, geothermal and solar energy) backed Al Gore, although their funds were dwarfed by those of the oil, coal and electricity industries. Now let us see what Bush’s administration looked like. One would expect that in a democracy, you would tend to find the most suitable people, from all walks of life, leading a country. You would expect to find teachers, doctors, artists, musicians – and so on. After all, each major group would tend to elect its representatives. So you would expect to find representatives from various groups (not just business groups). Let’s see how Bush’s administration measured up. As you will see, by some ‘coincidence’, there is little randomness in it. Most of Bush’s past administrations, the people who ran America, have three things in common: (1) almost all of them have extensive corporate connections; (2) some are the exact same ones that were there when his father was president (3) most of them have been friends for a very long time and done business together. Completely lacking representatives of other occupations and lifestyles that normally compose the public of America). Out of a population of almost 300 million Americans, in a democratic society where you might expect some randomness is the backgrounds of the top leadership, how ‘coincidental’ is it that only a group of old friends who happen to be well connected in big business and intelligence/military (and hardly from any of the other thousands of lifestyles) has been ‘elected and appointed to represent the people’?

President George Bush's Incoming Cabinet:

Cabinet Position	Cabinet Official	Corporate Connections
Agriculture Secretary	Ann Veneman	Monsanto, Pharmacia, Calgene
Attorney General	John Ashcroft	AT&T, Monsanto, Microsoft, Enterprise Rent-A-Car, Schering-Plough
Commerce Secretary	Don Evans	Tom Brown Inc. (oil & gas), TMBR/Sharp Drilling
Defense Secretary	Donald Rumsfeld	Pharmacia, Motorola, Sears, G.D. Searle, newspaper giant Tribune Company (L.A. Times and Chicago Tribune), Amylin Pharmaceuticals, Kellogg, Asea Borwn Boveri, Allstate, Gulfstream Aerospace

Energy Secretary	Spencer Abraham	GM, Ford, Lear
Health and Human Services Secretary	Tommy Thompson	Amtrak, Philip Morris, GE, Merck, Abbott Laboratories
Interior Secretary	Gale Norton	Brownstein Hyatt & Farber, Delta Petroleum, NL Industries, BP Amoco, Ford Motor Company
Labor Secretary	Elaine Chao	Northwest Airlines, Clorox, C.R. Bard, HCA-The Healthcare Company, Dole Food, Bank of America
Secretary of State Transportation Secretary	Colin Powell Norman Mineta	Gulfstream, America Online Lockheed Martin; Northwest Airlines; Greyhound; United Airlines; Union Pacific; Boeing
Treasury Secretary	Paul O'Neill	Alcoa, International Paper, Lucent Technologies
Veterans	Anthony Principi	Federal Network, QTC Medical
Affairs Secretary		Services, Lockheed Martin, Microsoft,
		Schering-Plough Corp., Ford Motor Company, Qualcomm Inc.

It is interesting to see how many conflicts of interest existed in these cabinet posts. Normally, you would expect that the best person for agriculture would run agriculture; the best for commerce would get that job, and so on. But it is nothing like that. For example, the Health and Human Services Secretary is meant to represent the people’s health for betterment, yet he has a vested interest in Philip Morris, a company that profits hugely from making and selling products that reduce health. The Agriculture Secretary is meant to look after the well-being of American agriculture and the food of the people, yet she has a vested interest in Monsanto and Pharmacia. Monsanto was one of the most controversial multinational, in Europe and Japan for its forceful attempt to bring in genetically modified foods that aren’t fully tested and causing U.S. grain to be rejected from those continents. The Commerce Secretary, was Don Evans, is also in charge of the National Oceanic and Atmospheric Administration, which puts him in direct control over the country’s oceans areas, where 25% of U.S. domestic oil and 26% of its natural gas come from. Don Evans actually ran his campaign-funding vehicle. His connection with Texas oil businesses is substantial. The Energy Secretary, Spencer Abraham, was the single biggest recipient of campaign funds from the automotive industry (received over $700,000) and the lobby group that opposes setting fuel economy regulations. Colin Powell served on the boards of Gulfstream (Kuwait and Saudi Arabia are major markets for this company) and AOL. His AOL shares rose $4 million on its merger with Time Warner. Interestingly, his son Michael Powell was the only FCC commissioner who voted to have the AOL-Time Warner merger go through without review. Michael Power was  appointed by George Bush as the FCC chairperson. The Treasury Secretary was heavily funded and worked in the largest transport companies. I like to point out there is nothing wrong with corporations, but keeping in mind that corporations are always trying to maximize shareholder value, control more market share and make more money, it is hard to see sometimes how the interests of the public would be considered paramount and transparently with the way current government elections are structured. Paul O'Neill, the Treasury Secretary, was Alcoa’s CEO and Chairman. Alcoa’s lobbyist, the Texas law firm Vinson & Elkins, was George Bush’s number 3 contributor. While Bush was Texas’ governor, Alcoa secured a legal loophole that allowed it to dump 60,000 tons of sulfur dioxide into the air annually, making it one of the state’s top polluters.

President Bush's Advisors:
Position	Advisor	Corporate Connections
White House  Chief of Staff	Andrew Card	GM
Director of the Office of Management and Budget	Mitch Daniels	Eli Lilly, Citigroup, General Electric, Merck

National Security Advisor	Condoleezza Rice	Chevron (Chevron
		actually named a 130,000­ ton oil tanker after her), Charles Schwab, Transamerica

Was oil and finance companies influencing national security policies? The point of this is not to say that all corporations are ‘bad’. (Not at all) They have an interest in expansion and profit. But the point here is that it is, in many people’s opinions, not a good idea to have corporations and only corporations be the main controllers of government ideas with such powerful force. The people are so supposed to be represented at all levels in government, but they cannot because of the way things have been set up.

Ambassadors:

(The best positions, for years, have not gone to who is best for the job, but to who gave money during the campaign – hardly a model for efficiency and transparent functionality. Notice that the list hardly has positions filled by people who didn’t contribute. Instead of ambassadorial jobs going to people who have proven their diplomacy and world cooperativeness, the best ones of them go to whoever gave money.) Lets take a look at President Bush’s past ambassadorships.

Nominee	To All Republicans	To All Democrats	Only to Bush
AUSTRALIA	$2,000	$2,000	$2,000
J. Thomas Schieffer
AUSTRIA	$137,450	$0	$6,000
W.L. Lyons Brown
BAHAMAS	$32,000	$0	$7,000
Richard Blankenship

BELGIUM	$413,830	$0	$108,000
Stephen Brauer
BELIZE	$3,750	$0	$2,000
Russell Freeman
CHINA	$24,000	$0	$3,000
Clark Randt, Jr.
COSTA RICA	$21,000	$0	$1,000
John Danilovich
CZECH REPUBLIC	$61,500	$0	$9,000
Craig Stapleton
DENMARK	$182,600	$0	$9,000
Stuart Bernstein
DOMINICAN REPUBLIC	$23,000	$0	$3,000
Hans Hertell
FINLAND	$107,750	$0	$6,000
Bonnie McElveen-Hunter
FRANCE	$399,359	$0	$114,000
Howard Leach
GERMANY	$3,500	$0	$0
Daniel Coats
HUNGARY	$125,000	$0	$29,000
Nancy Brinker

INDIA	$1,000	$0	$1,000
Robert Blackwill
IRELAND	$480,100	$11,000	$112,000
Richard J. Egan
ITALY	$127,600	$0	$107,000
Melvin Sembler
JAMAICA	$139,250	$0	$17,000
Sue Cobb
JAPAN	$20,250	$0	$1,000
Howard Baker
LUXEMBOURG	NA	NA	NA
Peter Terpeluk
MALTA	$36,411	$1,000	$10,000
Anthony Gioia
MAURITIUS	$585,181	$0	$120,000
John Price
MOROCCO	$3,200	$250	$1,000
Margaret Tutwiler
NETHERLAND  Clifford Sobel	$299,700	$3,000	$109,000
NEW ZEALAND	$42,000	$0	$6,000
Charles J. Swindells

NORWAY	$181,735	$1,250	$32,935
John Ong
PORTUGAL	$166,850	$1,000	$9,000
John Palmer
SAUDI ARABIA	$2,500	$0	$1,000
Robert W. Jordan
SINGAPORE	$4,500	$0	$3,000
Frank Lavin
SLOVAK REPUBLIC	$45,250	$0	$8,000
Ronald Weiser
SPAIN	$134,000	$1,000	$107,000
George Argyros
SWEDEN	$365,200	$2,000	$102,000
Charles Heimbold
SWITZERLAND	$456,173	$0	$111,973
Mercer Reynolds
TANZANIA	$30,500	$0	$7,500
Robert Royall
UNITED KINGDOM	$142,875	$1,000	$107,000
William S. Farish
URUGUAY	$37,325	$2,250	$4,000

By December 2003, President Bush had raised over $100 million, a few times more than his closest rival had, and all from just over 300 individuals bundling contributions together for him. These individuals include people such as Thomas Nassif of the Western Growers Association, lobbyists Charles and Judy Black, William McGuire who is CEO of United Health Care Group, and Warren Staley who is CEO of the agribusiness giant Cargill Inc.. Bush was able to raise such record-braking amounts from a small group of people because it was shown that he was willing to get their needs taken care of. Because the elections have become almost entirely won based on money expenditure (statistically speaking), these people insured by their dollars that he was elected. The industries that benefited most from Bush’s re-election, due to changes in the law that he proposed, was the pharmaceutical industry (no limits on drug costs for the Medicare system so the companies can charge as they wish), agribusiness (genetically-modified foods, subsidies, etc), and energy industries (repeal or lessen pollution restrictions). In this system, you have a government we have now seen how it becomes elected, and how the results are shaped. This is not an attempt to point to any one conspiracy or anything like that. This is not I repeat a conspiracy theory far from. And it certainly not condemnation of any one political party. But the facts as they are show us that there are people who are aware and those who are not. And those who are aware have goals, some with very large global goals, which they pursue. Some goals may be noble and some not. And nothing is impossible. What is amazing about the education system is that everybody knows that it trains people to know certain facts but leaves them wholly unprepared for the world as it functions today. It has always been one thing that differentiated the masses under control with the controllers and that was a lack of awareness and a withholding of knowledge.

HEALTH CARE FOR ALL IN AMERICA IT CAN BE DONE

Quality, Affordable Health Care For All  

By Melvin J. Howard

Entrepreneurs and private industry more generally are under appreciated and overlooked assets in health reform, which would be a great miscalculation. A number of companies are not waiting on Government to bring innovation to the system. Some companies are already in the process of helping the country turn the corner on key dimensions. It should be the role of policymakers to create the conditions under which health care entrepreneurs can thrive. To bring new advances in services, delivery and rehabilitation to the health care sector. When we can only see only way of doing things, we run the risk of getting caught in the rigidity trap. Here are a few examples these companies; big and small are poised to make a difference.

Cost

• NightHawk Radiology Services
• Companion Global Healthcare
• WalMart

Quality

• SafeMed
• SimulConsult
• Consumers Union

Patient safety

• Advanced Practice Strategies
• iCardiac Technologies 

Access

• Minute Clinic
• TelaDoc
• American Well

Customer service (or “experience”)

• Best Doctors
• PatientsLikeMe
• Google

  

It is clear to me that the US employer-based health care system is crumbling and a new model must be introduced. As set out from the Committee for Economic Development or (CED). I always have been an advocate of the Private and Public sector working together on new models. And I for one endorse the CED Model as a steping stone for health care for all without destroying Americas basic principal of free choice.

Employer insurance is failing because of rapid cost increases and the inability to provide high-value care. CED's report explains that quality, affordable universal coverage is neither achievable nor sustainable unless we transform the delivery model. Health delivery systems need an independent but transparent regulatory process to achieve productivity and innovation. The CED plan is not Medicare for all, and it is not markets for all," said Dr. Jerome Grossman, Senior Fellow, John F. Kennedy School of Government and Director of the Harvard/Kennedy School Health Care Delivery Policy Program. Dr. Grossman is a CED Trustee and co-chair of the CED Health-Care Subcommittee that produced the report after two years of research and discussion by CED's Trustees and health care experts.

There are successful models for consumer choice of insurance health plans, including the federal employees plan," said Robert Chess, Chairman Nektar Therapeutics. Mr. Chess is also a CED Trustee and co-chair of the CED Health-Care Subcommittee. "The CED proposal builds on the best of those ideas and adds some new ones to achieve affordable, sustainable, quality coverage for all Americans."Key Findings of Quality, Affordable Health Care for All: The U.S. employer-based health insurance system is failing. The cost of insurance is rising unsustainably - faster than wages. More employers are dropping or curtailing coverage than expanding coverage. U.S. businesses' insurance costs make them less competitive globally and depress cash wages. The quality of care is unacceptably low. Authoritative studies document numerous prescription and treatment errors that cause unnecessary suffering, illness, injury and cost. Patients get only an estimated 55 percent of necessary and appropriate care. And access to care is deteriorating: 47 million Americans lack health insurance, and that number is rising. The root causes of these problems lie deep within the structure of our health-care system. No one currently has an incentive to seek, or provide, quality, cost-efficient health care; our employer-based health insurance system lacks meaningful competition. Without controlling costs, we will never achieve affordable universal coverage. Employees usually have no choice. Insurers demand all of an employer's business - to reduce per-employee overhead costs and avoid enrolling only the sickest workers. So employees have no choice of a plan (if they are offered health care at all). But employees, understandably, want to choose their doctors. Thus, to satisfy both employees and insurers, employers can offer only one plan that provides access to most doctors. The only way to reimburse any doctor an employee might choose is on a fee-for-service basis - a system with the worst incentives to drive up costs: the more services, the more fees.

Recommendations

The nation must replace employer-provided health insurance. Past employer efforts to provide affordable, quality health benefits have failed. The market is flawed, leaving those most in need without coverage and driving costs ever higher. A government-run, command-and-control system will not succeed; and devolving complex medical decisions from doctors to patients will not yield affordable care either. Instead, we must restructure the health-insurance market (and through it the health-delivery system) so that all Americans can afford and obtain quality coverage when the incentives for employers, employees, and providers all encourage quality, affordable care. Individuals, not employers, must have choices among insurance options that meet their needs; no one should be forced into any one plan. People should be able to keep their coverage when they change employers. And importantly, people should be able to realize the savings - dollar for dollar - if they choose a less-costly plan, using clear information on quality and cost. This new competition would drive providers to minimize costs and improve quality. The nation can establish such a market for quality, affordable universal health care through two key steps: First, the federal government should establish independent regional "exchanges" as points of entry for people to choose among competing private health-care plans. This system improves on the Federal Employees Health Benefits Plan, which also covers members of Congress. Everyone would be guaranteed any one of a range of private insurance plans. The plans could not charge more based on age or preexisting conditions (unlike the current individual insurance market). System standards would ensure quality and comprehensive coverage and protect consumers through standardized "fine print." Plan comparisons and an annual open season would help people to change plans - introducing competition into the health marketplace. Each exchange would "risk-adjust" premium revenue to insurers - paying more to insurers that cover more people with expensive conditions - to give insurers a greater incentive to cover, rather than shun, sick people. The exchanges would be supervised by a "Health Fed," modeled on the independence and structure of the Federal Reserve. Next, every household would receive a fixed-dollar credit sufficient to purchase the low-priced quality health plan in its region. Every individual, therefore, could buy quality health insurance at no out-of-pocket cost. Anyone could purchase a more-expensive plan by paying only the extra cost. People could keep the kind of health insurance and doctor that they now have and prefer. Such fixed-dollar contributions have been successful for employees of Hewlett Packard, Wells Fargo, the University of California, Stanford University, and the states of Washington, Wisconsin, and California. The fixed-dollar credit would be financed by eliminating the current tax exclusion for employer-paid insurance, and by broadly based tax revenues, for example a payroll, value-added, or environmental tax. Every individual would in effect contribute toward the health-insurance program, so every individual would be entitled to insurance - without costly "mandates" or means-testing. With every individual assured of quality coverage, and able to save by choosing a low-priced plan, insurers and providers would then have a new incentive to offer quality, affordable care that people - not their employers - want. There would be competition in the health marketplace, driven by fair rules to reward quality and cost-effectiveness, rather than denying care and selecting risks. Rules-based competition has driven progress in every other industry in our economy and around the world, and competition has the greatest promise to move health care from its current path of unsustainable cost growth, mediocre quality, deteriorating health, and declining coverage. "This approach provides the working-age population and their dependents with quality, affordable health coverage. Expanded coverage minus cost control is unaffordable. Cost control absent a health-care market with effective competition is unacceptable. We hope that this plan will stimulate constructive debate and ultimately lead to a market-based system that focuses on the standards for effective competition where both government and the private sector can play their most productive roles," said Charles Kolb, CED President.

HOSPITAL BUDGETS POST HEALTH REFORM

(CODE BLUE) The changing of hospital budgets; 

By Melvin J. Howard

  

§        BUDGETS IN HOSPITALS

Hospitals plan their budgets not only based on the projected volume but also on the projected reimbursement for the services rendered. The hospitals’ ability to pay for the operating and capital expenses depend on how well they forecast the volume and factors; therefore, translating the volume into staffing, supplies and other operating expenses. The staffing standards used will have a major impact on the budgets. The tendency of most departments is to be at the same level or above, but not below the budgets in a majority of the cases. The continuously eroding operating and contributing margins of the hospitals can be impacted significantly if the budgets are impractical to begin with.

§        COMPONENTS OF HOSPITAL BUDGETS

The hospital-operating budget is usually a rollup of the individual entities/departments’ budgets. Most hospital departments’ operating budgets have the following components: labor, supplies, and other. Labor comprises of 60 to 70% of a department’s operating budgets and supplies 15 to 25%. Labor is further divided into payroll and non-payroll which is also known as contract, registry, agency, or outsourcing. This covers managerial, professional, technical, and support staff. Supplies include both patient consumed e.g. medical/surgical and department consumed items such as office supplies. Maintenance contracts to cover the equipment, and travel for education are some examples of the other expenses component of the budget.

§        PAST AND PRESENT BUDGETING METHODS AND THEIR INADEQUACIES

As labor is a significant and an important component of the total department-operating budget, I will limit this discussion to labor budgets only. At one time, future labor budgets were prepared as a percent of the past budgets rather than reviewing all the factors that impacted the budget. In years after that, the departmental budgets were prepared based on the percent change to the hospital-projected volume. Subsequently, the departmental volume projections were developed based on their ratio to the hospital volumes and the percent change was applied to the labor budgets. In the past quarter century, more hospitals used labor standards to convert the projected departmental volume to the staffing in FTEs and then convert the FTEs to the labor dollar expense. Sophisticated approaches used % of skill mix assumptions to the FTE projections based on labor standards to identify the staffing budgets by professional, technical, and support categories. A small percent of hospitals developed contingency budgets for optimistic and pessimistic scenarios.

All these budgets used deterministic models with no consideration for the probabilistic nature of the projections; whether they are workload volumes, FTEs, skill mix or labor $ making it limited in its reliability. The ‘cost plus’ reimbursement methods prior to mid 1970’s did encourage such unrealistic budget preparation and management practices as the hospitals got paid not for sticking to budgets but based on the actual expenses incurred. Spiraling healthcare costs warranted changes from the cost plus reimbursement method to prospective payment and continually decreasing reimbursement there after.

§        NEW METHODS

There are many variables involved in the departmental labor budget preparation including but not limited to:

·         Workload volume

·         Workload volume mix

·         Non-linearity of the labor standards

·         Staffing levels

·         Staffing skill mix

·         Staffing mix by full time & part time

·         Staff scheduling practices & impact of labor laws

·         Confounding effects of staffing skills on each other

·         Seasonality of workload

·         Availability of staffing

·         Use of overtime

·         Use of supplemental staff i.e. contract labor

·         Fringe benefits i.e. vacation, sick, and holidays

Most of these variables involved follow a probabilistic distribution although some of them are determined by policy such as the amount of earned paid time off (PTO) covering the vacation, sick, and holidays. Even in the case of PTO, the actual usage is a probabilistic distribution depending on the needs and mix of staff in a given department. Preparing the labor budgets with due consideration to the probabilistic nature will help improve the predictability and hence the reliability of the budgets. Accurate planning for the expenses will minimize surprises, especially the unpleasant type that could hurt the financial health of the hospital.

§        HOSPITAL EMERGENCY DEPARTMENT

EDs are referred as Level I, II or III trauma centers based on their capabilities, equipment, resources, and expertise available to the patients arriving for treatment. A patient coming to the hospital Emergency Department is categorized as an outpatient who could become an inpatient upon admission. The workload volume indicator is an ED visit. Every time a patient visits the ED, it is considered as an ED visit whether they come by themselves, brought by a family member, transported by an ambulance, or other mode such as helicopter. Such ED visit may be further classified as Emergent, Urgent, and Non-Urgent depending on the medical needs of the patient. They can also have other classifications based on the interaction with the patient i.e. brief visit, complex visit etc. and is used in addition to or in lieu of patient classification system. Patient classification is used either to assign staff and / or to charge the patient based on amount of staff time, tests, treatments and supplies used.

The arriving patient is either first registered or triaged depending on the medical necessity, and then put in an ED bed, nurse assesses the patient and documents the observations; the ED physician assesses the patient and orders the appropriate labs and/or medications. The diagnostic staff either comes to administer the test, e.g., EKG or X-Ray, procures a specimen e.g., Lab. or transports the patient for CT exam. Upon reviewing the results, the ED physician makes a decision, i.e., whether to discharge the patient, transfer to another hospital or admit the patient. The ED physician consults with other physicians if the patient is transferred or admitted. The labor involved are: Reception, & Registration, Triage nurse, Registered and Licensed Practical Nurse, Unit Secretary, Security Guard, Patient & Materials Transporter, Physician Assistant, and ED physician. Depending on the organizational structure of the hospital and department, some or all of these skills could be part of the ED budget. Certain staff may be working full time while others work only part time. Some may work overtime while others do not. Supplemental staff may come from the hospital’s internal float pool, contract help, or called from the on-call roster. Each one of these staff members has different wage and salary structure based on their skill and experience. Unlike some other departments of the hospital that may be open five or six days during the week with day and evening shifts, ED is open 7x24 year round. The demand for the ED services can vary by hour of day, day of week, week of the month, and month of the year.

Budgeting steps include:

1.     Project ED visits either total or by type;

2.     Select labor standards in hours per visit or visit type;

3.     Convert the workload volume into staffing in Worked FTEs;

4.     Break them down by skill levels;

5.     Allocate by position for adequate coverage and round up and add

                 staff if necessary;

6.     Add the factor for PTO to come up with the Paid ftes; Compare with the staff on the payroll to determine the use of contract help if there are no pending staff who are in the hiring pipeline;

7.      Apply the wage & salary factors to convert the ftes to labor dollars;

8.     Add the premium cost of overtime, on-call pay, and call-back pay differential;

9.     Add other labor costs if they belong to the operating budget category

10. The sum total of FTEs is the FTE budget and the dollars are labor dollar budget.

Usually hospitals start the budget four to six months before the start of the next fiscal year. In terms of the tools hospitals in general and ED in particular may use include either a spread sheet template or printed work sheets included as part of Budgeting Package distributed by the Finance department.

The department managers may seek help as needed. Otherwise, the manager verifies the projected volumes, follows the steps, completes the budget and submits that to Finance and will be reviewed by the line administrator.

Every time there is a change involved, uncertainty is a given and is accompanied by risk and dilemma requiring help. Imitating reality in the form of a model whether it is physical, schematic, or mathematical is helpful so that the model can be manipulated rather than the reality to show the probability of certainty for making decisions this is the most appropriate type of help for each potential situation.