Essential Tips for Budgeting Your Community Health Program

Welcome back, listeners, to the Community Health Management Design Podcast! I’m your host, Dr. Tami Moser, and today’s episode, "Crunching the Numbers: Budgeting for Your Community Health Program," is all about mastering the art of budgeting for your health initiatives. Whether you’re launching a new program or revamping an existing one, a well-crafted budget is your roadmap to financial sustainability. We’ll dive into creating startup expense budgets, forecasting ongoing operating expenses, and tackling common budgeting challenges. Plus, we’ll share practical strategies and real-world examples to help you navigate the financial landscape. So grab your Excel workbook, and let’s get started on making your community health program a success!

Tami Moser [00:00:01]:
Welcome to the community health management design podcast. I'm doctor Tami Moser. And today, we're diving into a crucial aspect of program development, budgeting. This episode, crunching the numbers, budgeting for your community health program, will help us kind of explore what this entails. Whether you're launching a new health initiative or revamping an existing one, accurate budgeting can make or bake your program. Today, we'll walk through creating a start up expense budget and forecasting ongoing operating expenses. We'll also explore the challenges you might face and how to overcome them. So let's get started, and remember that in your, Excel work be workbook, there is a tab for budgeting.

Tami Moser [00:00:45]:
Okay. 1st, let's talk about budgeting and why it's so critical in community health programs. A well crafted budget does more than just track expenses. It's a road map for your program's financial sustainability. It helps you secure funding by demonstrating financial responsibility, allocate resources effectively, identify potential financial risks early, and make informed decisions about program scope and scale. Now let's break down the 2 main components of budgeting, start up expenses and operating expenses. Start up expenses are one time costs that you need to get your program off the ground. These might include things like equipment purchases, initial marketing materials, legal fees for setting up the program, staff training costs, facility renovations, or setup.

Tami Moser [00:01:36]:
When creating your start up budget, be comprehensive and realistic. It's better to overestimate slightly than to run short of funds mid launch, and that is so critical. Here's a pro tip. Don't forget to include a contingency fund in your startup budget. A good rule of thumb is to add 10 to 15% to your total for unexpected expenses. And I kind of put this in the realm of a construction project. You know, a good contractor will always quote you a price that includes overages. So they build up that extra expense in there, which they may not need, but they have it available as a cushion for those unexpected things that pop up just weren't thought of before.

Tami Moser [00:02:24]:
And that almost always happens to some degree. Now let's look at operating expenses. These are the ongoing costs to keep your program running. They typically include things like staff salaries and benefits, rent and utilities, ongoing marketing costs, supplies and materials, technology and software subscriptions, and insurance, if necessary. When forecasting operating expenses, think in terms of both fixed costs, like rent, and variable costs, like supplies, which may fluctuate with program participation. Also, consider how these costs might change over time. Will you need to hire more staff as the program grows? Will your supply costs increase? Things like answering the question, will you need to hire more staff as the program grows? This has to do with how you decided to handle your ratio of providers to patients. And so when you get near the top end of a ratio, that's a good trigger point for looking at hiring additional staff.

Tami Moser [00:03:30]:
So if you put that trigger in there, where as part of your budgeting for ongoing expenses, you look at where the break point is for adding new personnel with the understanding that that means that your return on investment is going to look worse for a little bit until your patients go from that threshold point where you trigger needing to hire to a full load for that new person. So something to consider. Now let's address some common challenges in budgeting for community health. Challenge number 1, underestimating costs. This is especially common with indirect costs like administrative overhead or IT support. To overcome this, research thoroughly and consult with financial professionals or experienced program managers. One thing you need to get clear within your organization HR department to help us with hiring, there are expenses that come with that. So are we going to be pitching in a certain amount of money? Are we gonna be splitting the cost of that particular service, or is your organization donating, if you will, that cost associated with the HR component? You need to know how that works, and, really, that's gonna cover a broad range of things.

Tami Moser [00:05:09]:
If you're sharing resources with existing organizations, you need to know, are we gonna be covering part of that in the budgeting process, or is that a donated or in, in kind type of service for our organization. Challenge to overestimating revenue. While optimism is great, it can lead to financial strain if revenue doesn't meet projections. Be conservative in your revenue estimates, especially in the early stages of your program. And this goes back to my under promise over deliver. The same thing with your budget. I would rather overestimate expenses and underestimate revenue because in that situation, you're really never gonna be in a in a bad spot than the opposite, which always you end up in hot water. So keep that in mind.

Tami Moser [00:06:04]:
Challenge 3, failing to account for program growth or changes. Your budget should be flexible enough to accommodate scaling up or down as needed. And don't be afraid to do that, to scale up or scale down. Sometimes you may have bit off more than you can chew. And especially if you didn't do a pilot test, then that first, you know, foray into your particular program may go, oh, that's just one thing too many we're doing. We can't handle that on top of everything else. So that particular service, if you will, is gonna come out of the interventions. That would be scaling down or scale up because you can accommodate more.

Tami Moser [00:06:46]:
To address these challenges, consider these strategies. 1, use historical data. If you're in an established organization, look at budgets from similar past projects. That'll give you a good starting point. Number 2, seek multiple quotes for major expenses. Get quotes from several vendors to ensure you're budgeting accurately And you will more than likely in organizations be following certain kinds of standard operating procedures for quotes. So keep that in mind if you're a state or federal organization that may look a little different. Build in flexibility.

Tami Moser [00:07:21]:
Create different budget scenarios, best case, worst case, and most likely case. You know, often we do one budget and it's like, okay. That's it. But if you do 3 budgets, 1 with the best case scenario, this is gonna be the highest level of revenue we think we could cover with as many patients as we could handle. Worst case, this is almost nobody signs up. We're over budget in areas and most likely case, this is the practical pragmatic look at what we think is gonna happen. And that really gives you some flexibility because you can see maybe the variation that might occur and have plans in place to mitigate any issues that could cause. And then regular review.

Tami Moser [00:08:06]:
Plan to review and adjust your budget quarterly or even monthly in the early stages of your program. Now let's look at how budgeting might differ in various healthcare settings. In a retail pharmacy setting, for example, you might need to budget for inventory management systems and consider the cost of stocking health related products. Your revenue streams might include prescription sales and health screenings. In a health system setting, your budget might need to account for integration with existing electronic health record systems and coordination across multiple departments. Revenue might come from insurance reimbursements or grants. Here's a real world example. When we were budgeting for the Healthy Kid Millbrook program, initially, we underestimated the cost of developing culturally appropriate educational materials.

Tami Moser [00:08:51]:
This was overcome by partnering with local translation service and community organizations which actually improved our materials and community engagement. That is an example of what can happen. And I presented that as if we actually did that program. We did not. This is just my, example for our overview and micro credential. Remember, your budget is a living document. It should evolve as your program does. Don't be discouraged if your initial projections need adjustment.

Tami Moser [00:09:26]:
That's just part of this process. It doesn't mean you did a poor job. It means things always pop up. Now it's your turn. Here's your assignment. Create a startup budget and a 1st year operating budget for your community health program. Include at least 5 categories of expenses for each, Then identify 3 potential financial risks and how you might mitigate them. In our next episode, we'll discuss how to use your budget to make strategic decisions about program implementation and growth.

Tami Moser [00:09:57]:
You'll see how this financial foundation supports every aspect of your community health initiative, and don't forget that you have a worksheet in the Excel workbook that is set up for budgeting. Remember in community health management, solid budgeting isn't about numbers. It's about creating a financially sustainable framework for improving community health. So keep calculating, keep adjusting, and keep striving to make a difference in your community's health. Until next time, this is doctor Tami Moser signing off.