Chapter 16. Program Budget Planning
When establishing the program budget, it is imperative to have a detailed understanding of expenses and revenues. Without this understanding, it will be impossible to know about a proposed program’s level of surplus. It is important to note that fee-for-service, DSMT has a fixed reimbursement level mandated by CMS or other health insurance plans. Thus, the program will not have the ability to alter the level of Medicare reimbursement for providing DSMT services to beneficiaries because this reimbursement amount is set by the CMS. The program does, however, have control over the expenses. Therefore, program expenses will have to be adjusted to ensure a surplus that can be used to sustain or expand the program.
Total revenues are a factor of participant volume and reimbursement. Since CMS sets the reimbursement level, the volume of participants is a factor that can be manipulated in an equation to provide additional revenue. The total reimbursement is calculated by multiplying the number of participants receiving DSMT by the level of reimbursement provided per beneficiary, for that same service. When planning to increase participant volume, the program must take into account the impact that the increased volume will have on the expense column of the budget. When the level of service increases, some of the associated costs often increase. It is important to know what costs are variable (meaning they are based on the number of participants) and what costs are fixed (the cost stays the same no matter how many participants there are). Some costs are a combination of variable and fixed. Balancing increased costs of services with associated projected revenue is critical to program surplus. The additional expenses that can occur with increasing the services provided can include increased compensated staff time, increased use of consumable supplies, and increased facility costs.
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