Business Skills and Principles
What you must know
Be fluent in the operating budget (recurring salaries, supplies, purchased services - one fiscal year) versus the capital budget (equipment and construction above a defined threshold, depreciated over time). Expect items asking which budget an item belongs to.
Know FTE math: one FTE = 40 hours/week × 52 weeks = 2,080 paid hours/year. Subtract benefit, education, and vacation time (roughly 10–15%) to get productive hours (~1,800–1,870) used for staffing calculations. NHPPD = total nursing hours ÷ patient days. Productivity = worked hours compared with a target or benchmark.
Master variance analysis. Expense over budget is unfavorable; expense under budget is favorable; revenue under budget is unfavorable. Explain variances by volume versus rate/price versus efficiency.
Also know break-even (fixed costs ÷ contribution margin per unit), return on investment, cost per unit of service, supply expense per patient day, benchmarking, payer mix and revenue cycle basics, turnover cost (recruitment, orientation, vacancy), and project management fundamentals (charter, scope, timeline, evaluation).
Traps
Putting a CT scanner in the operating budget; treating an unfavorable expense variance as good news; using 2,080 hours when the item specifies productive hours; forgetting that break-even uses contribution margin, not price.
Worked example / rule of thumb
Unit budgeted 1,800 RN hours; actual 1,950 at $45/hour. Variance = 150 hours × $45 = $6,750 unfavorable - investigate whether it reflects higher census (volume) or overtime/premium pay (rate). Rule of thumb: name the driver before proposing a fix.