Input-output analysis and the hospital budgeting process

Two hospitals budget systems, a conventional budget and an input-output budget, are compared to determine how they affect management decisions in pricing, output, planning, and cost control. Analysis of data from a 210-bed not-for-profit hospital indicates that adoption of the input-output budget could cause substantial changes in posted hospital rates in individual departments but probably would have no impact on hospital output determination. The input-output approach promises to be a more accurate system for cost control and planning because, unlike the conventional approach, it generates objective signals for investigating variances of expenses from budgeted levels.