I HPi-in i i) \\i indhs J ospiiaeManagement Hospital Service Exchange IMPROVED METHODS IN HOSPITAL MANAGEMENT IMPROVED METHODS IN HOSPITAL MANAGEMENT/ A Treatise on the Introduction of Business Methods in the Management of Modern Hospitals BY G. W. CURTIS Superintendent of Santa'Barbara Cottage Hospital Santa Barbara, California HOSPITAL SERVICE EXCHANGE DISTRIBUTORS SANTA BARBARA, CALIFORNIA IQ2| Copyright, 1924 By G. W. CURTIS Published September, 1924 The Schauer Printing Studio, Inc. Santa Barbara, California To William Everett Musgrave, M. 1). A Friend of Hospitals Note: The principles of management, business routine and business forms described in this book have been applied by the author personally in the reorganization of a con- siderable number of hospitals in California with unqualified success and at great financial saving to the hospitals. The plan or organization set forth, therefore, is known to be workable in hospitals of varying size and type. TABLE OF CONTENTS CHAPTER I. Scientific Management Page 9 Necessity for business manager; Extensive scope of modern hospital; Professional workers not competent business managers; Interpretation of operating deficit; Recent origin of scientific man- agement; Scientific management in selling; Business trained men to lead business organizations; Scientific management in a manu- facturing plant; Scientific management in a printing establishment; Scientific management in a foundry; Scientific management applic- able to hospitals; Problems of hospital management; "Rule of Thumb" methods in discard; Hospital is a business undertaking; Use of forms; Demand for business methods in hospitals. CHAPTER IL Administrative Organization Page 18 How accomplished; Attributes of good executive; Essentials in organization; Cooperation; Definite policies necessary; Loyalty; Use of official bulletins; Administrative meetings; Conclusions. CHAPTER III. Budget Making . Page 24 What is a budget; Budget appreciated by governing boards; Fundamentals in budget making; Accurate records; Departmental support; Careful analysis of institution; Do not overestimate earn- ings; Need for storeroom and stock records; Collective responsibility helpful; Budget control produces economy; A typical budget. CHAPTER IV. Account Classification and General Ledger Page 41 Accounts should keep pace with growth; Steps necessary in reorganization; Diagnosis of needs; Standardization of forms; Analysis of plant; Study of administrative organization; Type of information desired; Designing of forms; Installation; Account classification; Division of account classification and ledger; Prepara- tion of statements; Physical division of ledger; Expenditure accounts; General ledger; Account number and name; Control accounts; Accounts receivable control; Accounts payable control; Miscellaneous control accounts; Use of left hand opening of ledger page; Further explanation of ledger unnecessary; Ledger is founda- tion to accounting system. CHAPTER V. Purchasing, Storing and Issuing Supplies. Page 53 Economies in purchase; Methods used in buying; Interviewing salesmen; Purchasing by contract; Seasonal buying; Buy in original TABLE OF CONTEXTS factory containers when possible; Secure quotations; Request for quotation form; Use of purchase order form; Value of purchase order form;Receipt of goods; Receipt of goods book; Complete store- room records as aid to purchase; Requirements of a good storeroom; Storeroom records and forms; Use of property numbers; The stock record card; Advantages of stock record card summarized; Issuing of supplies from stores; Avoid hoarding; Use of storeroom requisi- tion; Supplies issued on exchange basis; Approval of requisitions essential; Requisition a bookkeeping form; Control over use of supplies possible. CHAPTER VI. Employment and Payroll Records Page 71 Utilize training and experience of department heads; Each de- partment selects own help; Employee record cards; Termination of employment; Changes in rate of pay; Medical examination of employees; Leave of absence; Value of employee's records; Employ- ment of help requires analysis of person and job; Qualification of heads of departments; Payroll book; Time keeping; Pay by check; The payroll check; Check protection; Advantages of paying by check; Form used for request of absence from duty; Rules governing absence from duty; Housing of employees; Cheap versus good help; Factors which control rates of pay; The Golden Rule applied to employment. CHAPTER VIE Contact with Patients and Public Page 86 Impressions on entering hospital; The information desk; Register of patients in hospital; Register of patients recently in hospital; Bed chart; Staff register; Call system; Messenger service; Mail service; Securing good will of public; Telephone exchange; Telephone exchange daily report; Patients' valuables; Conclusions. CHAPTER VIII. Patients' Accounts Page 94 Control over earnings; Rate reduction; Rates should be set by the day; Source of charges; Daily financial reports; Cross check of daily financial report; Filing of daily financial report; The ledger account; Billing; Earnings and rebate record; Rebate record; Collections; Collection agencies; Collections made through good will. CHAPTER IX. Handling of Cash and Banking Page 111 Safeguard your cash; Make dishonesty difficult; Bonding em- ployees; Receipt for cash; Departmental receipt forms; Bank deposits; Deposit tags; Petty cash funds; Bank accounts; Subsidiary bank account for payroll; How to handle payroll bank account; Other subsidiary bank accounts; Petty cash fund for main business office; Commercial paper; The cash book; Responsibility for ac- curacy in cash records. TABLE OF CONTENTS CHAPTER X. Expense Records Page 121 Prompt payment of bills; Preparation of bills for payment; Preparation of voucher checks; Vendor's index; Voucher distribution book; Closing and posting voucher distribution book; Entering voucher checks which cover advances to payroll account; Entering voucher checks in cash book; Value of expense records. CHAPTER XI. Control of Inter-Departmental Transactions Page 134 Foster departmental identity; Food requisition; Handling of food supplies; Supervision of linen supply; Engineering department work order; Care of property; Benefits derived from engineering department work order; Equipment inventory; Internal requisition distribution book; Journal voucher; Interdepartmental bookkeeping. CHAPTER XII. Distribution of Overhead Costs Page 149 Elements which comprise costs; Difference between direct and indirect costs; How to handle indirect costs; Preliminary steps in distribution of indirect costs; Distribute indirect costs annually; Value derived from distribution of indirect costs; Survey of plant forms basis of distribution; Chart facts secured in survey; Complete cost records essential. CHAPTER XIII. Filing of Records Page 155 Records must be available to be useful; Records pertaining to patients' accounts; Interdepartment records; Expenditure records; Stock records; Payroll records; Books of record; Discard records systematically; Filing of bookkeeping forms; File in haste and repent at leisure. CHAPTER XIV. Statements and Statistics Page 158 Financial statements; Exhibits; Form used for long financial reports; Explanation of statement; Graphic charts; Yearly reports; Conclusions. IL LUSTRATIONS I Request for Quotation Page 56 II Purchase Order, Original 57 III Purchase Order, Duplicate 58 IV Receipt of Goods Book 61 V Stock Card 64 VI General Requisition 67 VII Employee Record 73 VIII Employee Record, Reverse Side 74 IX Vacation and Leave Record, Top Half .. 76 X Vacation and Leave Record, Lower Half Ti XI Vacation and Leave Record, Regulations 78 XII Payroll Check 81 XIII Payroll Check, Duplicate 81 XIV Telephone Exchange Daily Report 91 XV Rate Agreement 95 XVI Daily Financial Report 98 XVII Patient's Ledger Card 100 XVIII Bill 104 XIX Earnings and Rebate Record 106 XX Cash Receipt 112 XXI Petty Cash Fund Voucher 118 XXII Cash Book 120 XXIII Bill Approval Stamp 121 XXIV Voucher Check 123 XXV Vendor's Index 125 XXVI Voucher Distribution Book 127 XXVII Voucher Distribution Book 129 XXVIII General Ledger, Expenditure Account 131 XXIX General Ledger, Earnings Account 132 XXX Diet and Food Requisition 135 XXXI Linen Requisition 137 XXXII Engineering Department Work Order 139 XXXIII Internal Requisition Distribution Book 141 XXXIV Internal Requisition Distribution Book 143 XXXV Journal Voucher 146 XXXVI Overhead Distribution Chart 153 XXXVII Graphic Chart 175 INTRODUCTION Institutional management may be considered from two distinct angles; first, the professional and second, the strictly economic or business aspect. No attempt will be made to cover the first of these two important subjects; but the second, the business or economic side of institutional management, will be dealt with fully. In many institutions the two phases of management are combined in one executive head, but recently numerous attempts have been made at a division of these functions. Where a com- bination executive is obtained, usually the professional side of institutional management is stressed and the importance of the economic phase is minimized. It is perfectly logical and nat- ural that the professional side should be recognized first as the institution in reality exists for a professional purpose rather than for an economic one. Hospitals originated and have de- veloped for the purposes of caring for the sick, educating trained technical heln to assist physicians in their work, and cooperat- ing with social organizations and agencies in the relief offered to the unfortunate members of their communities. Institutions cannot be run with high professional standards and produce cer- tain desired results with an utter disregard for the economic phase of management. The costs of institutional treatment are extremely high and are increasingly so as new diagnostic facili- ties are being discovered and utilized. It has been stated re- cently that the costs of hospital care are becoming so enormous that hospitals today offer their services only to the extremely wealthy and the unfortunate, indigent poor. In the one case, the wealthy can afford to pay any price and in the other, most hospitals have endowed funds or contributions from time to time available for this type of service. It is the middle class which suffers, as a sickness to them is a calamity. They have a certain reputation to maintain and feel they must pay their bills that their pride, self-respect, and standing in the community may 5 6 INTRODUCTION not be impaired. With the increasing costs of hospital opera- tion, the increasing complexity of diagnostic equipment and the demands made upon hospitals for furnishing the most modern facilities for diagnosis and treatment, the economic aspect of hospitals is becoming an important one and is receiving at the present time more attention than ever before. Believing that there is a need for a simple treatise on the economic or business aspect of hospital management, the author has undertaken to cover the subject in as brief a manner as pos- sible,yet completely outlining a course of procedure which covers most of the routine economic or business phases of hos- pital work. It is realized that no two institutions are exactly alike, yet all are so similar that it is not difficult to standardize their business routine. For this reason few alternatives will be submitted, as alternate plans lead to confusion and the attempt is made to treat the subject in a simple manner. It is hoped that this book will be of some little assistance to executives who are called upon to face the complex business problems of the mod- ern hospital. IMPROVED METHODS IN HOSPITAL MANAGEMENT CHAPTER I. SCIENTIFIC MANAGEMENT Necessity for Business Manager The modern hospital of today is a complex institution. In many respects a hospital is similar to a hotel. It is recognized that a hotel of any size must of necessity employ a good busi- ness manager to head the institution and yet hospitals are often run by nurses and physicians who have accepted their positions not through any interest in the work, nor through any particular qualifications they might have which would fit them for a busi- ness manager, but through some peculiar turn of circumstances which required them to head an institution purely because of their professional ability. Extensive Scope of Modern Hospital All the departments of a hotel are duplicated in a hospital. The engineering department of a hospital is similar to that of a hotel. The buildings are extensive and require a supply of various utilities such as heat, light, water, gas, and telephone and with these services comes the usual work of repair and main- tenance. In addition to this, the hospital has several items of importance not found in the hotel. For instance high pressure steam must be taken to many parts of the building for steriliza- tion; some institutions at present are piped for anesthesia. The grounds are usually extensive and require the attention of expert gardeners. The subsistence and dietary department is of even greater importance than that of a hotel. The hotel furnishes food to people when they are in an attitude of being easily pleased ; the hospital finds people at their worst when they are ill. Food, therefore, is usually not appetizing in its ordinary forms, and extra skill must be used in its selection and preparation. The matter of serving food is a difficult problem in hospital work. Patients cannot be gathered into a central dining room which is of easy access to a large and well-equipped kitchen, but food of necessity must be delivered hot to every nook and corner of the 9 10 IMPROVED METHODS IN building. The housekeeping department is of considerable im- portance and not only must fulfill the ordinary requirements of a similar department in a hotel, but must also understand how to clean in a manner which meets the sanitary requirements of hos- pital work. The laundry is not only called upon to do plain laundry work, but must also know how to remove difficult stains from linen and still preserve the linen as long as possible. The purchasing department not only buys the ordinary commissary supplies used by a hotel, but must also enter the markets for such commodities as drugs, surgical instruments, rubber goods, scien- tific apparatus, and laboratory supplies. Not only are the de- partments of a hotel duplicated in a hospital, but those of the latter are more elaborate and require expert help and attention, and in addition the hospital must maintain a trained medical staff, a large nursing staff, numerous trained technicians, and exten- sive laboratories for diagnostic purposes. These departments of the institution are greater in number and of necessity more com- plicated that the departments of any well-managed modern hotel. If the hotel, as a business, recognizes the importance of expert management, hospitals should call for an even greater degree of efficiency in the direction of their business. A physician or a graduate nurse is often selected to head a hospital organization. He is usually chosen because of the reputation he has made in a medical or nursing field, rather than for anv particular qualification which would fit him to run a complex business. Tn addition to carrying the details of the work of a business manager, he is also asked to perform certain professional functions as well. Not only has he insuf- ficient time to do both properly, but the very fact that he has been successful in a professional way usually unfits him for the duties of a business manager. Under such guidance it is no wonder that only recently has the economic phase of hospital work become recognized. Professional Workers Not Competent Business Managers Interpretation of Operating Deficit Few hospitals are run for profit. Most of them are run for the good which they can do in their particular community HOSPITAL MANAGEMENT in the way of furnishing a convenient and needed place for caring for the sick and a laboratory for the education of trained scientific workers who cooperate with and assist physicians in their work. The majority of hospitals which are not run for profit meet their operating expenses through public subscrip- tion, and where a large deficit is incurred, the natural assump- tion is that the institution is doing much free, research, or tional work. Where this assumption is made, the larger the deficit,the greater the extent and scope of their work must of necessity be; and if the management is well organized, usuajly the subscriptions will have increased in proportion to the operat- ing deficit. 1 hese assumptions are not always correct and the' large operating deficit is many times due to the fact that the in- stitution is being run by a physician or a graduate nurse who has not had sufficient training or experience for this work and is de- voting the large majority of his time to the professional work of the hospital. Where this is the case, one often finds that there is no recognized business head of the institution. The duties which he is called upon to perform, of necessity cause him to delegate to several people without a means of close supervision, the business work of the institution. Tn many instances purchas- ing is being done by numerous employees. No one is recognized as being in charge of the storeroom supplies and a "help your- self" plan in issuing stores is apt to prevail. No particular records are kept of goods which are received, exchanged or re- turned for credit, and memory is relied upon in approving bills for payment. The employment of help is done by the heads of departments without approval by a recognized business head, for this reason rates are likely to be continually increased; vaca- tion leaves and sick leaves are seldom recorded or accounted for in a central business office. Consequently the two phases of hos- pital management which deal with the expenditure of large sums of money namely, the purchasing of supplies and the employ- ment of help, are neglected. As a result, the costs of the institu- tion mount higher and higher and the service instead of improv- ing as might be expected, becomes, as a corollary to that type of management, worse rather than better. 11 12 IMPROVED METHODS IN Recent Origin of Scientific Management Scientific management in the business world is of relatively recent origin. Competition in the smaller communities and sparsely settled regions of the country is not of great importance, but as population increases and large industrial centers develop, it is of ever increasing significance. Where complexity does not play an important part in industry, big profits can be made and the volume of business is not of prime consequence. How- ever, as competition increases, it necessarily reduces the amount of profit received and business must be ever-increasing in order to increase profits. Wherever the margin of profit is reduced, the importance of scientific management is increased, for the margin of safety is very small in a business doing a large vol- ume of work on a small margin of profit. A few unwise busi- ness decisions can entirely wipe out a small margin of profit. Science in business grows in importance as our industrial and business life increases in complexity. Scientific Management in Selling Competition also has brought about selling organizations and here again the scientific sales manager who knows how to present his product, how to select his men, and organize his territory and sales force, is in great demand. Along with scien- tific selling has developed scientific advertising and again the advertising manager is called upon not only to know the business which he advertises, but also must be a student of psychology and human nature. Business Trained Men to Lead Business Organizations Business recognizes that any reduction in the cost of pro- duction means increased margin of safety and increased profits for the business. Therefore business today of any importance recognizes that men of sound training should head its institu- tions. In many instances it means that business is obsessed with the idea of efficiency and scientific management. "Efficiency in business" in the last few years, are words which have become so commonly used that people are even beginning to shun them. People begin to feel a natural dislike for efficiency and that for HOSPITAL MANAGEMENT 13 which it stands. It is associated in many instances with mechani- cal precision. Employees feel that it kills all individuality and they sometimes associate the efficiency expert with the man who is apt to make machines of the entire personnel of a business or- ganization. However, competition in business has brought ef- ficiency methods to stay, whether liked or disliked, and wise methods of production and distribution mean in the long run not only more profits for the producer but also more goods to the consumer, the people who buy the products of industry. Scientific Management in a Manufacturing Plant As an illustration of what efficiency methods can do for business organizations, the case of a large machine shop is re- called. In this particular plant large machines were made and sold for several hundreds of dollars each for the purpose of cut- ting gears for automobiles. The industry had grown for several years as rapidly as the automobile was being developed and at the same time the profits of the institution were without limit. Several accessories were sold with this machine and replace- ment of parts were supplied from time to time. All prices in this plant h-ad for many years been set on foremen's estimates, or better, on foremen's guesses. At the time of reorganization of this plant, an attempt was made to put the factory on a scien- tific basis and a cost accounting system was installed which sup- plied data on the cost of manufacture of each piece of machinery which was produced. The findings of this system were startling, as it was discovered that the various parts and accessories to the main machine were sold in many instances at a great loss, and had been sold at a great loss for a period of several years. Scientific Management in a Printing Establishment Another illustration to show what scientific management can do for business is the case of a printing shop which had been run for many years at a modest profit. This printing shop conducted two departments, one for job printing and one for book binding. Upon careful analysis of the business, it was found that the job printing department had been making a con- siderable profit for a number of years, but that the book bind- 14 IMPROVED METHODS IN ing department had always been operated at a loss. Scientific management, of course, for this institution increased its profits materially. Scientific Management in a Foundry Yet another illustration is in the case of a large foundry where men were employed to carry ingots of iron short dis- tances. Every job in this foundry was analyzed and more effi- cient methods oi doing the work, were instituted. In this par- ticular instance it was iound that men were carrying these heavy iron bars all day long. A man would place one on his shoulder and walk slowly for a certain distance and deposit it in the proper pile. The efficiency expert recommended that the men pick up these bars and run with them the distance required. This was done until five bars were carried and then the men were allowed to sit down and rest for a certain period of time without physical exertion of any sort. In this manner it was found that a man could carry several times the number of bars he had carried before and still was not nearly as exhausted 'as he had been under the former method of working steadily all d-ay long with a heavy weight on his shoulder continuously. Scientific Management Applicable to Hospitals These illustrations are typical of what can be done in busi- ness organization. Is it not reasonable to expect that with proper training and thought the same thing can be accomplished in institutional management? The hospital is a business as much as is a retail store or a manufacturing plant. It is a busi- ness of caring for the sick. As great economies may be expected through careful business management of institutions as are ac- complished in other lines of work, but if a private business or undertaking is poorly managed, the results are disastrous to the stockholders only. In hospital work the disaster is generally shared by the entire community for it is the entire community which supports the average hospital. The contributing public, as well as the people who are cared for in the hospital as patients, are therefore entitled to an institution not only run successfully from the point of view of its professional work, but also well managed from the business point of view. HOSPITAL MANAGEMENT 15 Problems of Hospital Management 1 he problems of hospital management are numerous. Pur- chasing must be done economically. Goods must be bought at the right time and in the proper quantities. Help must be em- ployed and the rate of pay versus the qualifications offered must enter into each transaction. The institution must be well organized with a recognized business executive supervising all departments and seeing that their work is properly correlated. The financing of the institution must be met and solved in the most expeditious manner. The matter of collections is a prob- lem for the business manager, and considering the manner in which patients must many times be admitted without regard to their financial rating, collections consequently are difficult. Proper publicity, or as it might be called, advertising, is another problem which must be faced by the business manager. "Rule of Thumb" Methods in Discard "Rule of thumb" methods are still employed in many business undertakings and the method of running the institu- tion is by guess and intuition more than by facts. The man who runs his own business -after the "rule of thumb" fashion must suffer the consequences, but the hospital which is more or less of a public nature should not be subjected to the conse- quences of poor or insufficient management. The public during the world war was educated to give and not question the pur- pose of the gift or impeach the method used in managing the various war relief agencies. Many an institution since the war has taken this attitude of the public, which was created through unusual circumstances, as an opportunity to solicit promiscu- ously and feel that their demands should be met without ques- tion. The public, however, is demanding protection, and social and charitable institutions are being called upon to look to their policies of business management; if efficiency methods are used the agency and the support of it are seldom questioned. Hospitals must not be made an exception and must be run similarly to other business undertakings. The business executive Hospital is a Business Undertaking 16 IMPROVED METHODS IN of a large hospital necessarily must have a well organized corps of assistants. He must control all the activities of the institu- tion and yet he cannot be buried in detail or do all the work. In other words, he must protect himself in such a manner that he will know all that is going on in the institution and yet do the minimum amount of detail work, thereby saving his energy and time for the more important decisions which must be made daily. The routine business of any institution may be controlled largely through five forms which will be discussed in another chapter. However, it will be well to mention here that through the means of the Purchase Order, the General Requisition, the Engineering Department Work Order, the Employee Record card, and the Rate Agreement, the ordinary business routine of the institution can be controlled and supervised with the mini- mum amount of time and energy. No reflection on hospital executives who are looking after both the professional and busi- ness aspects of an institution is intended, but rather the diffi- culties of such a position and the qualifications necessary proper- ly to fulfill such a position are pointed out. Use of Forms Any systematic business procedure necessitates the use of business forms. It is possible to have too few business forms or too many. I have known of hospitals in which forms appear- ed to have been spread through the institution as confetti is spread at a carnival, in fact they have so many forms that it is necessary to institute additional ones to keep track of those which are in use. The method of adding and adding from time to time becomes a serious evil and the only remedy in such a case is to start at the bottom and do away with the entire burdensome machinery, instituting a system as simple as possible and yet as complete as necessary to secure the proper control and informa- tion for the management of the organization. It will therefore be seen that complexity is as grave an error as omission, and with this in view the scientific manager who walks the middle ground, keeping his system simple and yet effective is the one to be preferred and the one to whom we should look for guid- ance. HOSPITAL MANAGEMENT 17 Demand for Business Methods in Hospitals There is a growing demand for hospital executives who know modern business methods and can put them into practice, and also a demand on the part of the hospital executive for a knowledge of the best business practices applicable to hospitals. The important phases of hospital management will be discussed in detail, keeping in view the fact that simplicity is to be desired and yet any system of business management should be complete in every respect. CHAPTER II. ADMINISTRATIVE ORGANIZATION How Accomplished Administrative organization means the division of the in- stitution into its various component parts thereby simplifying the duties and responsibilities of the several people held account- able for the smooth operation of the plant. In the organization of a hospital by departments, much the same process is used as in solving any difficult situation. Where such confronts us we arrive at our conclusions through certain definite steps. First, through that of analysis, which means a division of the subject or problem into its different parts. The next step is to classify the information in a manner which seems logical and as we ar- range it, we arrive at certain conclusions -and have solved the problem we set out to accomplish. An institution has certain definite functions to perform and these functions after they have been analyzed, logically fall into certain groups and may be classified under various departments each having a recognized head. The scope of the modern hospital is too extensive for any one person or group of persons to be proficient in all its activi- ties. Skilled technical help is essential. After the work is or- ganized according to functions, and a competent person is placed in charge of each department with the necessary tech- nical help, a qualified executive must be selected to preside over the various units of the organization. Attributes of Good Executive A good executive has ability to select good departmental heads, to keep them hard at work and at the same time, con- tented. Contentment does not necessarily limit itself to con- cessions in the way of salaries, or in the amount of work which is supposed to be accomplished. There are other conditions of employment which are as important to the employee as the amount of work he has to do or the salary which he receives. 18 HOSPITAL MANAGEMENT 19 Salaries which can be paid in any position are somewhat con- trolled by the amounts which are paid in other places for simi- lar work. The executive head of an institution can, however, do many things other than the paying of unusually high salaries to create an atmosphere of contentment on the part of the em- ployees. Executives use various means of controlling their or- ganizations, but the one who has a kind word and consideration for his employee is usually the one who is able to hold together a permanent organization, and in the long run accomplishes the greatest amount of work and maintains the respect of out- side critics. Not only must an organization be well planned, but its functions and responsibilities must be clear cut and understood; not only must the heads of departments be well selected and trained in their particular duties or work, but other considera- tions are necessary before it can be considered a satisfactory institution. Essentials in Organization Cooperation Some of the essentials referred to are the following. First, there must be cooperation between the various departments of an organization or little can be accomplished. The functions of each unit must be clearly defined and outlined so there is no misunderstanding as to who should do a piece of work. There must be as little over-lapping as possible. With duties clearly defined and a unity of purpose, that is, of accomplishing their work for the best interest of the institution as a whole and of their department as a secondary matter, cooperation is secured. No hospital can accomplish its purpose or do good work with departmental heads who are continually quarreling with each other; and an executive should early recognize that the sooner such people sever their connections with the institution, the sooner will it be able to do its work in a satisfactory manner. Departments must work together and not in opposition to one another. An illustration to emphasize this point is the story told of a certain feeding station for stock being shipped from 20 IMPROVED METHODS IN western to eastern points. At this particular feeding station the stock was allowed to be removed from the cars and not only given food and water, but was permitted to roam around and secure a certain amount of relaxation from its long journey before proceeding to its destination. No enclosure was pro- vided to keep the stock from wandering great distances away from the point of loading and unloading. Halters were placed over the heads of each animal, these halters being in pairs so that each animal was attached to another, the theory being that when one calf wished to go in a certain direction, his mate was sure to decide at that particular moment he wished to go in the opposite and as a result the stock never strayed but short dis- tances from the trains. Had these calves been able to agree on a certain destination, they could have gone a great distance and it would have been impossible for the tenders to return them to the proper cars. It takes cooperation and unity of purpose to accomplish any given task and as long as people work in oppo- site directions in their respective departments, the work of the institution stands still, regardless of any amount of effort they may put forth. Another illustration is that of the guard at an asylum for the insane who is able to care for fifteen or twenty demented persons who, if they could organize and cooperate, might easily overpower the guard and make their escape, but it is a well recognized fact in these sanitariums that insane people cannot cooperate and cannot agree on any given procedure, hence twenty people are helpless even though guarded by a single person who has a definite task to accomplish, and who never wavers for an instant from his purpose of caring for his charges. Cooperation is a word which has been much overworked, yet it expresses in a way better than any other, the ability to work together, an essential in any well run institution. Definite Policies Necessary Second, the policies of the institution must be clearly de- fined and definite purposes set for accomplishment. It is not difficult for the executive to define clearly what is expected of HOSPITAL MANAGEMENT 21 each departmental head. It is a duty which he owes to each department, for it is impossible to work satisfactorily and ac- complish much unless some course of action is laid out in ad- vance. Some executives believe in not committing themselves to any given course of action as it frequently causes them to re- verse certain decisions which have been made and they feel their prestige in the institution has been thereby diminished. It is not necessary to look very far to find executives who are will- ing to place all blame for wrong doing or for bad judgment upon their various subordinates, and as long as their directions, instructions, and course of procedure are so vague and indefinite, it is possible for them to shift their responsibility to their de- partmental heads, usually to the dissatisfaction of the people who-are supposed to help them in the affairs of the institution. An executive should not be afraid to admit in certain instances that he has been in the wrong. It does not jeopardize his posi- tion or his prestige; in many instances it secures the admiration and good will of his employees because they feel that he is as human as any of them and that he is willing to recognize that his judgments are not always perfect and are therefore subject to change and revision as circumstances warrant. Loyalty Loyalty is an essential in any institution. Employees must be loyal to one another, respect one another, and fair dealing should prevail between employees and between departments. The administrator who does not value and cherish the loyalty of his departments is overlooking one of the most valuable forms of assistance he can possibly secure. It is not unusual for ex- ecutives to secure the loyalty of their employees to the extent that they have implicit faith in their employer and are willing to follow instructions even though contrary to their better judg- ment. The most successful executive is the one who not only has the loyaltv of his departmental heads, but also secures their respect, admiration, and even love. Use of Official Bulletins There are various means of disseminating information 22 IMPROVED METHODS IN after business routine and procedure have been established. One of the most valuable takes the form of the official bulletin. Any established routine business procedure should be put in writing and be of enough importance to be published and cir- culated throughout the organization. On all matters of import- ance, such published decisions should be made. The executive should put them in writing and stand by these decisions until they have been proved unwise by test. These bulletins as they ac- cumulate from time to time should be kept in a loose leaf binder by each departmental head. They may be mimeographed to save time in preparation and issued as'often as necessary. If tffe old routine or procedure is changed, the bulletin may be re-edited •and new ones issued to take the place of the ones which have be- come obsolete. If these are kept in a loose leaf binder they may be inserted as issued and every departmental head will thereby have a book containing all important business of the hospital. These are valuable, especially where new employees come into the organization; they can turn frequently to a set of official bulletins for guidance in the various hospital matters. Bulletins of this sort become quite numerous as time goes on and they may form a nucleus for a hospital handbook should the size of the institution ever warrant putting the same in more perma- nent form. This should not be done, however, until the proced- ures have been thoroughly tried out and until the administration is relatively sure that the instructions which are to be in perma- nent form are of such a nature as to require few changes there- after. Administrative Meetings Another valuable form of disseminating information is to hold meetings at which all departments are represented. These conferences can well be of an hour's duration if not held more frequently than once a month. The following are offered as sug- gestions for discussion: care of property, loyalty, cooperation, and other matters which are of interest to the various depart- ment heads. Hospital problems in the concrete may be discussed such as noise, the serving of trays, and the misuse of linen. It is well to select items for discussion that pertain to more than one HOSPITAL MANAGEMENT 23 department as otherwise the program does not hold the proper interest that it should. Sometimes outside talent may be secured to address these meetings, a member of the board of directors, or a doctor on the staff might be willing to talk on some subject of general interest. After department heads have returned from various professional conventions, a required report of attendance may be given at the next administrative gathering. Various an- nouncements as to policies can be made and matters of general interest discussed at such times. One of the objects of these meet- ings is to get together and get acquainted. People do better work after they meet frequently and realize that there are many prob- lems in the institution other than those they are called upon to face. As a result, they recognize the relative importance of their particular department and do not over emphasize it or the prob- lems which confront them in their work. These meetings should not be considered a proper place to single out any particular department and hold it up for criticism before the entire group. Department heads who are criticised before their fellow work- ers lose their self-respect and their interest in their work; this is, of course, fatal as respect of self and ability to do ones work well are characteristics which should be greatly valued. Conclusions A definite administrative organization, therefore, is es- sential in any large undertaking; and in order to secure a well working machine, it is necessary to bring about certain condi- tions such as loyalty, definiteness of purpose and cooperation before satisfactory results can be obtained. CHAPTER III. BUDGET MAKING What Is a Budget? Recently there has been a tendency in state and national governmental units to budget their activities a year in advance. Educational, charitable, and penal institutions depending upon governmental support must budget their income and expendi- tures and substantiate their demands in this form before re- ceiving consideration. The figures in a budget must be based on past experience coupled with a reasonable knowledge of the trend of development of the institution and of its future wants and income. A budget is merely a plan, as near as it is humanlv possible to produce one, covering a given period of time. All smoothly running procedures whether private or institutional must be planned in advance. In making a journey from San Francisco to New York, the man of experience and wisdom will arrange his itinerary in advance, study routes of travel and length of time consumed in route, find out about the accommodations offered by various rail- roads and trains; probably he will inquire about the scenery along the various lines, and ascertain the rates. He will also make arrangements for the uninterrupted conduct of his busi- ness during his absence. Compare the advantages of such a jour- ney and the peace of mind entertained by the man taking it to those of a person who has to make a last minute decision, who has neglected his plans and dropping his work rushes to the train accepting the accommodations offered because of lack of time to make inquiry and accepting the route of travel because it is the one first suggested. Some institutions are run after the manner of the unfortunate traveler, without much thought given to any program for the future, all efforts being confined to the problems of the present. A budget to an institution is a plan of operation. Instead of drifting along from month to month and year to year, solicit- 24 HOSPITAL MANAGEMENT 25 ing funds at the end of the year to meet a deficit in operation, it is better to balance expected income against estimated expendi- tures and thus determine a year in advance the operating deficit, take it before the directors and ask them to authorize the plan. They will then know the amount of funds needed and can make their arrangements accordingly.' Budget Appreciated by Governing Boards In buying a suit of clothes or a new hat a man usually asks the price and thus is guided in his selection. Why not try it on a hospital board of directors? Tell them in advance the costs of operation of the institution and if they object, suggest that they do the cutting. Doubtless they will appreciate this opportunity. It is more businesslike to offer a program at the beginning of the year and make any adjustments necessary to suit the directors than it is at the end of the year to hand them a bill of costs of operation. A budget also enables a board of directors to determine questions pertaining to salaries, building repairs and alterations, additions to plant, purchase of equipment, and other similar matters, at the beginning of each new year. After the budget is passed, the manager having received his instructions is able to relieve the directors of hospital financial troubles for the remain- der of the year. Fundamentals in Budget Making When a budget is once authorized the manager should ac- ceptor reject it; and if he accepts, he should do all in his power to live up to it in every respect. The manager, therefore, must be sure of his budget, and to be sure, it is essential that he keep several fundamentals in mind. They are: 1. Accuracy in past accounts and records. 2. Support of departmental organization. 3. Careful study of a program for the future. 4. Underestimated rather than overestimated income. 5. Storeroom and stock records. 26 IMPROVED METHODS IN Accurate Records The accounting and records department is to the hospital manager what the compass is to the mariner. Without accurate statistical and financial data he is lost. Good accounting involves accounts arranged to reflect precisely the departmental organi- zation of the institution, so that the costs of operation may be kept by departments. Also the income or earnings accounts should be kept by departments. By so doing, each unit can be looked upon as a business in itself. Departmental Support 1 he department head should be called in consultation when his budget is arranged. For instance, the engineer should be consulted about his salary and that of his assistants for the fol- lowing year. After salaries are adjusted, the matter of supplies is taken up to decide what is needed. Then it is important to consider new equipment or alterations necessary to engine room and plant. 1 his must be done with all departments, floor super- visors, operating room supervisor, dietitian, and gardener. After the affairs of all are settled individually and the head of each department agrees that his allowance is sufficient, the manager is safe in the expenditure side of the budget, for the total ex- penditures as presented to the board of directors is backed up by the sub-totals to which the departmental heads have agreed. These departmental totals as the year begins should be divided by twelve and each month as the cost statements are issued the costs should be checked against the budget, and at an administrative meeting the status of each department in relation to the budget should be exhibited. Great discrepancies should be followed by private consultations. The result is that the re- sponsibility of the institution is placed upon departmental heads; in this way the cares and responsibilities of the manager are greatly reduced. As an illustration of what a budget will do for an institution, the following instance will serve: Last January, a hospital of 125 beds was placed on a bud- get control basis. It had six nursing units. The supplies for each unit were budgeted, using as a basis the supplies consumed HOSPITAL MANAGEMENT 27 for the previous months of October and November. (No longer period could be utilized as figures were not available. It is preferable in drawing up a budget to have about ten months figures of the previous year for guidance.) In January, every unit was above the budget allowance. This was discussed at an admininstrative meeting. In February, five units were under their quota and one was over. All budgets for nursing units for the following months up to July were under their quota. Then two supervisors went on their vacations. During this time one of these budgets was exceeded. This was very sig- nificant of course, but it was of greater import when the manager visited the storeroom a few days after the return of this super- visor to have the storekeeper point out a large pile of supplies which had just been returned, saying, "Miss Grant just sent back these supplies. They were ordered while she was away, she stated she didn't need them, that she wanted to return them and that he was to be sure that she received credit." I cite this illustration to show to what extent departmental heads can be interested in programs of useful management -and economy. Careful Analysis of Institution A budget to be of value must not be arranged hurriedly. It should be the guide and test of all expenses of operation and in order to be of value it must be a reasonable budget based on facts of past operation of the institution and must also reflect a program of development and expansion. The careful manager will make a study of the trend of development of several years and strike an average of these years before making prognostica- tions of what contingencies the coming year will produce. An inadequate budget carelessly cast aside early in the year will tend to result in lack of due consideration and respect on the part of departmental heads of the benefits derived from a budget and the support desired will be withheld. Do Not Overestimate Earnings A fatal mistake in budget making is to overestimate earn- ings. There is a tendency in presenting a program a year in •advance to wish to make as favorable a report as possible. The 28 IMPROVED METHODS IN expenditures of the institution may have received very careful consideration, even to the extent that they form a perfect basis of operation for the entire year. The income, however, has been fully anticipated or perhaps inflated to produce a low paper deficit. Then some unforeseen contingency may arise which will prevent the institution from producing its assigned income. Salaries are set for the year and only by breaking faith with the employees can this phase of expense be curtailed. Sometimes the contingency which curtails the income may cause excess costs in the supply and expense budgets. An epidemic may cause an influx of free cases into the institution which reduces earnings without a comparable reduction in expense of operation. Many unforeseen events control the income. In arranging such estimate it is therefore better to underestimate rather than over- estimate. Study the income for a period of several years, and if a growing, healthy institution exists, the manager will note a normal rate of increase over a given period of time. Suppose the normal rate of increase for the past ten years has been ten per cent over each preceding year. If the receipts last year were $200,000 he can therefore figure they would be $220,000 for the coming year. After arriving at this conclusion the man- ager should cut this estimate in half and base his calculations on an income of $210,000 rather than one of $220,000. This will mean that when he goes before a board of directors he has a paper deficit of more than he expects. His operating expense budget is based on a program of income which is safe and which probably, if it varies at all, will be greater than anticipated. This has a tendency to keep the institution within bounds; it prevents wild spending ahead of the demands of the organiza- tion; in other words, the manager keeps 'within his income by underestimating his income. At the end of the year, the directors will be pleased to learn that there was a saving on the budget; in fact, they have raised a little more money than was needed and the manager closes the year with bills paid and a balance to make some of those innumerable betterments which are always necessary in a hos- pital of any size. HOSPITAL MANAGEMENT 29 Need for Storeroom and Stock Records Budget control necessitates a properly conducted store- room. This is not an evil but a blessing. All institutions of 50 beds or more should have complete storeroom records. They assist in ascertaining wants when supplies are purchased. It is not unusual to hear of an unscrupulous salesman selling a sup- ply of his line sufficient to last the buyer several years. Some- times this has proved a service in disguise and luck was better than judgment. This has been possible for several years due to rising markets. However, it more often happens in overbuying that the goods deteriorate with age, storage, and handling, and that the interest on the money invested more than offsets any appreciation in value. Storeroom records are therefore indis- pensable in intelligent buying as well as a necessity when operat- ing on a budget control basis. All purchase of supplies must be assigned as a charge against a storeroom account until issued to the actual consumer. Cotton may be used by seven depart- ments in the institution each having an operating budget. Six months' to a year's supply is purchased at a time. It is obvious that when a six months' supply is delivered it should not be charged against one month's operating expense. It must be charged to stores or stock temporarily and as issued to the vari- ous departments each can be debited according to its consump- tion and the operating costs are thereby accurately determined. If such procedure were not carried out, the monthly cost state- ments for each department could not be checked with one-twelfth of the yearly budget since they would occasionally carry several months' expenditures and the following statements would be correspondingly light. The value of the monthly check would then be destroyed and interest by department heads would be lost. Collective Responsibility Helpful An administrator cannot run an organization successfully without the support of his employees. A good manager, there- fore, is one who is able to make each department feel its respon- sibility for the financial success of its own activity. This collect- ive responsibility means better organization, a spirit of coopera- tion, and a better institution. 30 IMPROVED METHODS IN Budget control of hospitals and institutions is synonymous with economical operation. It produces careful spending and has saved thousands of dollars annually even in small organiza- tions. It is the type of management demanded by men of busi- ness. To summarize: the fundamentals essential to the success- ful operation of an institution on a budget basis are accurate ac- counts and records, departmental support and enthusiasm, es- tablishment of a program of future development, a careful study and estimate of future growth and income, and a properly con- ducted storeroom with records. Budget Control Produces Economy A typical budget is given in detail except that in submitting such a budget names of persons occupying the various positions designated under "Section One, Salaries" should be included. The budget submitted is purely an operating budget and does not contain any program for purchase of equipment, additions, or betterment of plant. An additional section might therefore be added to cover expenditures contemplated in such -a pro- gram. A Typical Budget SUMMARY OF BUDGET 19 2 4 Section I-Salaries $137,144.00 Section II--Supplies and Expense 115,233.00 252,377.00 Less- Operating Expense of Research Laboratories met from special funds Salaries 26,740.00 Supplies and Expense 18,000.00 44,740.00 207,637.00 Section III-Income 190,500.00 *Estimated operating deficit for Hospital$ 17,137.00 *This deficit includes the costs of a contemplated amount of free work of $20,000.00 and costs of operating the dispensary of $1,160.00. HOSPITAL MANAGEMENT 31 Budget 1923 Budget 1924 Increase Decrease SUMMARY Administrative Offices.. ..9,000,00 10,000.00 1,000.00 Accounting and Record Offices 6,540.00 7,800.00 1,260.00 Property and Supplies 1,200.00 1,200.00 Engineering and Buildings 5,280.00 5,340.00 60.00 Garden and Grounds.... 3,324.00 4,800.00 1,476.00 Dietetics and Subsistence 14,400.00 16,380.00 2,520.00 540.00 Housekeeping, Linen and Dormitories 9,130.00 10,140.00 1,440.00 430.00 Laundry 10,322.00 10,374.00 208.00 156.00 Roentgen Department.. 8,600.00 8,600.00 Research Laboratories..23,155.00 26,740.00 4,080.00 495.00 Clinical Laboratory 1,620.00 1,500.00 120.00 Dispensary 720.00 810.00 90.00 Department of Nursing28,020.00 32,860.00 4,840.00 Internes 1,380.00 600.00 780.00 122,691.00 137,144.00 16,974.00 2,521.00 ADMINISTRATIVE ; OFFICES Executive Officers 9,000.00 10,000.00 1,000.00 9,000.00 10,000.00 1,000.00 ACCOUNTING AND RECORDS Secretary 1,500.00 1,500.00 Bookkeeper 1,500.00 1,500.00 Stenographer 1,200.00 1,500.00 300.00 Clerk * 900.00 900.00 Telephone Operator .... 900.00 900.00 Telephone Operator .... 840.00 900.00 60.00 Librarian 600.00 600.00 6,540.00 7,800.00 1,260.00 SECTION I-SALARIES *No Budget. 32 IMPROVED METHODS IN Budget 1923 PROPERTY AND SUPPLIES Budget 1924 1,200.00 Increase Decrease Storekeeper 1,200.00 1,200.00 1,200.00 ENGINEERING AND BUILDINGS Chief Engineer .... 1,800.00 1,800.00 Assistant 1,440.00 1,500.00 60.00 Assistant 1,380.00 1,380.00 Night Engineer (six months).... 660.00 660.00 5,280.00 5,340.00 60.00 GARDENS AND GROUNDS Head Gardener .. 1,800.00 1,800.00 Assistant 1,380.00 1,500.00 120.00 Assistant 144.00 1,500.00 1,356.00 3,324.00 4,800.00 1,476.00 HOSPITAL MANAGEMENT 33 Budget 1923 Budget 1924 Increase Decrease DIETETICS AND SUBSISTENCE Chief Dietitian .... 1,200.00 1,500.00 300.00 Assistants No. 1 .... 1,020.00 1,200.00 180.00 No. 2 .... 1,200.00 1,200.00 Chef .... 1,800.00 1,800.00 Second Cook .... 1,200.00 1,200.00 Vegetable Man .... 720.00 720.00 Pot Washer 600.00 660.00 60.00 Tray Man .... 600.00 660.00 60.00 Tray Girl .... 540.00 600.00 60.00 Diet Cook .... 780.00 1,020.00 240.00 Relief Maids No. 1 .... 540.00 600.00 60.00 No. 2 * 420.00 420.00 No. 3 * 300.00 300.00 No. 4 * 600.00 600.00 No. 5 .... 540.00** 660.00 120.00 Vegetable Woman .... 540.00 600.00 60.00 Waitresses Head Waitress .... 1,200.00** 780.00 420.00 Assistant 720.00 600.00 120.00 Assistant .... 600.00 600.00 Night Cook .... 600.00 660.00 60.00 14,400.00 16,380.00 2,520.00 540.00 *No Budget. **$5 allowance per month for rooming outside. 34 IMPROVED METHODS IN Budget 1923 Budget 1924 Increase Decrease HOUSEKEEPING, LINEN AND DORMITORIES Housekeeper 900.00 960.00 60.00 Seamstress 840.00 780.00 60.00 Floor Maids No. 1 540.00 540.00 No. 2 540.00 540.00 No. 3 250.00 240.00 10.00 House Mother . * 900.00 900.00 Maid-Nurses' Home 780.00 660.00 120.00 Porter-Nurses' Home 540.00 660.00 120.00 Porters No. 1 600.00 720.00 120.00 No. 2 720.00 720.00 No. 3 660.00 720.00 60.00 No. 4 600.00 660.00 60.00 No. 5 660.00 720.00 60.00 No. 6 900.00 660.00 240.00 No. 7 600.00 660.00 60.00 9,130.00 10,140.00 1,440.00 430.00 LAUNDRY Foreman 1,820.00 1,820.00 Forelady 1,560.00 1,560.00 Washer 1,300.00 1,144.00 156.00 Ironer 1,118.00 1,118.00 Mangle No. 1 988.00 988.00 No. 2 884.00 936.00 52.00 No. 3 884.00 936.00 52.00 No. 4 832.00 936.00 104.00 Press 936.00 936.00 10,322.00 10,374.00 208.00 156.00 *No Budget. HOSPITAL MANAGEMENT 35 Budget 1923 Budget 1924 Increase Decrease ROENTGEN DEPARTMENT Director . 5,000.00 5,000.00 Technician No. 1 . 1,200.00 1,200.00 No. 2 . 1,200.00 1,200.00 Secretary . 1,200.00 1,200.00 8,600.00 8,600.00 RESEARCH LABORATORIES Director . 4,000.00 4,000.00 Assistant Director . 3,000.00 3,000.00 Chief Chemist . 3,000.00 3,000.00 Assistants No. 1 . 1,800.00 1.800.00 No. 2 . 1,200.00 1,200.00 No. 3 . 1,560.00 1,800.00 240.00 No. 4 * 1,620.00 1,620.00 No. 5 ... . 1,080.00 900.00 180.00 No. 6 . 480.00 1,500.00 1,020.00 No. 7 . 600.00 1,800.00 1,200.00 Secretary . 2,115.00 1,800.00 315.00 Assistant Dietitian . 1,200.00 1,200.00 Laboratory Assistants No. 1 . 1,200.00 1,200.00 No. 2 . 1,200.00 1,200.00 Dish Washer . 720.00 720.00 23,155.00 26,740.00 4,080.00 495.00 CLINICAL LABORATORY Bacteriologist .. 1,500.00 1,500.00 Caretaker of Animals... .. 120.00 * • 120.00 1,620.00 1,500.00 120.00 *No Budget. 36 IMPROVED METHODS TN DISPENSARY Social Worker Budget 1923 .. 720.00 Budget 1924 810.00 Increase 90.00 Decrease 720.00 810.00 90.00 NURSING DEPARTMENT Superintendent of Nurses .. 1,800.00 1,800.00 Night Supervisor .. 1,200.00 1,200.00 Assistant * 1,080.00 1,080.00 Graduates 13 at $1,020.00. .12,240.00 13,260.00 1,020.00 Floor Supervisors No. 1 * 1,200.00 1,200.00 •No. 2 .. 1,200.00 1,200.00 No. 3 .. 1,200.00 1,200.00 No. 4 .. 1,200.00 1,200.00 No. 5 .. 1,200.00 1,200.00 School of Nursing Instructor .. 1,500.00 1,500.00 Pupil Nurses 33 1/3 at $120... . 2,880.00 4,000.00 1,120.00 Operating Rooms Supervisor . 1,500.00 1,500.00 Assistant . 1,020.00 1,200.00 180.00 Anesthetist . 1,080.00 1,320.00 240.00 28,020.00 32,860.00 4,840.00 INTERNES Five at $120.00 a year. . 1,380.00 600.00 780.00 1,380.00 600.00 780.00 *No Budget. HOSPITAL MANAGEMENT 37 SECTION II SUPPLIES AND EXPENSE Budget 1923 Budget 1924 Increase Decrease AD.MINISTRATIDE OFFICES Supplies and Expense 144.00 600.00 456.00 Traveling Expense.. 800.00 800.00 Car Allowance 360.00 360.00 ACCOUNTING AND RECORDS Supplies and Expense 1,548.00 2,000.00 452.00 PROPERTY AND SUPPLIES Supplies and Expense 50.00 72.00 22.00 GENERAL MAINTENANCE Supplies and Expense 1,356.00 1,200.00 156.00 Fuel Oil 3.600.00 4,200.00 600.00 Gas 1.140.00 900.00 240.00 Electricity 2,646.00 2,646.00 Water 2,500.00 2,200.00 300.00 Telephone 1,440.00 1,075.00 365.00 Taxes 3,600.00 5,700.00 2.100.00 Insurance 1,200.00 1,800.00 600.00 Buildings, Repairs and Alterations.... 1,800.00 800.00 1,000.00 Painting 2,400.00 2,400.00 Garden and Grounds 300.00 300.00 ENGINEERING AND BUILDINGS **Supplies and Expense 2,000.00 * 2,000.00 MAINTENANCE OF TRUCK **Supplies and Expense 500.00 * 500.00 38 IMPROVED METHODS IN Budget 1923 Budget 1924 Increase Decrease DIETETICS AND SUBSISTENCE Supplies and Expense 1,800.00 Milk and Cream 6,000.00 Meat, Fish, Poultry 7,200.00 Butter 3,600.00 Eggs 3,600.00 Bread and Pastry.... 1,140.00 Fruit and Vegetables 9,600.00 Groceries 3,060.00 Tea and Coffee 540.00 3,000.00 7,000.00 10,500.00 4,000.00 3,000.00 1,140.00 8,000.00 8,700.00 1,000.00 1,200.00 1,000.00 3,300.00 400.00 5,640.00 460.00 600.00 1,600.00 HOUSEKEEPING, LINEN AND DORMITORIES Supplies and Expense 2,670.00 3,600.00 930.00 LAUNDRY Supplies and Expense 1,500.00 1,800.00 300.00 ROENTGEN DEPARTMENT Supplies and Expense 3,000.00 4,800.00 1,800.00 RESEARCH LABORATORIES Supplies and Expense 12,000.00 18,000.00 6,000.00 CLINICAL LABORATORY Supplies and Expense 1,000.00 1,000.00 PATHOLOGICAL LABORATORY Supplies and Expense 100.00 200.00 100.00 OPERATING ROOMS • Supplies and Expense 4,050.00 3,800.00 250.00 PHARMACY Supplies and Expense 200.00 Drugs 2,550.00 Prescriptions 600.00 200.00 1,800.00 1,800.00 1,200.00 750.00 ELECTRO-CARDIOGRAPH Supplies and Expense 120.00 120.00 HOSPITAL MANAGEMENT 39 Budget 1923 Budget 1924 Increase Decrease NURSING SERVICE No. 1 * 120.00 120.00 No. 2 1,500.00 800.00 700.00 No. 3 1,230.00 900.00 330.00 No. 4 1,470.00 800.00 670.00 No. 5 1,000.00 900.00 100.00 No. 6 1,200.00 1,100.00 100.00 SCHOOL OF NURSING Supplies and Expense 500.00 900.00 400.00 INTERNES Supplies and Expense 100.00 200.00 100.00 RESEARCH Supplies and Expense * 250.00 250.00 DISPENSARY Supplies and Expense 390.00 350.00 40.00 95,124.00 116,833.00 31,410.00 9,701.00 Less Garden Supplies Furnished Kitchen 1,600.00 1,600.00 95,124.00 115,233.00 31,410.00 11,301.00 *No Budget. **Included Elsewhere. 40 IMPROVED METHODS IN SECTION III-incomp: EARNINGS 1923 1924 January 16,933.95 February 14,234.07 March 17,539.19 April 15,151.58 May 17,848.12 June 15,109.81 July 15,640.89 August 15,275.79 September 14,790.39 October 13,746.35 November 14,184.82 December (Estimate) 13,000.00 Total *183,454.96 **190,500.00 *Includes $2,700 income on Endowment Funds. ** The increase of approximately $7,000 in earnings is based upon the lowest percentage of increase in hospital earnings for the period of the past eight years; The patient day increase of 1922 over the year 1921 was an average increase of three per day. This is the increase contemplated for next year. CHAPTER IV. ACCOUNT CLASSIFICATION AND GENERAL LEDGER Accounts Should Keep Pace With Growth Many hospitals have attained their present size and scope of activity through years of growth and development. Architec- turally they have perhaps passed through several periods of al- teration, patching, and addition. In some instances the old plant has even been discarded and a modern building has been erected which announces to all observers that here is an institution which accepts as its standards only the best in structure and equip- ment. But how about its accounting department, its methods of business routine, its records? Are these phases of the institution still struggling along in the alteration, patched-up, built-on era? If so, it is time to discard and rebuild. An accounting system has a foundation the same as a building, and there comes a time in all growing institutions when even foundations must be dis- carded and its system of records and accounts must be rebuilt from the ground up. Steps Necessary in Reorganization Several steps are worthy of consideration in such a process. They are: 1. A careful analysis of the physical organization. 2. A study of its administrative organization. 3. Decide the type of information desired; the results to be obtained. 4. Designing of the system and forms. 5. Installation of new system. Diagnosis of Needs A physician does not attempt to lay out a course of treat- ment for a patient until a careful diagnosis has been made. Neither should a record system be devised or installed until a 41 42 IMPROVED METHODS IN careful study of the institution has been made. From such a study it will be discovered that the differences in hospitals -are in matters of detail only, that in the fundamentals they are essen- tially the same. All hospitals admit patients, conduct ledger accounts with patients, render bills, and collect and receipt for cash. The sources from which charges originate may vary in number and type but the procedure in handling charges is fun- damental and subject to standardization. Help must be em- ployed, time records kept, and wages paid at stated intervals. Supplies are purchased, goods received, stored and issued in all institutions, bills paid, and appropriate records in connection with their payment kept. Standardization of Forms In promoting forms for institutions, it will be seen, there- fore, that first they -are general in application and second they are adaptable to the varying circumstances under which they are to be installed. The forms recommended in this book may be divided into two groups namely, those which are so general in their character and application that they may be completely standardized; and second, those that can be standardized in prin- ciple, but the various headings used must conform to the re- quirements of each institution. Of the first group the following are included: Daily Financial Report, Telephone Exchange Daily Report, Rate Agreement, Employee Record, Purchase Order, Stock Card, Vendor's Index, General Requisition, En- gineering Department Work Order, Journal Voucher, Petty Cash Fund Voucher, Request for Quotation and General Led- ger Sheet. fhe Patient's Ledger Card, Cash Receipt, Bill Form, Earnings and Rebate Record, Payroll Check, Vacation and Leave Record, Voucher Check, Diet and Food Requisition, Linen Requisition, Voucher Distribution Book and Internal Requisition Distribution Book are changed slightly to meet vary- ing conditions in different hospitals. In securing the data necessary for this last group of forms and deciding the precise routine in which all forms are to be handled, the steps necessary in such a reorganization, which are HOSPITAL MANAGEMENT 43 enumerated at the first of this ehapter, will be discussed at great- er length. All departments and subdepartments in the institution should be noted. This data becomes the basis for building up the account classification, a typical illustration of which will follow. Future plans as to the enlargement of existing facilities and the addition of new activities should be observed. The location of the storeroom in relation to the departments to be served and to the receiving entrance should be given consideration. Its posi- tion should also be noted with reference to the other administra- tive offices. The entrance to the hospital in relation to the infor- mation desk, the guests' waiting room, the admission desk, tele- phone exchange, cashier's desk and bookkeeping department should all be arranged with the view of granting the greatest amount of service with the least possible number of employees and effort. Analysis of Plant All departments of the institution should have administra- tive heads, their positions should be well defined and the chan- nels of authority and responsibility clearly outlined and thoroughly understood. Such business functions as employment of help, reduction of published hospital rates, admission and discharge of patients, collection of accounts, purchasing, receiv- ing, and issuing of supplies should be traced and the proced- ure in each case determined. Study of Administrative Organization Type of Information Desired It is imperative to decide the kind of information the record system will be called upon to yield. Is it an institution with a multitude of endowments and charity obligations which are to be accounted for and reported? Does the institution belong to a chain of organizations which make cetain demands of the institution in the way of statistical data? Are certain depart- ments abnormal in size and business activity and warrant special or unusual consideration? Has the Board of Directors specified data which must be secured, and lastly, has the administrator 44 IMPROVED METHODS IN certain hobbies which should be reflected in the arrangement of the business routine? These preparatory steps are enumerated at length because, first, there seems to be a growing tendency to feel that all hos- pitals are fundamentally alike, and that, therefore, the same busi- ness forms and procedure may be carried out with success in all institutions; second, that a series of articles, dealing with hos- pital accounting and records illustrated with forms which have been successfully employed in certain hospitals, is of value in a general way only and cannot be embodied wholesale by an in- stitution without regard to its particular needs and peculiarities. Conditions vary in different institutions and should, therefore, receive consideration in designing its business forms and pro- cedure. Designing of Forms With the preliminary data in mind, work may proceed on the designing of forms. This particular step has been simplified, the forms being completely standardized wherever possible, and in all other instances a minimum amount of supplementary facts, to make the form workable, is required. A complete set of tools does not make a good mechanic. A complete set of hospital forms does not make a smoothly run- ning business organization. Forms to be valuable must be used properly and the business routine through which they pass well regulated. Many times it is found that a form is not being utilized as intended. The mechanical procedure only is being followed without securing proper results. The efforts expended are wasted and no form at all is better than one incorrectly used or one used at the improper time. Book keeping and form keep- ing are means to an end and of themselves are valueless unless certain definite results are accomplished. A complete set of new accounts cannot be put into opera- tion over night. It is a task which will occupy several months. It is not meant that the mechanical use of forms requires that Installation HOSPITAL MANAGEMENT 45 long for installation, but before all procedure is operating smoothly, before statements are being secured promptly and as required, and before tabulated data for stated fiscal periods is available, the full benefits are not obtained. Even then eternal vigilance is the formula for properly kept records as employees many times find "easier" methods but which do not produce de- sired results. Account Classification The structure of an accounting system is built around the account classification. By proper arrangement of the ledger accounts and by embodying this arrangement in all the busi- ness forms and procedure, many hours of time each month may be saved the bookkeeping force. The following classification is typical, and the six main divisions may be utilized in any set of accounts. ACCOUNT CLASSIFICATION 1 FIXED ASSETS 11 Real Estate 111 Real Estate (Hospital Site) 112 Real Estate Improvements 12 Buildings 121 Hospital Buildings 1211 Main Building 1212 Metabolic Wing 1213 Maternity Wing 1214 Children's Wing 1215 X-ray Wing 122 Other Buildings 1221 Heating Plant 1222 Laundry 1223 Nurses' Home 1224 Dispensary 1225 Transformer Vault Building 1226 Tank House 13 Equipment 131 Equipment 1311 Furniture and Furnishings 1312 Scientific 46 IMPROVED METHODS IN 1313 Office 1314 Machinery and Tools 1315 Kitchen Appliances 132 Automobile 21 Cash Accounts 211 Commercial Bank, General Account 212 First National Bank, Research Funds 213 County National Bank, Dispensary 214 Petty Cash 22 Accounts Receivable 23 Stores 24 Investments Control 25 Deferred Charges and Accruals 251 Insurance 252 Taxes 253 Endowment Fund Income Accrued 2 CURRENT ASSETS 3 LIABILITIES 31 Accounts Payable 32 Donations for Specific Purposes 33 Endowment Fund Income Control 4 CAPITAL AND SURPLUS 41 Surplus 42 Endowment Funds Control 43 Profit and Loss 44 Reserves 441 Bad Debts 5 EARNINGS 51 Hospital Service 52 Surgery 521 Operating Room 522 Anesthetic 523 Surgical Supplies 53 Subsistence 531 Nurses' Board 532 Meals and Trays 54 Roentgen Department 541 Picture Work 542 Treatment 543 Radium HOSPITAL MANAGEMENT 47 55 Laboratories 551 Chemical 552 Clinical 553 Pathological 56 Pharmacy Supplies 57 Consulting Fees 58 Miscellaneous 581 Telephone and Telegrams 582 Laundry 583 Out Patient Department 584 Other Items 59 Rebates 591 General Relief 592 Courtesy 593 Endowment Funds 594 Research 6 EXPENDITURES 61 Administration 611 Administrative Offices 6111 Salaries 6112 Supplies and Expense 6113 Traveling Expense 612 Accounting and Record Offices 6121 Salaries 6122 Supplies ard Expense 613 Property and Supplies 6131 Salaries 6132 Supplies and Expense 62 General Maintenance 621 Salaries 622 Supplies and Expense 623 Fuel Oil 624 Gas 625 Electricity 626 Water 627 Telephone 628 Taxes 629 Insurance 629-a Rents 629-b Interest 629-c Building Repairs and Alterations 63 General Service Department 631 Engineering and Buildings 6311 Salaries 6312 Supplies and Expense 48 IMPROVED METHODS TN 6313 Maintenance of Truck 6314 Work Done for Other Departments 632 Grounds and Gardens 6321 Salaries 6322 Supplies and Expense 6323 Supplies Furnished or Sold 633 Dietetics and Subsistence 6331 Salaries 6332 Supplies and Expense 6333 Milk and Cream 6334 Meat, Fish and Poultry 6335 Butter 6336 Eggs 6337 Bread and Pastry 6338 Fruit and Vegetables 6339 Groceries 6339-a Coffee and Tea 634 Housekeeping, Linen and Dormitories 6341 Salaries 6342 Supplies and Expense 635 Laundry 6351 Salaries 6352 Supplies and Expense 6353 Work Done for Outsiders 64 Public Utility Departments • 641 Roentgen Department 6411 Salaries 6412 Supplies and Expense 642 Research Laboratories 6421 Salaries 6422 Supplies and Expense 6423 Laboratory Equipment 6424 Laboratory Expense 6425 Diet Kitchen Expense 6426 Library Expense 6427 Office Expense 643 Clinical Laboratory 6431 Salaries 6432 Supplies and Expense 644 Pathological Laboratory and Morgue 6441 Salaries 6442 Supplies and Expense 645 Operating Rooms 6451 Salaries 6452 Supplies and Expense 646 Pharmacy HOSPITAL MANAGEMENT 49 6461 Salaries 6462 Supplies and Expense 6463 Drugs 6464 Prescriptions 6465 Supplies Furnished Other Departments 647 Dispensary 6471 Salaries 6472 Supplies and Expense 65 Nursing Service 651 General 6511 Salaries 6512 Supplies and Expense 652 First Floor 6521 Salaries 6522 Supplies and Expense 653 Second Floor 6531 Salaries 6532 Supplies and Expense 654 Metabolic Wing 6541 Salaries 6542 Supplies and Expense 655 Maternity Wing 6551 Salaries 6552 Supplies and Expense 656 Children's Wing 6561 Salaries 6562 Supplies and Expense 66 School of Nursing 661 Salaries 662 Supplies and Expense 67 Internes 671 Salaries 672 Supplies and Expense 68 Research Division of Account Classification and Ledger The six groups of accounts namely, (1) Fixed Assets, (2) Current Assets, (3) Liabilities, (4) Capital -and Surplus, (5) Earnings, -and (6) Expenditures are distinct divisions of the general ledger. The classification is flexible, accounts may be added or taken away at will and yet not disturb the general ar- rangement. This manner of handling accounts permits of ease in preparation of a statement, the ordinary trial balance being eliminated. 50 IMPROVED METHODS IN Preparation of Statements In taking off a statement the fifth division or earnings group is prepared first, listing the accounts with the current month's earnings opposite each account. Next, the expenditure or sixth group is listed with the current month's operating expenses op- posite each account. I he difference between group five and group six is the net profit or net loss for the period. This figure, together with the accumulated total profit or loss of all previous months of the current fiscal period, is the balancing figure for the -asset and liability statement which can now be copied in the exact order as the accounts appear under Sections (1), (2), (3), and (4) of the ledger. Physical Division of Ledger The six divisions of the ledger should be separated physi- cally with tabs placed conveniently for locating the various ac- counts under each division. Expenditure Accounts Note that the grouping of accounts under (6) Expendi- tures is by departments and should correspond to the adminis- trative organization. If this is done it will assist materially in the operation of an institution on a budget basis, which was dis- cussed in chapter 111. It is not necessary to open separate led- ger -accounts for each account under expenditures. A typical expenditure account is noted in the illustration on page 131 show- ing the total for the department on the right hand opening of the page and the total of each subaccount under the department on the left hand opening of the page. General Ledger Postings into the ledger are made from columnar books specially designed to secure segregation of earnings and ex- penses by various accounts so that no detail is carried into the general ledger and no account receives more than two postings a month, or less, as-a rule. The general ledger should be a loose leaf book thereby facilitating the addition to or the removal of pages. As certain accounts grow in size, pages may be trans- HOSPITAL MANAGEMENT 51 ferred to a transfer ledger, the order of accounts being the same in both ledgers so that old entries may be traced with ease. Account Number and Name It should also be noted that the pages in the general ledger are not numbered except to indicate the number of sheets occu- pied by -an account. The account classihcation acts as a means of locating an account in the ledger and the various pages occu- pied by an account in each instance begin with the numeral one and as many numbers used as there are pages required. Each account should be headed with the account number and name. In the case of expenditure accounts where a division of the main account is shown at the left hand opening of the page, each column used should be headed with the subaccount number and name. Control Accounts There are several control accounts which appear in the general ledger, the detail of which is carried in subsidiary hies. This is true of the stores account and of accounts receivable. The detail of the stores account is kept on a stock record card. These stock cards may be reconciled with the control account regularly, at least once every year. The use of this form and its reconciliation with the control account for stores will be con- sidered in chapter V. Accounts Receivable Control The detail of the accounts receivable control is kept on the patients' ledger cards. This hie is maintained in the general office and the detail cards reconciled monthly with the control account. This also will be discussed further in its proper place. Accounts Payable Control Accounts payable control should also be reconciled monthly with the unpaid voucher file which represents the detail of this account. 52 IMPROVED METHODS IN In order to simplify the general ledger it may be advis- able under certain conditions to open up other control accounts. If the detail of these accounts is not bulky, they may be handled in the back part of the general ledger under special sections. An illustration of this is the handling of endowment funds where they are numerous. A control account may be opened in the general ledger and each fund receive special consideration and stand as a separate account in the back portion of the ledger im- mediately following division six. When this method is employ- ed, all transactions must be posted twice, once to the control ac- count and once to the detail account, thereby keeping the control in perpetual balance with its subsidiary accounts. Investments of endowment funds may also be treated similarly. Miscellaneous Control Accounts Use of Left Hand Opening of Ledger Page It should be borne in mind that the left hand opening of the page is for distribution of debit postings only; this is especially desirable in the sixth section of the ledger. However, it is fea- sible to utilize these columns for memorandum purposes in other instances. Further Explanation of Ledger Unnecessary More could be said about the arrangement and construc- tion of accounts in the general ledger, but only the more im- portant features have been mentioned. The handling of general ledger accounts is a subject familiar to most people -as it is com- mon to any form of account records. Ledger Is Foundation to Accounting System In conclusion, it will be seen that the account classification and the general ledger itself is the foundation or backbone of the entire set of records, and that any extensive changes in an ac- counting system must begin with the accounts of the general ledger. CHAPTER V. PURCHASING, STORING AND ISSUING SUPPLIES The total operating expense of a hospital is about equally divided between its payroll and its expenditures for supplies and expense items. Of the fifty per cent of total costs devoted to supplies and expense, many items involve but little considera- tion in the matter of purchase. Such fixed items as water, gas, electricity, taxes, insurance, and fuel oil contribute a consider- able quota of this amount. The careful manager will find means, however, of regulating the amounts consumed and in this man- ner control the costs of these items. The several hundred remain- ing articles which make up the varied purchases of the average hospital are subject to extensive variations in quality and price and it is in this type of expenditure where much money may be saved or lost to the institution. Economies in Purchase Some hospital executives buy direct over their desk a con- siderable portion of the supplies needed, but few have sufficient ability in determining quality or accurate knowledge of markets or of the needs of the institution to adopt such methods. Execu- tives should recognize their lack of ability to have sufficient information at their finger tips to enable them to buy with in- telligence these several hundred articles and should surround themselves with safeguards adequate to secure such data before orders are placed. An executive in an institution of any size should have as his assistant in this phase of his work, a purchas- ing -agent, or a combination purchasing agent and storekeeper. Such a person can assist in the matter of securing data on price and quality, many times assembling samples for perusal and inspection. Information as to amounts used during stated per- iods can also be secured by this person as many times the price is affected by the quantity purchased. Heads of departments Methods Used in Buying 53 54 IMPROVED METHODS IN are of great assistance and can be utilized by asking their opin- ions as to economies in purchasing. The accumulation of suf- ficient data to insure intelligent buying is a laborious process and can occupy profitably a considerable portion of one person's time even in small hospitals. Interviewing Salesmen Salesmen many times are of valuable assistance in furnish- ing information about purchases. Such representatives can be of real assistance and their visits should be encouraged rather than discouraged. If the executive is occupied or does not wish to interview the salesman, the purchasing agent or storekeeper can assist in this duty. Many times the storekeeper has items to be discussed with salesmen regarding back orders, deliveries or breakage, which can be more easily adjusted personally than bv letter. The salesman who makes himself offensive bv urging his supplies upon a customer is usually susceptible to dis- couragement provided the storekeeper has protected his pur- chasing in the proper manner. T think that-all executives could well afford to adopt the rule that no orders are to be placed through solicitors or salesmen direct. After such a rule has been in practice a few months, the regular salesmen will understand the situation and conform to the general practice. The infre- quent visitors will not welcome such routine but it is this type of salesman that should be handled the most carefully and with whom orders should be placed only after thorough considera- tion. The salesmen who are offended by such procedure are the ones against whom caution should be most diligently exer- cised. Favors extended by salesmen should be discouraged as the purchaser should feel free from obligation and free to direct his purchases to the firm where price and quality alone merit the business. Purchasing by Contract Contract purchasing is a common means of securing stand- ard commodities used extensively and continuously. Articles to be bought advantageously in this manner are meat, eggs, milk, butter, fuel oil, and similar items. Any firm, if guaranteed your HOSPITAL MANAGEMENT 55 undivided patronage for a considerable period of time, can afford to make special concessions in price, manner of delivery and service rendered. Staple articles, therefore, should be pur- chased in this manner whenever possible. In securing data be- fore letting such a contract, prices not only should be stipulated but qualities and brands should be specified. The time covered by such contracts varies with the commodity being purchased. Quarterly contracts are common where prices fluctuate greatly, as with meats. In other instances, on such articles as soaps, an- esthetics, etc., contracts may be let on a yearly basis with a reduc- tion in price from the regular market quotation and with a guar- antee that should the market fall below the contract price the buyer is protected and given the new rate. Seasonal Buying Great savings are affected in some instances through sea- sonal buying. The market price on many products shows a seasonal fluctuation which can usually be relied upon. In such cases, and where storeroom facilities permit, it is advisable to buy in large quantities, the goods to be delivered several months subsequent to the placing of the order. Potatoes, apples, can- ned goods, -and cotton supplies are articles which can be bought with profit on this basis. Frequently a contemplated saving is more than offset bv decay or destruction through heat or cold where storage facilities are not proper, hence the placing of large orders should be given careful thought. Buy in Original Factory Containers When Possible Ordering supplies in original factory containers is an- other form of economical buying. Drugs and chemicals vary greatly in price depending upon the quantities requested. Great savings are often realized through slightly varying the quan- tities purchased, thereby -avoiding charges plus percentage of profit for breaking original packages and repacking. Secure Quotations The vast majority of hospital supplies, however, are order- ed irregularly as occasion warrants or when the stock of supply 56 IMPROVED METHODS IN is nearly exhausted. In making such purchases it frequently pays to secure quotations before placing orders. This is not always practical, but if the order involves an expenditure of $25 or over, it is safer to secure quotations than to place the order direct without inquiry. A quotation sheet will often bring in- formation, other than price, which was not contemplated when the request for quotation was made and may change completely the nature of the order. REQUEST FOR QUOTATION SANTA BARBARA COTTAGE HOSPITAL THIRD AND BATH STREETS SANTA BARBARA, CALJFORHIAj 't Date 2 Street 3 3 City rt-i ,. Zy&/., Gentlemen: V Wc should like you to furnish us with quatatio the following items: QUANTITY article and description PRICE QUOTED //&J b a.ZZ<- k <>_</ Very truly yours. G. W. CURTIS, Superintendent Illustration I. Request for Quotation. Request for Quotation Form The use of the quotation sheet is so simple as to require but a brief explanation. This sheet should be made out in dup- licate, the original going to the firm from whom the quotation is requested and the duplicate retained for the files of the store- room. These duplicates may be filed by firm name, alpha- HOSPITAL MANAGEMENT 57 SANTA BARBARA COTTAGE HOSPITAL THIRD AVENUE AND BATH STREET SsNTA BARBARA. CALIFORNIA PURCHASE ORDER Mi ssinn Office JEmiinment Co. N9 Date -January -3 6451 1924- Str f ft 1234 St at, 6 St, , CI tv Santa Barbara PLEASE DELIVER THE FOLLOWING. BILL CONTAINING OUR ORDER NUM BER MUST ACCOMPANY GOODS IN DUPLICATE BACK ORDERS TO BE SHIPPED PREPAID QUANTITY ARTICLE AND DESCRIPTION PRICE QUOTED DATE DELIVERED 3 doz. tan Desk 1000 Marking Tags -33B 4 doz. Red Cards like sample enclosed Shipping Instriietions Messenger Santa B/ D D A D A /"V'T'-T' A Deliver not later than Department Ordering btorea (COPY FOR VENDOR) Illustration II. Purchase Order, Original Copy. The item of Blotters shown above is also shown as an entry in other illustrations, see Stock Card and General Requisition. 58 IMPROVED METHODS IN SANTA BARBARA COTTAGE HOSPITAL THIRD AVENUE AND ' BATH STREET SANTA BARBARA. CALIFORNIA ATn . N Y 6451 PURCHASE ORDER Firm Name Mis_sion_QfTiceEquipmentCo. Date Jnnuftry 5 190 4 Street 1234 State St., Citv __Santa Barbare., . PLEASE DELIVER THE FOLLOWING: QUANTITY ARTICLE AND DESCRIPTION PRICE QUOTED DATE DELIVERED p/ 3 doz.| 4 doz. Dark tan Desk Blotters J / a/z 7 Marking Tags -33B Red Cards like sample enclosed /0*3 Shipping Instructions Messenger Santa Barbara Cottage Hospital Deliver not later than By Department Ordering Stores BILLS APPROVED FOR PAYMENT Items . Date //Bv . Voucher Check Number 2434 Items Dute By - Voucher ChecX Number Illustration III. Purchase Order, Duplicate and Triplicate copies are alike. Note record of bill approval and payment at bottom of form. HOSPITAL MANAGEMENT 59 betically. As the originals are returned, the duplicates may be destroyed and thus the file remains active. If desired, a file may be maintained of returned quotation sheets. This is also arranged alphabetically but with a special section for each firm as it will be more voluminous than the active file of quotation sheets. Past quotations may easily be referred to in such a file and in some instances render valuable information in purchas- ing. The form, Request for Quotation, is illustrated on page 56. Use of Purchase Order Form The Purchase Order illustrated on n-ages 57 and 58 is in triplicate sets, the original copy of which is mailed to the vendor and the duplicate and triplicate copies are for use in the store- room and bookkeeping offices. It is desirable to record all pur- chases on this order form, the exceptions being such items as -are delivered daily, bread, milk, meats and similar items. Bills for articles of this description may be checked for payment against the daily delivery tags which have been approved by the person receiving the goods. 1 he two carbon copies of the Purchase Order should be sent to the storeroom or receiving department when the origi- nal is sent to the vendor. The duplicate copy should remain on file here in numerical order and the triplicate copy filed by firm name alphabetically. 1 hese two files act as a cross index to each other, the Purchase Order being available when either the firm name or the purchase order number is given. As the goods are received, delivery is indicated on the duplicate copy opposite each item and under the columnar heading "Date De- livered." After each item, it is also indicated whether the item is issued direct to a department or put into stock. The property number alone inserted after an item indicates it has been placed in stock. If it is issued direct to a department, an abbreviation of the department name written opposite indicates the depart- ment receiving the goods. When all items on a Purchase Order have been received and the delivery noted thereon, the duplicate order should be forwarded to the bookkeeping department for further attention. Breakage and shortage should be indicated for guidance in the 60 IMPROVED METHODS IN payment of bills. Upon receiving the Purchase Orders properly completed by the storekeeper, the bookkeeping department files them alphabetically. This file of Purchase Orders is used as the basis for the approval of bills by the bookkeeper. As bills are checked against Purchase Orders for payment, the Purchase Orders are attached to the approved bills until the check in payment has been written. Notation at the bottom of the Purchase Order may then be made as to what items have been approved for payment, the date they were approved, who approved them, and on what check number they were paid. After this data has been recorded at the bottom, the Purchase Order is filed again numerically, but this time in the bookkeep- ing office. Tf partial delivery only has been received and par- tial payment only made, the Purchase Order goes back to the storekeeper for further attention and repeats the above process until complete delivery or cancellation has been recorded. There is room for recording but two payments at the bottom of the Purchase Order. Additional payments when necessary can without difficulty be crowded into the space at the extreme bot- tom of the sheet. In summary, then, the original Purchase Order is mailed to the vendor. The duplicate Purchase Order first goes to the storeroom and is filed numerically as a receipt of goods file. Second, it is sent to the bookkeeping department and is filed alphabetically until bills are paid and their payment recorded. It is then filed numerically in a permanent file in the book- keeping department. The third copy of the Purchase Order is sent direct to the storeroom and is filed in a permanent alpha- betical file. Value of Purchase Order Form By universal use of this Purchase Order form the pro- miscuous buying by individuals throughout the institution may be eliminated. A rule should be put into effect that no buying is permitted except through the medium of this form. All Purchase Orders should be signed by the chief executive or sup- erintendent and all expenditures thus approved before any obli- gation has been incurred. It is important that the department HOSPITAL MANAGEMENT 61 ordering should be indicated on the Purchase Order form as it assists the storekeeper in knowing to whom the supplies are to be issued when received. The judicious use of the Purchase Order will produce economies in any institution which has for- merly delegated authority in buying to several different persons. Strict attention should be given to the receipt of goods. The receiving entrance, located near the storeroom and equipped with a platform scale for checking weights, should be a place which can be locked so that late arrival of goods may be safely kept pending a proper check the following day. Receipt of Goods Receipt of Goods Book As goods are unpacked they are weighed, counted, or measured as the case may demand. Thorough checking as to quality and comparison with samples submitted, where such has RECEIPT OF GOODS BOOK Firm Name Date Received Order Number Disposal Property Number Invoice Stock Cards Article Barker Bros. Nathan-Dohrmann 2/9/23 2/9/23 207 760 Mat. W. Stock 63.00 18.00 P 2 Dressers-Walnut 72 Cream Pitchers Glass 2 Oz. 1078 Illustration IV. Receipt of Goods Book been required, is essential. The condition of the shipment should also be noted and claims for shortage, damage, or break- age promptly made. A Receipt of Goods Book should be kept wherein is recorded the date the goods were received, followed by the firm name from whom received, the articles received, the purchase order number, the property number if the article is put into stock, or, if issued direct, the department re- ceiving the shipment or article. A special column is reserved for each type of information enumerated. A stock book with- out columns may be purchased and ruled by h-and for this work, or better, a book printed and ruled especially for this purpose 62 IMPROVED METHODS IN secured. A sample page from such a book is illustrated on page number 61. Complete Storeroom Records as Aid to Purchase The department of property and supplies, or the storeroom, is often much neglected and relegated to a portion of the build- ing that is dark, damp, unventilated, and unfit to use for any purpose whatever. Money spent in properly conducting a storeroom is repaid several fold. If a storeroom is used as a place for pushing in and piling up a certain unused portion of an order and later the remainder is handed out on a "help your- self" basis, the institution is open to waste and extravagance. First, in purchasing, it is difficult to know how much to purchase as no systematic records of consumption or use are available. With a certain amount of difficulty the old invoices may usually be traced and consulted but at least the information is not easily procurable and no data is on hand to show what the present sup- ply is and a physical count must be made to determine this infor- mation. Possibly in this count items or whole cases of items may be overlooked. Buying without proper storeroom records is at best a haphazard procedure; overstocking is common and fre- quently duplicate orders are placed. Stock deteriorates rapidly if not kept dry and in a well ventilated room. Many articles of value are damaged or destroyed if not stacked neatly in per- fect order on shelves. This is true of such items as stationery, printed forms, glassware, and dishes. To repeat, great econo- mies result from a properly conducted, suitable storeroom and from complete, well kept, storeroom records. Requirements of a Good Storeroom A good storeroom should conform to the following require- ments : 1. It should be well located. The delivery entrance should be conveniently nearby. It is best to have a storeroom arranged in such a manner that the delivery entrance is at one end of the room and the issue entrance at the opposite. In this manner deliveries need never block the issue entrance and when large shipments arrive they may be properly handled without hinder- HOSPITAL MANAGEMENT 63 ing the issue of supplies. Visitors to the storeroom on business are then not able to look over and handle new arrivals of goods and, as often happens, damage some article the mechanism of which they do not understand. 2. It should be well equipped. A railing or fence may shut off the storeroom proper from hospital employees and visi- tors. Some clerical work must necessarily be conducted in the storeroom for which adequate furniture and office appliances must be provided, the character of which depends entirely upon the volume of business and size of the institution. Stacks of shelves are most convenient when opening on two sides with plenty of passage space between the stacks. The shelves could well vary in width and height to accommodate various articles. Racks are best for some types of supplies, bins and drawers for others. Stock is equivalent to money and it should be stored in such a manner that it is 'accessible yet protected against undue handling. The storeroom equipment is, of course, incomplete without a light truck for moving heavy articles and a platform scales as already mentioned. 3. It should be light, dry, and well ventilated. Many arti- cles deteriorate rapidly if stored in a damp, dark room. Prac- tically no item of stock, if stored for a sufficient length of time is such a place, will be able to withstand such storage and main- tain its original standard of quality. Natural light and ventila- tion and some means of supplying artificial heat in damp, cold weather are important considerations. The outside windows can be protected by either heavy wire screens or iron bars to make burglary difficult. Storeroom Records and Forms The full benefits may not be derived from the storeroom unless proper records are kept. The Request for Quotation, Purchase Order, and Receipt of Goods Book have been describ- ed, -all of which belong to the records of the storeroom. In addition to these, another very important part of the record system is the Stock Card. Note the arrangement of columns and data called for by this form as shown on page 64. 64 IMPROVED METHODS IN ARTICL _E Blotters SANTA BARBARA COTTAGE HOSPITAL 1 d esc R i pt i on Desk STOCK CARD RECEIVED ISSUED BALANCE ON HAND DATE FROM WHOM PURCHASED ORDER NUMBER PROPERTY NUMBER ■ QUANTITY UNIT PRICE TOTAL PRICE DATE TO WHOM QUANTITY QUANTITY VALUr 3 1 Miss. Office Equipment C< I. 1045 1035 36 |09 3 3C I 3 5 Acct 2 34 r - T- - ■ 1 1 Illustration V. Stock Card. Goods received are posted to this card from Receipt of Goods Book. See also Purchase Order illustration II and III and General Requisition illustration VI. HOSPITAL MANAGEMENT 65 Use of Property Numbers In describing the Receipt of Goods Book, it was stated that all goods which were placed in stock and not issued direct, should be given a property number-and this number recorded in the book under the proper column. This number acts as an identification and may be put into use by giving each type of article in stock a property number beginning with the number (1) and by using the next number available for each type of article until all are numbered. If there were 801 types of articles in stock there would be 801 property numbers. In this case, if all stock were properly numbered and 801 numbers had been used the first article recorded in the Receipt of Goods Book which was placed in stock would be given the property number 802. To illustrate further, assume 10 pairs of rubber gloves size 6% were given the property number 483 as the numbering system was installed. Also assume that the first item of goods to be received on the new basis and recorded in the Receipt of Goods Book was rubber gloves, size 6%. Further assume that 801 numbers had been used as above mentioned, this second lot of rubber gloves, size 642, would then be given property number 802. In changing over a storeroom record system where old records are discarded, or in beginning a new record system, it is necessary to inventory stock and these property numbers can be given to all articles at this time. During the inventory, if it is found that four sizes of rubber surgical gloves are in stock, four property numbers should be used. No two articles or groups of articles should bear the same number unless exactly •alike. Later shipments should all be given new property num- bers even though identical with articles already numbered and in stock. Therefore, it is probable that many types of articles in stock will be represented by more than one property number. Some rubber gloves size 6l/2 may bear the property number 483 and others the property number 802. The highest property number always means the new stock and, therefore, assists the storekeeper in making issues, stock of the lowest property num- ber being issued first. All articles should be marked in some manner, glassware and dishes with china marking pencil; the 66 IMPROVED METHODS IN number may be applied to the containers or coverings of other articles; and still others may be marked on the back or bottom without damage. By using initiative, a manner of marking or identifying every article may easily be found. The Stock Cards are made up from the Receipt of Goods Book. Every property number in this book forms the basis for a stock card entry. Where a card does not already exist for a certain article a new one is made up. There are three series of columns on the Stock Card, indicated as "Received," "Issued," and "Balance on Hand." From the Receipt of Goods Book, the first of these series of columns may be completed as the in- formation is all contained in this book with the exception of unit price which may easily be computed. The date received, from whom received, order number, property number, quan- tity, and total price should all be transcribed to the Stock Card. In computing the unit price, it is better to use the nearest amount in even dollars -and cents, fractions of cents being disregarded. If an article cost 17% cents, use 18 cents as the unit price. The total price and unit price should be the amounts billed, cash discounts not being considered in these computations. The card should be properly headed with the name of the article and its description in the proper space. The first should be numbered (1) and any subsequent cards to which entries are forwarded are numbered in sequence These cards may be filed in the bookkeeping office or in the storeroom. If the requisitions are priced in the storeroom the file should be kept there, and if priced in the bookkeeping of- fice it would be necessary to have the Stock Cards on file in that office. They should be filed alphabetically by types or articles. The tabs in such a file would read as follows, aluminum ware, anesthetics, bandages, beads, books, buttons, blankets, and other similar headings, the number of divisions depending somewhat upon the size and type of stock carried. There will be many cards back of each division and if these are arranged according to property number, the lowest number appearing first and ar- ranged numerically in order, the pricing of General Requisi- tions will be greatly facilitated. The Stock Record Card HOSPITAL MANAGEMENT 67 The second series of columns shown on the Stock Card is completed when the General Requisitions are priced. Further explanation of this will be given when this step is described. Every time an entry is made in the ''received" or "issued" set of columns, the amount on hand is extended in the "balance on hand" series of columns under the heading "quantity." The column headed "value" is used only when inventory is taken, the value of the stock on hand is then computed on all cards -and the total reconciled with the control account in the general led- ger. SANTA BARBARA COTTAGE HOSPITAL GENERAL REQUISITION UNIT Acc WANTED AND ounting and Records ARTICLE PROPERTY DATE_ AMOUNT March 5 i9»_4-- DESCRIFT [ON OR REMARKS 500 Letterheads 1247 4 25 500 Plain paper 558 •1 50 2__ Pencils _Rnx anvelope s -Desk Blatters-) 1085 575 1035 L 12_ Z5_ Ifi- * L Requested by POAM IO-4M-7-1I Approved by. TOTAL - - Received by Illustration VI. General Requisition. Note the item of blotters also appears in other Jlustrations, Purchase Order and Stock Card. 68 IMPROVED METHODS IN Advantages of Stock Record Summarized The Stock Card has several distinct values aside from that of being a necessary link in a complete set of storeroom records. These may be summarized as follows: 1. A perpetual inventory of all stock on hand is obtained. 2. A complete record is furnished of purchases of -any given article, showing when bought, price, quantity, and from whom received. This is of extreme value in purchasing. 3. A complete record is obtained of the issue of any given article showing the quantities issued, date of issue, and to whom issued. Issuing of Supplies from Stores Supplies may be economically purchased, carefully checked when received, stored in such a manner as to preserve all their original freshness and quality, and yet extravagantly issued and consumed. The issue of supplies should be just as carefully checked and controlled as is their purchase. This may be ac- complished through the means of the General Requisition illus- trated on page 67. Avoid Hoarding Discourage the hoarding of supplies by department heads. Where large stocks of supplies are kept on hand by a depart- ment, there is a tendency to be too generous in their use. Es- tablish regular times of issuing supplies and dispense only amounts sufficient to care for the needs of the department until the next date of issue. Of course, in practical usage, it is not necessary to limit supplies on hand to such amounts and the theory in its application has to be moderated to meet varying circumstances and needs. The interval of issue in some institutions is once a week; in others, supplies are issued as needed. It seems desirable to strike a medium between these two extremes. In small institu- tions, issuing weekly is sufficient while in large hospitals an issue every other day should certainly be adequ-ate. HOSPITAL MANAGEMENT 69 Use of Storeroom Requisition No supplies should be issued from stock except through the medium of the General Requisition shown on page 67. Require all requisitions to specify the name of the department, bear a date, and be signed by the head of the department making the request. The person drawing up a requisition should complete the first two columns showing the amount wanted and the name of the article. The last column headed "Description or Re- marks" is used only when extra explanatory data is necessary to describe the article adequately. Supplies Issued on Exchange Basis It is advisable to issue certain supplies on an exchange basis, having a published list of such articles. When these are requested, the exchanges should accompany the requisition to the stores or precede it. The word Exchange should be noted opposite such items under the column headed "Description or Remarks." Approval of Requisitions Essential It is imperative that all requisitions be sent to the admin- istrator's office for -approval by a certain hour on issue days. After approval has been secured, they are sent to the storeroom for issue. As the requisitions are filled the property numbers of the various articles are placed opposite under the column marked "Property Number." Items not in stock should be marked off the requisition-and a list prepared of shortages. This list is then discussed with the proper administrative officer, when a decision is reached as to the advisability of purchase. Requisitions which have been filled as completely as possible from stock -are signed by the person receiving the supplies and handed by the storekeeper to the bookkeeping department for further attention. Requisitions a Bookkeeping Form The bookkeeper then prices the requisitions from the stock cards which contain the unit prices of all articles. At this time, the proper deductions are made on the stock card under the 70 IMPROVED METHODS IN series of columns headed "Issued." The date of issue, to whom issued, and quantity issued is recorded and the amount subtract- ed from the old balance and the new balance extended under the column headed "Balance on Hand," "Quantity." The requisitions are totaled after all items issued have been priced; they are then sorted by departments as completed during the course of any given month; and at the close of the month the various requisitions are summarized on a sheet of paper showing the total issues in dollars and cents to each department or subaccounts under a department. The account names on this summary sheet should appear in the same order as they occur in the account classification, as it facilitates entry in the Internal Requisition Distribution Book or through the Journal Voucher. The Internal Requisition Distribution Book and Journal Vouch- er will be described in detail in Chapter XI. By means of this entry the control account for stores is credited and the proper expenditure -accounts charged. Control Over Use of Supplies Possible The control of the supplies used in an institution means the control of about fifty per cent of its operating costs. Tn the method outlined above, all issues are approved by the adminis- trative officer in charge; if the supplies are not in stock a list of such shortages is handed this officer for discussion and approval as to purchase. If approved, a form of securing quotations is suggested and finally, after all the preliminaries of purchase are carried out, the purchase order must be submitted to the ad- ministrative officer for signature. In such procedure, the maxi- mum of control is possible and the interests of the institution are s-afeguarded. Money saved means more to spend in other ways and to meet additional needs. Systematic business proced- ure cannot be realized without effort, but such practices fur- nish their own reward in the economies secured. CHAPTER VI. EMPLOYMENT AND PAYROLL RECORDS Utilize Training and Experience of Department Heads Approximately one half of the operating expense of a hos- pital is the amount paid to employees. The money spent in this manner is controlled more easily than the amount spent for other purposes. The greatest responsibility of the administrator in the matter of employment is the selection of competent heads for each department. Hospital executives are specially trained and equipped to understand the intricate details of management in only a limited number of departments. The scope of hospital activities is so extensive that it is fair to assume that most heads of departments are better trained for their particular work and have a better working knowledge of their own department than has the average hospital executive. The head of the institution must have at least a general knowledge of -all work being con- ducted under his supervision, but this knowledge should be recognized by himself as purely general in character; therefore he should utilize the experience and technical training of each worker. The best administrators acknowledge these facts, care- fully select their assistants to head each department, and when this has been done, place sufficient confidence and trust in those assistants as to ability and motives, to allow them to run their departments without interference. In this manner, the tremend- ous responsibility placed in the hands of the executive is dele- gated to the department heads, and his duties become purely those of standing by with assistance and sympathetic understand- ing as difficult situations arise. The superintendent who estab- lishes such working relationships will find the responsibilities of his position diminished and will more easily retain the good will and respect of his subordinates. The head of a large industrial organization once said that he paid his subordinates to bring decisions to him rather than to come to him for decisions. If department heads are well trained and selected because of their ability to manage a par- ticular phase of hospital work, sufficient latitude of judgment 71 72 IMPROVED METHODS IN should be granted in order that they formulate plans to meet each vexing problem and bring a proposed solution of the situa- tion to their superior for verification. Each Department Selects Own Help If department heads are responsible for the conduct of their respective departments, surely they should be allowed to select their own assistants. Responsibility must be coupled with the privilege of the selection, and discharge of help for whose act- ions responsibility is assumed. Such selection and discharge, of course, should receive the routine approval of the hospital superintendent since it is possible in such procedure to recog- nize the abuse of power at its inception before any harm is done. Probably the best means of accomplishing such supervision over the employment -and discharge of help and adjustments in wages, is through the means of the Employee Record card. This form is illustrated on pages 73 -and 74. A rule may be established that no employee's name be recorded on the payroll, no change of rates be made, and no employee's name be removed from the pay- roll without such approval by the superintendent through the medium of this form. Employee Record Cards These cards should be in the hands of all heads of depart- ments. As persons apply for work from time to time, their name and address, telephone number, age, dependents, social condition, training, qualifications, previous work, reference and other data may be recorded by the person in charge of a department and the card preserved by them -as a convenient record of persons available for positions. Should the person be employed at a later date, the time he is to begin work should be inserted on the face of the card. The following data should then be ad- ded on the first line appearing on the back of the card: date, de- partment, position, salary, perquisites and reason for the neces- sity of a change in the payroll. This should then be forwarded immediately to the superintendent's office for approval, which is indicated by placing his initials on the back of the card under the column headed "approved." The card then goes to the payroll clerk for recording the addition to the payroll. The HOSPITAL MANAGEMENT 73 FO»M NO t- SANTA BARBARA COTTAGE HOSPITAL / '7" EMPLOYEE RECORD _ - n t Date. yr-iTK ...../. ,C.,.. Name A Citizen of Residence ...£.?....^/Phone .................* Aire .............Sex TFenendents X >*-> Relative or Friend c-a_ Social Condition / » L / Education Special Training ......Xc? Previous Work ....Z.iL j 6 z 1 Qualifications D b. i j< VACATION V SICKV LEAVE LEFT EMPLOI'MENT FJWM TO DAYS TO DAYS | j - tj J- & Date Resigned .. :....:.. / <Z / 7 > 3 0 / a A * ■'7 V Date Discharged Cause Approved by .TL. 1 - Superintendent. 1 - - - - - - ---- ' ■ - ■ ■ - -■ Illustration VII. Employee Record. 74 IMPROVED METHODS IN DATE DEPARTMENT POSITION SALARY PERQUISITES REASONS FOR CHANGE ' APPROVED L'/'L «...Mz /.7..r..?.. -*/i (LoXClJUL. nr z - 4 Medical Examination ..... 192.../.... I have examined the above applicant and find _ _ „....Signed ...„ ' ~ ' c K_./ D Illustration VIII. Employee Record, Reverse Side. IIOSPITAL MANAGEMENT 75 card is then filed in an alphabetical file of employees on duty and becomes the authority for issuing salary checks. Termination of Employment Should an employee leave or be discharged, the head of the department concerned calls immediately at the payroll clerk's office, asks for the emoloyee's c-ard and records on the face of the card in the lower right hand corner the date of resignation or discharge and the reason or cause of the termination of em- ployment. This then secures the approval of the superintendent and the name is removed from the payroll records. The card is then placed in an alphabetical file of employees who have left the institution. This inactive file is of value in tracing former employees or in giving information concerning their past em- ployment at the institution. Changes in Rate of Pay Increases or decreases in rate of pay are also recorded on the back of this card in the several lines reserved for this pur- pose and in every case such change must be -approved before it is put into effect. In this connection, it is convenient to adhere strictly to the rule that no increases are to date retroactively but must take effect subsequent to the date of submission. All of these approvals may be made routinely, except when disap- proval or additional information is desired, whereupon the de- partment head is summoned to appear and give further reasons for the recommendation. Medical Examination of Employees Employees in some departments of an institution should undergo a medical examination before reporting for duty. Such examinations should be recorded on the back of the card and signed by the examining physician. Hospitals should at least require this formality of those employees assisting in the pre- paration, cooking, and serving of food. Leave of Absence Space is also provided on the face of this card for the re- cording of vacations and sick leaves granted on pay. Leave of absence without pay should be indicated as such. This in- 76 IMPROVED METHODS IN Form No. -3M-6 22-23 SANTA BARBARA COTTAGE HOSPITAL VACATION AND LEAVE RECORD 192.// To The Superintendent: I hereby make application for leave of absence pay, from (with or without) (J to ..............'/..//...................inclusive, for the purpose indicated: (vacation, sick leave; personal reasons, official business) During the past year I have been absent from duty with pay days. I have made arrangements to conduct the depart- a ./ ment in a satisfactory manner during Signed "Ztz/ Approved ..//. Department Head" ' ■ -1 Illustration IX. Top half of Vacation and Leave Record. HOSPITAL MANAGEMENT 77 SANTA BARBARA COTTAGE HOSPITAL VACATION AND LEAVE RECORD To Your application for ttbsenee. from duty from 1O inclusive, hag been approved, with pay from io Zj.. inclusive, and without pay from.-rr.. - to ■. inclusive G. W. CURTIS, Superintendent By Illustration X. Lower half of Vacation and Leave Record. 78 IMPROVED METHODS IN SANTA BARBARA COTTAGE HOSPITAL Regulations Relating to Absence from Duty VACATIONS All permanent employees of the hospital shall be entitled to a vacation of two weeks for each year of service, such vacation to be taken at the convenience of the employee and the institution. A vacation shall be considered earned at the close of the first year of service and shall be taken subsequent to that time. However, where it may seem desirable, and at the option of the hospital, a vacation of one week may be taken at the close of the first eight months of service, this is to be con- sidered as a portion of the vacation for the first yearly period. Employees shall be considered permanent at the close of the first year of service. It shall be the general rule that no substitute employee will be hired during a vacation period, but that temporary arrangements will be made to satisfactorily cover the service during the time an employee is off duty. Vacation leaves shall not be cumulative. All vacations must be approved by the head of the department concerned and by the Superintendent and be made a • matter of record. SICK LEAVE Permanent employees shall be entitled to a sick leave or leaves of not to exceed two weeks per year. All sick leaves shall be approved by the head of the department concerned and by the Superintendent and be made a matter of record. The heads of departments shall acquaint themselves with the circumstances in each case before approving a sick leave. Substitutes shall not be hired to take the place of employees on sick leave except in unusual cases. ■ i ... - ... ■■■■■■- - - - ■ - -, ■ i --i Illustration XI. Regulations which are printed on the reverse side of Vacation and Leave Record. HOSPITAL MANAGEMENT 79 formation is secured from the Vacation and Leave Record, which is another payroll form of great value. It will be de- scribed in detail and is illustrated on pages 76, 77 and 78. Value of Employee's Records The Employee Record card is one of the most useful of forms as it not only systematizes the transactions pertaining to the payroll and becomes a complete history of the employment of every employee, but it also establishes a maximum amount of supervision of payrolls with a minimum amount of effort expended. Employment of Help Requires Analysis of Person and Job It is difficult to describe the characteristics -and qualities of a valuable employee, as the importance of these attributes varies with the requirements of the position to be filled. To employ help successfully requires ability to analyze the person and the job. Each applicant for a position will no doubt pos- sess some desirable traits; it is not possible to have all such quali- ties present and developed to a high degree of perfection in each employee. In some positions rapidity of thinking and action is more important than precision and accuracy. In other posi- tions mistakes are costly or fatal. It is necessary, therefore, to know the requirements of a job and to secure the greatest possi- bilities of fulfillment in the person employed. Qualification of Heads of Departments There are several requirements to be met in the selection of heads of departments, which should be given precedence over the consideration of the technical training and experience of the applicant. The work of every department must correlate properly with the work of the entire institution. Persons ca- pable of supervision must be fair in their estimation and treat- ment of other people. They must be strictly honest in deed as well as in principle. They should never make their authority apparent and offensive to employees working under their charge. They must be compatible, willing to adjust themselves and their work to meet trying conditions which may arise and difficult people with whom they may come in contact. Fairness of mind, 80 IMPROVED METHODS TN honesty of purpose, and compatibility of manner are traits which will many times overcome handicaps due to lack of training or experience and hence should certainly not be overlooked by employer or employee. Sometimes employees are retained in service because of their great technical knowledge and ability only, but under such circumstances their place should never be considered secure. Payroll Book All payroll rates are determined through the means of the Employee Record card, the payroll records being prepared originally from this source. The payroll book need not be a speci-ally designed form. Several varieties to suit various re- quirements are usually on display at any stationery store and should contain columns for recording the employee's name, number, if used, rate of pay, total time worked, and amount paid. The names of employees should appear grouped under the various department headings as worked out in the plan of or- ganization and in the same order as listed on the account classi- fication under the section headed "Expenditures." The total salaries paid by departments should be extended in this book as well as the amount paid to each individual. This facilitates the handling of the payroll distribution by departments as will be explained further under Voucher Checks. Time Keeping The various heads of departments should keep uniform time books which can be turned in at the payroll clerk's office on the last day of the payroll period. In some hospitals and where the number of employees warrants its use, a time clock should be installed. Where such a system is employed, heads of departments should approve the cards and hand them to the payroll clerk for recording. Pay By Check The most satisfactory method of wage payment is by check. When this plan is used, the cashier should not be expected to become a paying teller and cash payroll checks out of hospital HOSPITAL MANAGEMENT 81 receipts. Employees may be urged to deposit their checks and, in turn, transact their business through the medium of the bank. THE FIRST NATIONAL BANK MO 6601 OF SANTA BARBARA. CALIFORNIA <»O-15S> s x ; ih Santa Barbara, Calif., ® 192 z Z z 3-3 Pay to the order of- cc 2 -«A ~ l)oll)irs Santa ) (y ' SANTA BARBARA COTTAGE HOSPITAL Illustration XII. Payroll Check. THE FIRST NATIONAL BANK 6601 OF SANTA BARBARA. CALIFORNIA e X r Santa Barbara, Calif., Ax-/7 92 </ 0 » 5 u 5 u E j » f / / Pay to the order of X • c COPY Illustration XIII. Duplicate copy Payroll Check. The Payroll Check The form of Payroll Check recommended is shown above. It will be noted that a carbon copy of each check is written at the same time the original is prepared. The carbon copy is of value in the reconciliation of the bank account and in the preparation of the list of outstanding checks. These copies are placed on a thin cheap grade of paper of a different color from the Payroll Checks and are marked "Copy" so that 82 IMPROVED METHODS IN there is no danger of confusing them with the originals. The checks are printed six to the sheet, thus facilitating their pre- paration when large quantities are being typed. The original checks -are perforated, the copies being left in sheet form. The originals and duplicates are padded in book form for conven- ience in handling; this also prevents them from becoming dis- arranged numerically. As the checks are cleared through the bank they are filed numerically and the carbon copies are placed in the covers in which they were originally padded, thus forming a convenient means of storage. Check Protection A protected check should be the only form issued as it is •a reasonable precaution to take and the machines available for check protection are safe, easy to operate and last indefinitely with practically no repair. Any bank will be glad to recom- mend a desirable protectograph, and this advice should be sought as several machines on the market are not suitable for large general office purposes. Advantages of Paying by Check Making cash payments to employees is not a good policy. Advances, if handled in the usual manner by check, are not overlooked when the regular payroll is prepared. Payment by check eliminates the hazard in drawing large sums of money from the bank and disbursing it on pay day; it prevents disputes as to money contents of pay envelopes and the necessity of having each employee receipt for his salary. Employees also should appreciate this form of payment as it reduces the hazard in handling considerable sums of money. A lost check can usually be recovered, if not, payment can be stopped -and a new check issued to the employee. Loss of a pay envelope is seldom re- covered. The use of a form which will systematically care for the approval of absences, with or without p-ay, due to sickness, va- cation, and leave for personal reasons or official business is high- ly imperative in any hospital. It is not safe to rely on memory Form Used for Request of Absence from Duty HOSPITAL MANAGEMENT 83 in such an important matter for it will be found that under such circumstances employees are prompt to take advantage of a lack of records. A Vacation and Leave Record form, such as shown on pages 76 and 77, should be available to employees at the business office. These may be given out on request. A rule can be put into effect that before a leave of any sort is granted, except in cases of accident, sickness or other unforeseen absence, the form is to be completed, proper approval secured, and notification returned to the employee. This form provides space for a state- ment of the length and purpose of the leave of absence desired. It should be stated as to whether the absence is requested with or without pay. Space is -also provided for a statement as to the date of employment of the employee and how many days have been granted on pay previously that year. This form is then handed to the head of the department for approval. If approv- ed the departmental head sends the form to the payroll clerk's office. Here the statements as to time off on pay and date of employment are verified and such verification indicated by the payroll clerk placing his okeh on the record form. The form then goes to the superintendent for approval. If approved or disapproved the payroll clerk fills out the lower half of the form accordingly -and sends it back to the department from which it originated as notification. The record of such approv- ed leaves of absence is then posted on the Employee Record card in the lower left hand corner under vacation or sick leave as the case may warrant. Notations are made on the payroll book for purposes of computing salary paid and the form then Hied by name alphabetically. Rules Governing Absence from Duty The rules governing absence from duty should be published on the back of this form in order that there may be no misunder- standing regarding privileges allowed. A suggested set of such rules is shown in the illustration on page 78. These rules of course may be changed to suit the needs and requirements of various institutions. Employees are quick to sense unfairness, and special favors granted some employees, which may not be shown others of the same class-and status, cannot be kept a secret. 84 IMPROVED METHODS IN Published rules and their uniform application is the easiest and most sensible manner in which to handle this problem. The type of quarters furnished help is a great factor in securing and holding reliable people. Few hospitals build quarters for their employees, unless situated in such a manner that help cannot be expected to live outside the institution. Most hospitals which house their help do so because they have a building which has been discarded for the purpose it was orig- inally intended, and the use of it as quarters for employees turns a building which would otherwise be sold and removed or wrecked into a source of reduction of operating expenses. When such quarters are utilized, it must be kept in mind that a man or woman who will be content with unsanitary, unhealthy quar- ters is not usually -a fit employee to keep on the payroll. The employees who do remain on duty are those who cannot find employment elsewhere and thus what was looked upon as a potential asset in the operation of the institution is in reality a detriment and an expense to the operation of the plant. Quarters for help should be light, well ventilated, with small but individ- ual bedrooms provided, and some space devoted to recreational rooms. Plumbing and bathing facilities should be of the best as sickness caused by unhealthy quarters could easily be a menace to employees and patients alike. Housing of Employees Cheap Versus Good Help Cheap help is not always economical help. Some admin- istrators turn to the payroll as the most apparent means of cur- tailing hospital costs. If the salary of a position is reduced $10 per month it seems logical to assume that $120 per year in oper- ating expense has been saved. The payroll is the last point at which economies of operation should be considered. Superior help, paid a good salary, many times can accomplish work which would require a greater number of employees paid a low- er wage. Every employee consumes supplies, in some instances the supplies consumed in one day equal many times his salary. It is not difficult to imagine, therefore, that a $10 reduction per month in the salary paid a given position might require an in- HOSPITAL MANAGEMENT 85 crease in expenditure of several times that amount for supplies consumed or utilized by that person. It naturally may be as- sumed, therefore, that sometimes an institution can save money by increasing rather than reducing the size of its payroll. Factors Which Control Rates of Pay It is not to be inferred that all salaries in any institution can be raised and thereby expect to effect a saving. There is a limit to which such a rule could be applied with profit and when it is felt that the saving is not equivalent to the increase of wage paid, the maximum in salary has been reached. Sal- aries for the same class of help vary in different localities; de- mand and supply regulate wages to a considerable extent; cus- tom is a factor in determining rates of pay and may be used to advantage in some instances; seasonal demands forheln also con- tribute an element not to be overlooked. These -and other factors enter into the rate of pay in any contract of employment, vet are subsidiary and unimportant when contrasted with either of these questions,-are we employing cheap help or are we em- ploying help which will assist in the economical administration of the institution? The Golden Rule Applied to Employment People vary greatly in mannerisms and appearance, vet all have certain characteristics in common. It is the administrator who judges help by their apparent differences rather than bv the traits fundamental to all human nature who finds his problem of employment difficult. Most people appreciate fairness and despise favoritism, admire honesty of purpose and abhor treach- ery, thrive on praise of their good qualities and thus -are assisted and encouraged in overcoming their faults. The employer, the hospital superintendent, or the head of a department who rec- ognizes that his employees enjoy being treated in such a manner as he enjoys being treated himself, and thus applies the Golden Rule to his employment problem, is sure to find that human beings the world over respond to such treatment and accordingly the problem of employment loses some of its previous difficul- ties. CHAPTER VII. CONTACT WITH PATIENTS AND PUBLIC Impressions on Entering Hospital First impressions are usually the most lasting and it is im- portant that they be favorable to the hospital. Thousands of patients, visitors and the general public pass through the en- trance and main corridors of the average sized institution an- nually. Here is a fine potential asset to a hospital provided these casual observers are impressed favorably. Many striking illus- trations where an attempt has been made to create such im- pressions might be cited. Beautiful gardens, lawns, and attract- ive architectural features of the building near entrances all tend to provide -an atmosphere of cheer and hospitality. The receiv- ing corridor, offices and waiting rooms should be made to attract rather than repel the visitor. A few draperies, attractive and comfortable furniture, flowers, ferns, -and various other home- like furnishings are desirable. The offices, information desk and telephone exchange should be accessible to the public with- out search or annoyance. Bad impressions -are often created and unfavorable comment given when the public is left to drift aim- lessly about seeking information and places which should ob- viously greet them on entrance to the building. It is not intend- ed to suggest a definite plan of office arrangement but rather to mention features which do have a direct relationship in the successful operation of the utilities found in any public institu- tion. The Information Desk It is not to be expected that the general public will be able to care for itself and to satisfy its many wants. Information service should greet the person entering the building and be available from early morning until late at night. This service should, of course, be combined with other duties in the small hospital. The most usual and satisfactory combination is that of having the telephone operator give out such information as is required. Signs of a conspicuous yet attractive nature placed 86 HOSPITAL MANAGEMENT 87 in the corridors assist materially in routing traffic. Combining the duties of cashier, admission clerk and information clerk is also possible in the average sized institution. The facilities which should be available at such a desk, regardless of what scheme or combination of duties is used are as follows: 1. Alphabetical register of patients in the house. 2. Alphabetical register of patients recently in the house. 3. Bed chart. 4. Physicians' and nurses' registers. 5. Call system. 6. Messenger service. 7. Mail service. Register of Patients in Hospital The alphabetical register of patients in the house is cor- rected daily. New admissions should be available at this point so that current information regarding location of all patients is correct. Probably the most accessible form for such a register is a type of visible index cards, a patented device of which there-arc several varieties. At the time a patient is admitted and infor- mation is secured for the medical history record, a carbon copy of the general information which should be available in such a register and on the patient's ledger account can be obtained. If a four by six card is padded alternately with the admission form, and the admission form is designed with this object in view, the admission record and the card for the visible index may be obtained at one writing. This small card should go imme- diately to the bookkeeper in charge of the ledger accounts and the history admission sheet accompany the patient to form the nucleus of the medical history record. When the ledger account has been set up from the information available on the card, the card should then go to the information desk for inclusion in the patients' alphabetical register. A report of admissions and discharges should be checked with this register daily to keep it current with the hospital cen- sus. This register furnishes information for answering many questions. The data on such cards consists of patient's name, address, telephone number, age, occupation, sex, business ad- 88 IMPROVED METHODS IN dress, name and address of relative or friend, name and address of person to whom bill is to be sent and location of patient in the hospital. Securing complete data when patient is admitted s-aves time and confusion later and often saves the institution money in allowing bills to be rendered promptly and to the proper person. Register of Patients Recently in Hospital The admission card, when removed from the alphabetical register of patients in the house, should be placed in an alpha- betical index file of recently discharged patients. It is well to keep such cards segregated by months. Three indexes should be provided, one for the discharges of the current month and two for the discharges of the past two months. Each month the cards back of the index tabs in the most ancient file may be re- moved and discarded. Information regarding patients dis- charged more than two or three months previously is seldom desired and can be had at the record office from the medical history. The bed chart is a very important adjunct to the informa- tion desk. Various types may be used, but regardless of type, it should show at a glance the rooms or beds occupied, reserved, and vacant. If the wall type is used a little card holder of some form can be utilized to indicate each bed. One color of card- board may indicate a bed is occupied, another color that a bed is reserved. The patient's name and room number should be print- ed or written on the card. A holder with no card indicates a vacant or available bed. The vacant space can show the room or bed number and rate per day. This information may be printed on the board under each card holder. A very desirable form of bed chart and also one which may be made up at a moderate cost is that of sliding panels which can be attached underneath the information desk or counter. Each panel, which may be pulled out in view as the writing shelf on a desk is pulled out in view, contains one of the nursing units of the hospital. On this panel is sketched in paint a floor plan of that particular unit, showing patients' rooms, wards, and corri- Bed Chart HOSPITAL MANAGEMENT 89 dors only. A small circle in the rooms or wards indicates a bed. The price of the room or bed and also the room or bed number is painted on the panel. A thumb tack of one color may be used to indicate an occupied bed, and of a second color to indicate a reserved bed. A tiny slip of cardboard attached under the thumb tack should bear the patient's name. Such a chart gives the clerk a mental picture not only of vacant, reserved, and occupied beds, but also their definite location in the building such as front or rear. Such information often facilitates -a choice on the part of the patient as he can picture to himself the portion of the building he is to occupy. The information on this chart should be maintained -accurately from the admission and discharge lists. Reservations can be immediately recorded on the chart and no mistakes are possible in reserving rooms. A telephone should be immediately adjacent to the bed chart and the pa- tients' register. Staff Register Some form of visible index device should be available at the information desk giving the names, addresses, and telephone numbers of staff doctors, staff nurses, and administrative officers. Many times an information desk is unsightly because no facili- ties are provided for accurately and systematically keeping data necessary for such service. Slips of paper, cards -and notebooks are then resorted to and the information is not only unavailable but the entire service is retarded, the public waits unnecessarily and bad impressions are created. Call System An information clerk is continually called upon to locate persons in distant parts of the building. Some form of automatic call system is practically necessary as the telephone does not handle satisfactorily this feature of the work. If the institution is small, special rings on the telephone for persons wanted fre- quently are used with success. In the larger hospitals other de- vices must be utilized such as the magnavox system of paging. It is noisy however, and objections are raised to its repeated use as the tones are loud and very annoying to the sick, nervous pa- tient. A quiet form of paging is the electric light system which 90 IMPROVED METHODS IN seems very satisfactory but is limited to a definite number of persons who may be called. Located conspicuously at the ends of all corridors is a box in which are many compartments each having a small electric light which when lighted from the central information desk will shine through the front walls of the box, which are made of glass, and display a number which is of course understood to designate some person of the hospital staff. This form of call system is expensive to install and has -a definite limit as to the number of persons who may be called. Regardless of method used some form of call system other than that furnished by the telephone should be installed in -a hospital of over one hundred and fifty beds. Messenger Service It is desirable that some form of messenger service be main- tained bv the hospital. Flowers, mail, packages, and messages should be conveyed promptly by the office boy or girl to patients' rooms and to the various department offices, such services being directed from the information desk. Mail Service The mail service may be handled from the same desk. In- coming mail should be distributed and forwarded promptly and outgoing mail made up and stamped. Have -all first class official mail delivered at this desk for posting and provide stamps at no other place in the hospital. Consider mail delivered seal- ed without postage as personal and if no return -address other than the hospital is given, open the letters and return them to the writer for postage. Forward promptly mail for patients or employees who have left the hospital. Any forwarding in- structions for patients' mail may be noted on the back of the admission card which will be found in the alphabetical register of patients recently in the house. Data for forwarding em- ployees' mail is secured from information on file in the payroll clerk's office. Securing Good Will of Public Regardless of the size of the hospital or number of em- ployees whose work centers around the information desk, the HOSPITAL MANAGEMENT 91 SANTA BARBARA COTTAGE HOSPITAL TELEPHONE EXCHANGE DAILY REPORT DATE TIMS OFER- TOLL CALLS LOCAL CALLS REARON FOR CALLED ATOR OFFI :ial CAS M CHAR SK CAS H CHA IQI CANCELLATION BALANCE FORWARD. F) TZ /7T2L^. J*. Xu. . 1 y ■ / y. (J SA- 7), < 'y . 7f ft tv * / ($[ 1>m A .> A £ /« - J l-r. r J INSTRUCTIONS Cota Cash this date. 1. All reports will be turned in daily to cashier, who will receipt same. . 2. Reports are thtn given to kookkeeper for posting. 3. Cashier will receive money from operators in payment of cash calls entered hereon. Received (Signed). tL Cashier. 4. One operator relieving another wil sign for all entries and rrfoney collected, under last entry, the cash columns should be footed and the totals should balance with the contents of the money box. Bookkeeper illustration XIV. Telephone Exchange Daily Report. The last item on this report has been posted to the Patient's Ledger Card, illustration XVII. 92 IMPROVED METHODS IN type of work done at this point is always the same. The em- ployees rendering such service must be patient, courteous, and neat in appearance. An attempt should be made to regulate and systematize this work in such a manner as to attract favor- able attention and gain the good will of both patients and public. Telephone Exchange Perhaps no one service an institution can render is so uni- formly abused, when guilty of inefficiencies and so generally accepted without favorable comment if perfect in its operation, as is the telephone exchange service. Telephone operators must be accepted for employment on the basis of technical ability in operating a private telephone exchange service, and on the much more rare attribute of maintaining a uniform temper under try- ing circumstances. A business form which greatly facilitates the work at the telephone exchange is the Telephone Exchange Daily Report. This form is illustrated on page 91. This report should be kept at hand continually and handed to the cashier at the close of each day together with all money collected. After the cashier has receipted for and verified the cash collections, the report is handed to the ledger clerk for posting charge calls to the vari- ous patients' accounts involved. The reports are then kept on file chronologically and serve to check the telephone and tele- graph bills at the close of each month. All toll calls and telegrams are recorded on this form, the charge for each call being placed under the columns headed "official," "cash," or "charge" as the call may warrant classifi- cation. No official local calls are placed on this form. Only where a local call is to be charged to a patient's account or as cash is collected for the same is it recorded. The vast majority of local calls are non-charge calls and are therefore ignored. This report tends to secure better service due to the fact that it systematizes the operator's work, it furnishes a record of cash collected at the telephone desk, it secures a record of all calls to be charged, and furnishes a means of checking a bill which Telephone Exchange Daily Report HOSPITAL MANAGEMENT 93 otherwise is paid blindly without check as to accuracy. The receipt number used in taking in the cash collected is recorded on the report by the cashier after her name in the space provided for her signature. Patients' Valuables A hospital is liable for the valuables of its patients. One manner of avoiding this liability is to notify patients that if valu- ables are not deposited at the office responsibility for the same is not accepted. When valuables are left at the office, such should be sealed in an envelope before a witness at the information desk, the seal of which package should not be broken under any cir- cumstances until delivered. Instructions for the use of such envelopes are printed thereon and each envelope serially numbered. A receipt is given the depositor bearing the same number and the package of valuables is surrendered only upon its return. This receipt is then signed by the patient and sent to the record room to be attached to the medical history as evidence that the valuables on deposit have been delivered. Envelopes of this character are used by many hotels and may be secured without difficulty. Conclusions To repeat, first impressions are the most lasting and it is at the information desk where such impressions are received. The facilities at such a point cannot be too attractive or pleasing •as the attitude of mind created by the information desk is the mental measure the patient carries with him to his room and to his home. Since hospitals depend largely upon the good will of the public for their support, a neglected opportunity for securing public favor means less public interest and therefore less assist- ance. CHAPTER VIII. PATIENTS' ACCOUNTS Control Over Earnings Supervision and control of the earnings of an institution are as essential as is the careful handling of its expenditures. Money must first be earned and collected before it can be ex- pended and this phase of management needs continuous con- sideration. Certain rates for rooms, operations, laboratory ex- aminations and other services should be carefully arranged and published to avoid confusion and misunderstandings. These rates should then be strictly adhered to under-all circumstances, and no deviations allowed unless over the written signature of the executive officer in charge. This departure from published rates may be granted through the means of the Rate Agreement form which is illustrated on page 95. Rate Reduction A request for a reduction may originate from a patient, a member of the attending staff, or an outside person or agency. Regardless of the source of the request, the rate slip is always required before the request receives consideration. In institu- tions where a social worker is employed, it is well to have such a person initial such slips before coming to the executive's desk as it is of assistance in reaching a decision in each case to know that an impartial employee of the institution who is familiar with the facts approves the reduction. The manner in which the account is to be reduced should be carefully stated. It can be a percentage reduction or a flat reduction of a certain amount. Sometimes it is preferable to set a maximum sum which the patient can •afford to pay, the balance being cancelled regard- less of the amount. By classification is meant the type of reduc- tion which is to be made. Suggestive markings are as follows, "Courtesy to Employee," "Courtesy to Attending Staff Doctor" and "General Charity." These reports should receive prompt 94 HOSPITAL MANAGEMENT 95 consideration and then be passed on to the bookkeeping depart- ment for action. The judicious use of this form accomplishes several purposes. SANTA BARBARA COTTAGE HOSPITAL RATE AGREEMENT 6 DATE ° 192 BOOKKEEPING DEPARTMENT: ' /O, THE CHARGES FOR SERVICES RENDERED WHOSE ADDRESS IS f O AS FOLLOWS. J^XX-A-□ CLASSIFICATION *-? ft REQUESTED B Y APPROVED BY N FORM-5-3M-8-I5-23 * -> , I Illustration XV. Rate Agreement. The information on this form has been posted to the Patient's Ledger Card, illustration XVII. First, it limits the authority for rate reduction to one person, the executive officer, who is responsible for the proper conduct of the institution. Second, it clears the bookkeeper of responsi- bility in all cases of reduction and makes the accounts clear to any auditor who is requested to check and certify the same. Third, it causes the authority for reducing rates to be removed a step from the persons who meet the public. It is always easier to refuse indirectly through a printed form than it is for the per- son who meets the parties making the request to deny the merits of any particular reduction upon which they may be called to pass. The information secured from these Rate Agreement slips is transferred to the ledger account by the bookkeeper and the slip is then filed in the bookkeeping office in an alphabetical file for reference purposes. 96 IMPROVED METHODS IN Rates Should Be Set By the Day It is preferable to set the rates for room or bed rental by the day-and not by the week or month. If the rates are set other than by the day, great inconvenience is caused in rendering bills for a fractional part of a week as the computations are sure to bring about uneven -amounts; in some instances it will cease to be a mental calculation and pencil and paper must be brought into use. Hospitals vary greatly in rates and the type of service charg- ed for as extras. In some institutions the rate for bed rental is made sufficiently high to cover many of the sundry items for which the hospital with a low bed rental must charge. Many times it is found that additional charges have been made for service originally free, as a means of securing greater revenue, until so many types of service appear on the bill rendered the patient that he is confused and dissatisfied, not so much with the size of his bill as with the complexity of terms used and items enumerated. It seems that a medium position in this instance is the most desirable. There are about ten or twelve items for which legitimate and fair charge may be made and which are accepted with good spirit by the patient. Source of Charges Charges from many different departments and units of departments originate throughout the building and gravitate to the general business office for recording. A charge over- looked or mislaid means an absolute loss to the hospital and too much care cannot be exercised in reporting these items. The manner of reporting these charges should be uniform as to the time of completion and the form the report assumes. Nothing is so demoralizing in the handling of patients' accounts, as to have financial reports drift into the office at all hours of the day and night, or to have these charges turned in on scratch paper, memorandum book, verbally, by telephone and other ways too numerous to relate. The hospital should adopt a uniform time of closing the business day. If five o'clock in the afternoon seems desirable, thirty minutes may be allowed for completing the reports which should all be turned in at the business office HOSPITAL MANAGEMENT 97 before six o'clock that night. Any charges which occur after that hour may be included on the report of the following day. Daily Financial Reports A uniform type of report adaptable for use in any depart- ment and for any type of service is illustrated on page 98, and is called Daily Financial Report. All charges from any source except the ones for telephone and telegraph service which are reported on the Telephone Exchange Daily Report, are sent to the business office on this form. If .a department has no work to report for any given day, a Daily Financial Report should be marked "No Charges," signed and handed in at the office as usual. It is not safe for the bookkeeper to -assume that no charges have been made by a department simply because no report has been turned in at the office. The report could be lost or forgot- ten. Therefore, it is essential that every reporting unit complete a report each day they are open for service, regardless of the fact that no services may have been rendered. In some instances the careful use of a uniform report handed in daily at a regular time, substituted for -a haphazard form of financial report, has made a very appreciable increase in the amount of hospital earnings. The name of the unit reporting should be written in at the top of the page, the report dated, signed and transmitted rou- tinely to the bookkeeper in charge of the ledger accounts. When a nursing unit knows of a patient leaving the house where late charges are apt to occur and not regularly reach the office until after the patient has gone, such information should be given im- mediately by telephone to the bookkeeper. A pencil entry on the ledger account may be made and changed to an ink entry when verified by the regular report later in the day. A check on the various departmental reports may be had through the medium of the reports from the nursing units, each unit reporting-all charges of which they have direct or indirect knowledge as follows: "Miss Lowden, Room 406, X-ray." This indicates to the bookkeeper that a charge for service rendered by the x-ray department should appear on the report of that same Cross Check of Daily Financial Report 98 IMPROVED METHODS IN SANTA BARBARA COTTAGE HOSPITAL DAILY FINANCIAL REPORT NAME OF PATIENT ROOM NO. SERVICE RENDERED CMAROU REMARKS .jL ■ z ch-X - z ? • & s / o <7 'k 7J j <L 7u ,7 -ZiU / 7 /n // / 7u. a *=* s, z - . 7 7t /~ l_ !LJ 7 > /r Va ,, ■ Illustration XVI. Daily Financial Report. Note charge in circle has been posted to Patient's Ledger Card, illustration XVII. HOSPITAL MANAGEMENT 99 d-ay. In a similar manner, laboratory, operating room and other charges are reported by the nursing units. In such instances, the report from the nursing unit does not state the charge for the service, only the fact that such service was rendered. Then, by checking the reports of the nursing units against all other reports, omissions may be discovered by the bookkeeper -and such omissions called to the attention of the department in error. Likewise the nursing unit may be called to account for services rendered by various departments, notice of which they have fail- ed to record. Such consistent checking causes -a minimum of loss in the way of forgotten charges. The reports of the nursing units, of course, will also contain items supplied by them directly to the patient and for which charge is made and recorded. After charges have been posted from the financial reports to the various ledger accounts, these reports are arranged each day in the same order, fastened together and filed in a chrono- logical file for reference. The complete reports for each month so chronologically arranged may be fastened together or bound in book form. Thus, every charge entered on a patient's -ac- count may be readily traced, in cases of dispute, to the original record which appears over the signatures of the various depart- mental heads and is usually conclusive and convincing proof of the correctness of the charge. Filing of Daily Financial Report The Ledger Account The ledger accounts for patients are in card form and are set up at the time of entrance to the hospital from the data re- ceived on the admission card. This step was described in Chap- ter VII. The information called for at the top of the Patient's Ledger Card,-as shown on page 100, should be completely re- corded. It is important to exercise great care in securing exact data as to where and to whom bills should be rendered. In case of rate reductions, the information on the Rate Agreement slip is transferred to the ledger card, as has been stated previously. The space reserved for this purpose is op- posite the words "Rebate Report" in the upper right hand cor- 100 IMPROVED METHODS IN rC 1 2 3 4 5 6 7 8 RM NO 4-1000-12-23 - & Residence Address k~. Business Address ... 0- 10 11 12 13 14 15 10 SANTA BARBARA 7 13 19 20 21 22 23 COTTAGE HOSPITA Dept Location Phone No 24 L 25 26 27 23 29 30 Card No. 0 Admission Date of Entry 31 Number 7- Friend Address >r Relative .. ,..x Phone No. Regal tr Rate Send bill to I'hone Address .... Notations .. 6 - - • ZZOX DEBITS c RF.DITS Dat if Hospital Service Operating Room A nest belie Surgical Supplies Nurse's Board Meals and Trays 1 "«3»I Roentgen Department E Laboratory Fees Pharmacy Supplies Item 'onsult; Fees E Misccllan- T ota It Date Reference Arnot V ■v * - 6 ± / 0 . " ¥ 3o ? * r/ 3. // d /r 0 . - /f - / 0 >7 7 /I - 77 /o z /> - / - /J - 6 / rf I - / - / - / > I - / - rj yj i y / - - - - - - Fo rwa» < - - - Illustration XVII. Patient's Ledger Card. Trace entries from Rate Agreement, Daily Financial Report, Telephone Exchange Daily Report and Cash Receipt to this form. HOSPITAL MANAGEMENT 101 ner. All charges are posted on this card at the full published rate on the debit side and a reduction, where one has been grant- ed, appears on the credit side of the account. The entering of charges at full rates enables the hospital to know its total earn- ings regardless of the amount which may be written off to char- ity or courtesy. Various debit columns are provided on this card to suit the particular needs of a given institution. As post- ings are made on a ledger account from the financial reports, the date should be recorded opposite the first posting of each day. Subsequent postings to the same account may be recorded on the same line without repeating the date. The total postings on each line must be extended to the "Total Amount" column, but this is not done until the card is utilized for billing purposes or is balanced at the close of the month for entry into the Earn- ings and Rebate Record which will be described later. It is unnecessary to record daily the charges for room rent. This charge may be entered weekly as bills are rendered and •also at the end of each month for any expired room rent which remains to be recorded. This last entry is made at the time the card is balanced for posting in the Earnings and Rebate Record •and will be described at length in the proper place. All payments are recorded on this card through the means of the duplicate copy of the Cash Receipt. In entering cash pay- ments on this ledger card the date and receipt number as well as the amount are recorded. This facilitates the tracing of cash receipts from the ledger account whenever necessary. Three alphabetical files of ledger cards are kept: an active file for patients who are in the hospital; a file of inactive ac- counts for patients who have left the hospital and whose ac- counts remain unpaid; also accounts completely closed which have been transferred to a closed alphabetical file. The card number indicated at the extreme upper right hand corner is to be used only as second and third cards are added to any given account. Then, for convenience in review- ing an account, it is well to number the cards 1, 2, 3, etc. Ordin- arily, the front and back of one card offers sufficient space for the recording of all transactions. 102 IMPROVED METHODS IN The numbers at the top of the ledger card 1 to 31 inclu- sive are used to call attention automatically to the date that bills are to be rendered. Signal devices may be secured that clamp on the top of the card and protrude to the view of the book- keeper handling the accounts. Where a weekly system of bill- ing is used, a tab is placed on the date or number seven days following the number representing the date of admission. If the patient enters on the tenth day of the month, a tab or signal device is placed over the numeral 17 before the card is placed in the file. On the seventeenth, this signal together with all other signals placed over the number 17 on the other cards will appear in a row in the file and may readily be re- moved from the file, the charges already entered extended in the "Total Amount'' column and bills rendered. In each case as the bills are rendered and the cards returned to the file, the tab or signal is again moved ahead seven days, or, in this illustra- tion, to the twenty-fourth. These numbers and signals can also be used for guidance in sending follow-up statements and correspondence to patients who have left the hospital and whose accounts remain unpaid. Tabs or signals of several colors may be utilized indicating vari- ous facts such as, date set for response to a statement, date set for response to form letter number one, or similar data necessary where such letters are used in collection schemes. Many com- binations can be utilized as the follow up device is very flexible, and the bookkeeper with initiative will work out a scheme best adapted to his particular needs. Where it is desirable to distinguish readily, pay patients from free cases, private room patients from ward cases, or to make other like classifications, Patients' Ledger Cards may be printed in several different colors each color representing a cer- tain type of patient. Billing It will be noticed that the order of the columnar head- ings appearing on the debit side of the Patient's Ledger Card illustrated on page 100 is maintained on the Bill Form shown on page 104. This facilitates the transcribing of the charges from HOSPITAL MANAGEMENT 103 the ledger account to the bill. As the charges are read from the card, left to right, they may be recorded on the bill in the same identical order. It is usually well to have instructions printed on the form regarding payment which may be varied to suit in- dividual needs. Statements of this sort printed in red attract immediate attention. The earnings accounts always appear in the same order as will be noted by referring to the Account Classification, Section 5, the Patients Ledger Cards, the Bill Form, the Cash Receipt, and the Earnings and Rebate Record. This same order is also maintained in the general ledger ac- counts. This arrangement, while a very simple matter, saves hours of bookkeeping time and it is surprising to know that in many hospitals such uniformity is not followed. Earnings and Rebate Record The Earnings and Rebate Record is a tabulation of all earn- ings and rebates which appear on the Patients' Ledger Cards. Through such tabulations, the information as to total earnings, earnings of each department and total amount of rebates is ob- tained. The procedure for entry of information from the ledger cards to this book of record is as follows: At the beginning of each month all the admission numbers of all patients in the house are transcribed into the Earnings and Rebate Record in numerical order under the columnar head- ing "Admission Number." This entry should be followed by the patient's name opposite each number in the column provided for this purpose. If, therefore, there are one hundred and ten patients in the house on January first, one hundred and ten admis- sion numbers with the corresponding names are entered in this book in numerical order. Their sequence will not be perfect, as many numbers between the smallest admission number and the largest will be omitted, as only numbers of patients in the house are entered. After the last entry of patients in the house is made, each line is numbered in numerical order beginning with the first new admission -and continuing on until a line has been reserved with an admission number for each patient admitted during the month. SANTA BARBARA COTTAGE HOSPITAL THIRD AVENUE AND BATH STREET SANTA BARBARA, CALIFORNIA ( Date <»» Street City For Services Rendered ■- ROOM NO. HOSPITAL SERVICE X>AYS AT S x// FROM / ~< TO -/ - INCL. / X ANESTHETIC SURGICAL SUPPLIES MEALS AND TRAYS (SPECIAL) X»RAY / TREATMENTS CHEMICAL LABORATORY CLINICAL LABORATORY - PATHOLOGICAL LABORATORY PHARMACY SUPPLIES CONSULTING FEES TELEPHONE AND TELEGRAMS / - LAUNDRY CHAESES FOR PHYSICIANS SERVICES NOT INCLUDED IN THIS (ILL. /TOTAL BILLS POSITIVELY MUST BE PAID WEEKLY IN ADVANCE fl; DUE S' £ L 7 y / -- Illustration XVIII. Bill Form. See also illustration XVII Patient's Ledger Card from which the data for this bill is secured. HOSPITAL MANAGEMENT 105 As patients leave the house or are discharged, all charges on their account for the current month are footed, the totals of each line on the ledger account are extended in the total column -and the total column is footed. The card is then ruled and the differ- ence between the debit and credit footings, in case of a balance, is brought down and the card is ready for entry in the Earnings and Rebate Record. The total earnings for the current month as represented by each column on the ledger card, which has previously been foot- ed, is entered in the same corresponding column of the Earnings and Rebate Record opposite the patient's admission number and name. The total earnings for any one patient as represented by all entries in the various columns opposite his name is entered in the column headed "Total Earnings." At the close of the month after all accounts of discharged patients have been entered in the Earnings and Rebate Record, the blank spaces represent the admission numbers and names of patients still in the house. At this time, all these numbers should be transferred to a new page or pages to form the nucleus for the Earnings and Rebate Record of the following month. After these numbers have been transcribed, the accounts of patients in the house are posted to date, ruled, and entered. This completes the entries of earnings and all admission numbers should show, in each case, earnings for the month provided omissions have not been made. Rebates are entered and classified in the proper columns at the same time the earnings are entered. If there are miscellaneous accounts of patients out of the house without admission numbers, such accounts may be entered once a month after the accounts of all regular patients have been entered. After all entries are made the book is footed. The total of the "Total Earnings" column should of course correspond to the totals of all the individual earnings columns. Similarly, the total column of rebates should equal the total of all the various rebate columns. These footings are posted to the General Ledger. The footings of all the earnings accounts are posted to the credit of their respective earnings accounts in the General Ledger and the total of the "Total Earnings" column is posted to the debit of SANTA BARBARA COTTAGE HOSPITAL EARNINGS AND REBATES •< 823 SURGED 23 531 532 SUBSISTENCE ROE 542 543 HGEN DEPARTMENT .31 552 LABORATORIES 553 ADMISSION 4AMI AYS HOSPITAL SERVICE OPERATING 1 ANESTHETIC IS BOARD TRAYS CTU EATMENT II RADI UM c'> CLI.HCAL PATHOLOCICAU FORWARD 'ay- , t 7_ > / 7 ■l •? -7 - 2 7- / J u / 0 <71 0-1 ■? 4 / ■> V c z; 7 3 J . - L -To Z J / P 3 ) 1 (, z/ J V , / £ 3 / .zZ > Zi ( J"i f / 0 Cs " / 7 77 L s -r V y q i. 7 z J c re 7f i 1U / 7 / o 0 / J 0 / - <. Z7 7l 7 / r / J / / ? ' K- *- ->Z/ J 3« 7- J o - 4 4 4~o 3 Hr t y t> / > 7 {jl <- i <j - / / J c / y 7/ 6J- 4 dLz;? V O 2 Z» J « i -r T T - FOR r fHI MONTH ( 31 > I92>/- PAGE se CONSULTATION FEES M SCELLANEOUS TOTAl ' REBATES * *95 S*e •HARMACY ITEM AMOUN TELEPHONE TELEGRAPH .AU II other items AMOUN EABNINGB « 75"*u oo*'" TESY IT INC O*^ENT research .ABORATORY BAB SRBTS / 3 3 o* - % V Q 1: J 1'34- 3 £ / I. 3 L S 7 ->•/ 7 V; / =r >•'«> - 2 ; f 7 0 0 Vv J f o -L- z k 7 / o F u z _ jL 7 J // Lb /V /- // - / / / o 6 r'j 3 i■ - o~ ■ ■>/. - / 0 J i z 4 - ' / & i 2 _ jL2 -n - O (•. L ??' / O f o .J J • ? 7 <=<} 7' / 7 0 - II 3' H. 1 - - 1 h - t i-r~ :±=== .3= Illustration KIX. Eari lings a id {< ba te Rc co rd Th e fir St nt rj sh own M here is tha of the Pa ient's Led ger Card showi n illustrat ion XVII. J 106-107 106-107 IMPROVED METHODS IN HOSPITAL MANAGEMENT o 37 108 IMPROVED METHODS IN Accounts Receivable in the General Ledger. The total of the re- bate total column is posted to the credit of Accounts Receivable and to the debit of Rebates in the General Ledger. The segre- gation of rebates is distributed on the left hand opening of the page of the rebate account there being sufficient columns to allow one for each class of rebate. A page from the Earnings and Re- bate Record is illustrated on page 106 showing typical entries. It will be noted that one of these entries is that of the Patient's Ledger Card illustrated on page 100. Many institutions determine their earnings by departments on a basis of a segregation of cash receipts. This method is a fallacy as in practice it is sometimes impossible to determine what items of a bill are covered by a part payment. Some- times payments on an account may extend over a period of sev- eral years, in which case, a department would not receive credit for work until long -after the expense incurred had been charged against them. Some system similar to the recapitulation of act- ual earnings as described here should be utilized. A depart- ment doing scientific work has no responsibility for the collec- tion of accounts. That function belongs to the business office, and the department performing the work should receive credit for it the month the work is completed, regardless of whether the account is collected then or never collected. Collections There is no better time to collect money for a service than before, during, or immediately after it has been performed. In the case of hospital bills it is even advisable to ask for payment of room rent in advance, excepting cases where credit has been established to the entire satisfaction of the management of the institution. The old adage, "It is easier to pay for a live horse than a dead one" applies particularly well to the payment of hospital bills. A patient entering the hospital with good inten- tions regarding the settlement of his account will not object to a request for an advance payment. People who do object are usu- ally of suspicious credit rating and it is better to classify them correctly at the beginning of their stay than after a large balance in the hospital's favor has been created. HOSPITAL MANAGEMENT 109 As a patient enters an institution he feels the need of hos- pital care, he is seeking the institution and its services, -and if he is ever in a favorable state of mind to pay his account it is at this time. Accounts which remain unpaid upon discharge are difficult to collect. Former patients going back to work, when improved, or cured, find many needs for current funds and are inclined to use their money for purposes far more urgent than the settlement of a hospital bill. If they are not improved or cured they will feel that their stay in the hospital was of no bene- fit and with a few weeks at home, many complaints will develop in their minds regarding the service rendered them and with each complaint a reason is created for not paying the balance due the institution. Bills should be rendered weekly during a patient's stay in the hospital and an attempt made to secure settlement. After a patient has left the institution owing a balance, statements, bills and follow up collection letters bring in a considerable per cent of such accounts. Collection agencies may be resorted to after of- fice methods have failed, and lastly, legal procedure may be utili- zed in some cases. Collection Agencies In the selection of a collection agency, great care should be used, as the methods of collecting commercial accounts are often damaging to a hospital's reputation. Before suit is brought in the collection of an account, the medical record of the patient involved should be scrutinized to see that no possible treatment rendered by the hospital could be misconstrued and become ma- terial for counter-claims or defense against payment. More satis- factory results can usually be obtained with less notoriety if claims are assigned outright for collection to a reliable agency or-attorney. Instances of where it is as difficult to obtain monev from a collector as from the original debtor are not difficult to find. Collections Made Through Good Will In the case of accounts long past due, it must be borne in mind that the mental attitude of the debtor has much to do with 110 IMPROVED METHODS IN the success or failure of collection. The worst possible means that can be employed is immediately to antagonize the debtor. Much has been written on scientific collections and the trend of all such writings is that the prospect should be resold to the idea of paying the account. In the case of a hospital, it should be re- called wherever possible, how badly the former patient was in need of hospital care, what a fine thing it was to be able to go to a good hospital and receive proper medical and nursing atten- tion. If the institution is doing free work this should be pre- sented. In short, a friendly feeling should be established toward the hospital and its work. This accomplished, the money is forthcoming immediately provided it can be spared, and few hospitals care to collect money where a real hardship is brought about by its payment. CHAPTER IX. HANDLING OF CASH AND BANKING Safeguard Your Cash The handling of considerable sums of money is looked upon by many institutional managers as a phase of work which requires constant, direct supervision, and, due to the lack of some systema- tic form of indirect control, it is consequently a continual source of worry. There are many articles and supplies of great intrin- sic value in constant use in the hospital over which no formal control or check is exercised and about which the management seems to exercise slight concern; yet cash and its handling, the delegation of which can be entirely left to the average type of office employee, occupies an important place in the average manager's duties. It is important, therefore, that a plan be de- vised for covering this phase of the work in order to release en- ergy and time for the more important duties of safeguarding the interests of the hospital in activities and the use of supplies which are not as easily controlled or checked. Make Dishonesty Difficult Few people are fundamentally dishonest. Provided with the absolute necessities of life and a few of the more common forms of amusement and recreation, they have slight inclination to take that which does not belong to them. Couple with this fact the difficulty of obtaining money without being readily dis- covered, one has a situation which most employees will not try to circumvent. It is of first consideration, therefore, in employing office help to handle cash, to see that such employees have no real mo- tive for being dishonest. Their salary should be a reasonable one for the work done so as to avoid a feeling that they earn more than they are being paid. Also it is well to ascertain if their social position calls continually for more money than their al- lowed income will permit them to obtain. Such employees would then be reasonably safeguarded against dishonesty by mak- 111 112 IMPROVED METHODS IN ing dishonesty difficult. This can be accomplished through the means of several devices which will be described. All employees entrusted with cash in an extensive way should be asked to furnish bond, the employer being required to pay the premium and the employee to furnish gladly the person- al information demanded by the surety company. Even the com- pletion of an application blank of the bonding company has a salutary effect. The employee is given the feeling that he is en- tering into a position of trust and will meet the situation with a determination to keep his records and integrity above reproach. The fact that his employment is of concern to a third party and that a default will be a matter of record difficult to efface will sometimes deter a dishonest act. It is, therefore, a good insur- ance policy for an employer to carry. He owes it to himself and to his employees to secure this form of mutual protection. Bonding Employees Receipt for Cash An unvarying rule applicable to any hospital is that all mon- ey be taken into the records of the institution through the means of a Cash Receipt. A simple form of such a receipt which is SANTA BARBARA COTTAGE HOSPITAL Hospital service - - SANTA BARUA'RA, CALIFORNIA Operating Room -- Anesthetic . - N9 10399 Date Meals and Tray® Roentgen department - - Received of Pharmacy supplies [/ _ Consultation Fees ---• - - Sum ...... telephone and Telegraph - - - LAUNDRY - - Other Items - On account - Santa Barbara Cottage Hotpital CLASSIFICATION G w CURTIS. Superintendent TOTAL L £ • x. . £ Illustration XX. Cash Receipt. This receipt has been posted to Patient's Ledger Card shown in illustration XVII. HOSPITAL MANAGEMENT 113 illustrated below is printed in duplicate and serially number- ed. These receipts are bound fifty sets to the book, the original being perforated for removal, the duplicate remaining in the book as a permanent record. It will be noted that itemization may be made on the left hand side of the receipt when such is requested or advisable. At the close of each day's business all du- plicates should be totaled, a bank deposit made up of the amount received, and an adding machine tape attached to the back of the last duplicate copy showing an itemized list of the receipts for the day. Sometimes it is necessary to have a second form of receipt similar to the one just described and serially numbered, perforated and bound for use in various outlying departments of the institution where it may seem advisable to make cash col- lections. This receipt is given a separate serial number with the prefix "D" which indicates that it is for departmental use, and in addition has the words "Departmental Receipt'' printed upon it. A further distinction between these two forms may be ob- tained by having each of a different color. The duplicate receipt copies should vary in color from the originals to prevent confu- sion in handling. It may seem advisable to have the x-ray de- partment collect the charges it makes against out-patients. If such is the case, a department receipt book may be issued, a small fund allowed them for the purpose of making change and receipts issued here in the same manner as at the general busi- ness office. Every unit using departmental receipts, at the close of business each day should report to the cashier, bringing its receipt book with all money collected. The cashier should then total the collections for the day, verify it with the cash presented, and issue to the department an official hospital receipt covering the amount of money presented. This receipt should read "is- sued against departmental receipts No. 11-21" or such numbers as have been utilized. Each department receipt should then be in- itialed across its face by the cashier as proof of its having been accounted for and the number of the official receipt issued should •also appear above the initials to serve as a cross reference to be utilized for auditing purposes. The originals of the official re- ceipts issued to the department cashier should be kept on file in the department as an indication that all money collected hps 114 IMPROVED METHODS IN been turned in at the cashier's office. Where departmental re- ceipts are utilized in this manner, collection may be made with comparative safety in as many outlying units as may seem war- ranted. Departmental Receipt Forms In large hospitals where many out-patients are handled daily, it seems inadvisable to request such patients to call at the general office to pay their accounts. Many times these requests are ignored and the office is then obliged to make, through the mails, a collection which should have been handled as a cash transaction. Such accounts are often uncollectable for patients of this kind are usually transient and sometimes give inaccurate or temporary addresses. In hospitals of one hundred beds or more departmental re- ceipts may be utilized to advantage in the x-ray, hydrotherapy, phsiotherapy and surgery departments. In the dispensary or pharmacy, where collections are large in numbers but small in amounts, a cash register should be employed and the money col- lected for the day presented to the cashier along with the register tape for audit. An official receipt is issued for these collections and given to the department concerned. A rule, therefore, to which no exceptions are made in the handling of incoming cash is that all money collected sooner or later must be recorded through the medium of the official hospital receipt. Cash may first be collected through the means of the cash register or the departmental receipt but it must clear eventually through the official hospital receipt form. Bank Deposits A second rule which should have no exceptions is that all money taken in through the means of the official Cash Receipt should be deposited daily at the bank. Where distance does not permit of such routine, the receipts of each day should be listed as a separate deposit. The complete observance of this rule avoids the undue accumulation of large amounts of cash, it causes the receipts of each day to check with the deposit of the same HOSPITAL MANAGEMENT 115 day and thus facilitates a check or audit and provides for the speedy collection of all checks, drafts and other negotiable paper tendered in payment. Deposit slips should be made in duplicate, one for the bank and one for reference in the cashier's office. This dupli- cate tag, made up daily is of assistance in tracing information concerning discrepancies in bank deposits. Some banks issue deposit slips in book form rather than in pads and it will be found that the book form is the most convenient when available. In listing checks, the clearing house number should always ap- pear opposite the amount of each check. Deposit Tags Petty Cash Funds T he tendency to handle small amounts of money in an un- official manner should be discouraged. In large institutions various funds will be discovered from time to time which never have received official recognition. No department should be given authority to build up funds for their own use unless the receipt of these amounts is handled through the regular channels for receiving money, and unless its disbursement is supervised in the same manner as regular hospital funds. A gift designated for a special purpose in a certain department is subject to the same business routine, as to its receipt and expenditure, as are routine hospital collections from patients. Funds in the hands of hospital employees to be utilized for special purposes without the supervision of the head of the institution is weakening to the morale as it makes heads of departments free from hospital rou- tine; the use of such funds is not a matter of official record and is naturally not included in the hospital reports. This causes a misunderstanding on the part of the public which works a dis- advantage to the employee handling the contribution. Bank Accounts The banking business of the hospital can be simplified by having one bank account for the receipt of all funds whether 116 IMPROVED METHODS IN they be receipts from patients, from miscellaneous earnings, from donations, or from endowment funds. It is not neces- sary to place monies in separate bank accounts in order to keep accurate records. If the proper ledger accounts are ar- ranged, all money received can be deposited in one account and yet one can readily determine the various sources of income and the particular purposes of expenditure. If this system is carried out faithfully, the Cash Receipt is a complete uniform record of all cash income and the Voucher Check, described in Chapter X is a complete uniform record of all expenditures. Subsidiary Bank Account for Payroll It may be advisable to conduct bank accounts subsidiary to the general bank account mentioned above. These subsidiary accounts, however, should clear through the general account and the only source of supply of funds to these accounts is through the general account. The only subsidiary bank account necessary in the average hospital is one for payroll purposes. It is desir- able to have all wages paid by check. This check of necessity must take a different form from the voucher check used in con- nection with general disbursements. Also because of mechanical ease of bookkeeping and balancing and reconciliation of bank statements with ledger balances, it is better to have a special sub- sidiary payroll bank account. How to Handle Payroll Bank Account This special account does not need to tie up hospital funds through the maintenance of a large balance. The payroll may be handled entirely through a system of advances from the gen- eral bank account. At the beginning of the month, the account has no book balance. It has a practical balance since all the payroll checks of the preceding month have probably not cleared through the bank. On the first day of each month, when pay- rolls are handled on a monthly basis, an advance, from the gen- eral fund to the payroll fund, may be made of an amount suffi- cient to meet advance payments to employees and final wage settlements which may occur during the month. If the first ad- HOSPITAL MANAGEMENT 117 vance is not sufficient, a second or third may be made. Then when the total payrolls are completed at the close of the month or at the end of the payroll period, -a final advance check from the general account, deposited in the payroll account, should be made. This check represents the difference between the total of the payroll for the entire month and the amount included in the various advances made. This final check should give reference to the total amount of the payroll for the month and show the distribution of the payroll by departments on the jacket of the Voucher Check form. This final advance check should also bear reference to the serial numbers of previous advance checks made during the month. After the payroll for the month is issued, the subsidiary payroll bank account again has no theoretical or book balance, the actual balance always being the list of outstanding checks. Other Subsidiary Bank Accounts Other subsidiary bank accounts may be set up, but there is a greater danger in having too many rather than too few. The practice of distributing cash deposits among several banks to gain favor and support to the hospital, not only serves to confuse and tangle the records of the institution but many times fails in its purpose so completely as to produce an effect directly op- posite to the one desired. Petty Cash Fund for Main Business Office The cashier's office should be provided with a petty cash fund for the purpose of making change and also to meet the payment of small petty items that require immediate attention. Such items as freight, expressage, and notary fees are paid through this fund when necessary. A form of Petty Cash Fund Voucher is provided -as illustrated on page 118. This form of re- ceipt is required for all payments made from this fund except when regular receipted bills are available. As the amount of cash in the petty cash fund becomes low, all receipts for money expended should be vouchered and a check drawn on the general account for reimbursement of petty cash. The voucher jacket of the general fund check should show the various accounts to 118 IMPROVED METHODS IN Form - 2M-5-H-23 PETTY CASH FUND VOUCHER SANTA BARBARA COTTAGE HOSPITAL SANTA BARBARA, CALIFORNIA, August 1, 9z_4_ To PdJtne.stei Dr. Postage Stamps • 10 00 Paid by Received Payment /n Signed ■, - Illustration XXI. Petty Cash Fund Voucher. HOSPITAL MANAGEMENT 119 be charged as represented by the receipted bills submitted by the cashier. Where departmental receipt forms are used, a portion of the petty cash fund is loaned to the various departments for the purpose of making change. Receipts are kept in the petty cash drawer covering these loans. Reimbursement checks to petty cash may be cashed from hospital receipts, the reimbursement check then being included in the deposit from which cash of an equivalent amount has been withheld. Commercial Paper It is necessary for the cashier to recognize all the various forms of commercial paper such -as bank checks, drafts, postal money orders, express money orders, and travelers' checks. An understanding of the fundamentals of the laws of negotiable instruments should also be required of the cashier. The im- portance of proper indorsement and of the immediate banking of all negotiable paper tendered as payment must be recognized. The cashing of checks, as an accommodation, by the cashier is to be discouraged. Bad checks are more often received in this manner than in the settlement of accounts, and a stranger's credit must be fully established before such favors are extended. Re- quirements made by banks regarding identification -are none too stringent for the hospital cashier to follow. The Cash Book It is not essential that the Cash Book be of special design. The receipt or debit side should provide space for a summary of the daily receipts and deposits. The first column in the Cash Book on the left hand opening, or receipt side, should carry the date. The second or explanation column should contain a state- ment of the receipt numbers included in each entry. The first money column should carry the total amount of the receipts which have been posted to the credit of patients' ledger accounts and the second money column the amount of all miscellaneous receipts. If deposits are made direct to more than one bank account, a separate money column should be devoted to each 120 IMPROVED METHODS TN account. Three money columns are therefore necessary to handle the receipt side of the Cash Book and as many more may be added as are necessary to care for additional receiving bank ac- counts. At the close of the month the total of the first column is posted to the credit of "Accounts Receivable" in the General Ledger, the total of the second column must be analyzed from the information afforded from the duplicate copies of the Cash Re- ceipts. This information should be recapitulated and posted to the credit of the various ledger accounts concerned. The total of the third column when but one bank account is used, equals the total of the first two columns and is posted to the General Ledger under "General Bank Account." A typical Cash Book entry follows: Date Explanation Patients' Miscel- Bank laneous Accounts Receipts Deposits January 16, 1924| Receipts 476-489 $540.00| $135.83] $675.83 Responsibility for Accuracy in Cash Records Illustration XXII. Cash Book Debit Side. A cashier should be provided with reasonable safeguards in the handling of currency. The money drawer must not be easily accessible to the public or employees. Various office em- ployees not responsible for the accurate handling of cash must not be allowed access to the cash drawer under any circumstances. A shortage, where no definite person is responsible, is apt to cause bad feeling between employees and in some instances brings about accusations and misunderstandings which cannot be adjusted. Mistakes, shortages, and lax methods of handling money are not to be tolerated. A premium should be placed on accuracy and honesty. Dishonesty can be avoided by not fostering methods which in themselves are conducive to dishonesty; and in cases where dishonesty does occur, much of the responsibility can usually be placed on the manager of the institution for pass- ive permission of conditions, the existence of which breeds inaccuracy. CHAPTER X. EXPENSE RECORDS Prompt Payment of Bills A hospital, even as an individual, is dependent as to its credit rating upon the prompt payment of outstanding bills. Should the financial condition of the hospital permit, all accounts each month should be paid by the tenth of the month following. In some instances it is better to borrow money than to allow accounts to remain unpaid. Whenever possible, an institution should pay bills promptly enough to take advantage of all cash dis- counts. Firms who do not print discount notices on their station- ery or bill head forms frequently will allow a cash discount upon request. Preparation of Bills for Payment As bills arrive through the mail they should be stamped and dated as follows: Date Bill Received Purchase Order No Date Goods Delivered. Approved as to Price, Extensions and Footings Account Charged Gross Discount Net Check Number Posted Approved Superintendent Illustration XXIII. Bill Approval Stamp. 1 he bookkeeper should then send one copy to the storekeeper for his files and retain the original, stamped as above, for the files of the bookkeeping department. The originals may be filed temporarily in an alphabetical index provided they are not bills upon which a cash discount demands prompt payment. In Ch-apter V it was stated that on receipt of the Purchase Orders from the storekeeper with delivery notations they, too, were 121 122 IMPROVED METHODS IN filed alphabetically. In the approval of bills for payment, there- fore, it is convenient to approve the a's first, the b's next, and so on through the alphabet. As the bills are checked against the delivery notices on the Purchase Orders, the Purchase Order number and the date the goods were delivered are written in on the bill in the second and third lines on the impression made by the rubber stamp. Where prices occur on the Purchase Order, such prices are compared with those on the bill, the bill is then checked as to arithmetic and such facts are indicated on the bill by having the clerk doing the work initial the fourth line provided by the rubber stamp impression. The account to be charged, as shown by the Purchase Order at the bottom, is then written on the next line. The sixth line is used to show the gross amount of the bill, the discount taken, if any, and the net amount to be paid. Notations as to bill approval are made on the bottom of the Purchase Order, indicating the items which have been approved for payment, the date of approval and by whom -approved. After these notations have been made the bill is attached to the Purchase Order and sent to the superintendent's office for approval of payment. Preparation of Voucher Checks When such approval is secured, all the bills to be paid each firm are sorted with the Purchase Order still attached, fhe next step in the course of payment is to draw up the check, which is the special form of Voucher Check illustrated on page 123. A carbon is used in the preparation of this check form, thereby securing -a copy of both the check itself and the expla- nation stub attached below the check. The various bills to be paid are listed separately on the explanation stub showing date, explanation when necessary, and the gross, discount, and net amounts. The total in the net column on the stub is of course the total shown on the check and also is the total shown in the lower right hand corner of the second sheet, or jacket, provided no discount has been taken. The gross -amount is always charg- ed to the various expenditure accounts concerned so that when discount is taken this total, charged as expense, will be the gross HOSPITAL MANAGEMENT 123 The Santa Barbara Cottage Hospital N? 2434 the Santa Barbara Cottage hospital N9 2434 Santa Barbara. March 12 _I924_ Pay to THE ORDER OF Mission Office Settlement Co. SB 60.KR ■ ■ Dm i a f. ANTA BARBARA COTTAGt HOSPITAL- -GKNKRAI,. ACCOUNT \ COTTAGE HOSPITAL N« 2434 GROSS DISCOUNT NTT 3 1 X 60 66 x 60 66 TOTAL 60 66 DISTRIBUTION AMOUNT 1 10 25 1 ACCOUNT NO 662 15 00 .so CA»M ACCOUNT No ?.?. BOOK RMS / 0 U 1 AecouHT m . .5.(51.11...... tun.. ACCOUNT NO 1 ACCOUNT NS -- - Account No 1 ACCOUNT NO. - re.. .. . ' ACCOUNT NO. . ..... Illustration XXIV. Voucher Check. Trace the entries involving this check as shown in the following illustrations: Voucher Distribution Book, Vendor's Index, Purchase Order and Stock Card, where it is entered as number 1036 rather than the number 2434 as shown above. 124 IMPROVED METHODS IN amount of the bills rather than the net amount for which the check is drawn. fhe bills to be paid are then detached from the Purchase Orders and attached with a staple machine to the Voucher Check second sheet or jacket. The number of the Voucher Check is then placed on the Purchase Orders involved, in the space provided in the lower right hand corner, and the Purchase Order if completed as to delivery and payment is then filed numerically. The information required to fill out the various account numbers to be charged, as shown on the lower right hand corner of the voucher jacket, is secured from the information on the face of the various bills. This information has been previously inserted on the bill. The checks are then detached from the voucher jackets, put through the protectograph and dated. They are now ready for signature and are sent to the proper persons each check be- ing accompanied with the voucher jacket and bills attached. If the check is released it should then be recorded in both the Cash Book and the Voucher Distribution Book, the page num- ber on which it is recorded in each case being entered in the space reserved for this purpose in the lower left hand portion of the voucher check jacket; if not being released the check is recorded in the Voucher Distribution Book only. After entry in this book, the voucher jackets with bills attached are listed on the Vendors Index card and filed numerically. The checks, if being released, are mailed out and if not released are kept in numerical order in a file, which represents accounts payable. These checks, which are not released, should be totaled and rec- onciled with the ledger "Accounts Payable" each month. When bills are not being paid the date should be omitted on the check and added as the check is later released at which time it is also entered in the Cash Book. Vendor's Index The Vendors Index card mentioned above is one showing the name of a firm, its address, and a list of all payments made HOSPITAL MANAGEMENT 125 to it. The payments are listed by month, voucher number, and amount. These cards are kept in an alphabetical file and pro- duce a valuable index when tracing payments made to various firms. This form is shown below. All Voucher Checks should be recorded thereon and such record indicated by a posting check mark in the space provided for this purpose on the voucher check jacket. A Vendor's Index card should be kept on which all cancelled checks are recorded. SANTA BARBARA COTTAGE HOSPITAL VENDOR'S INDEX name Mission Office Equipment co YEAR lq22 YEAR YEAR MONTH YOU. NO. AMOUNT MONTH YOU. NO. AMOUNT MONTH YOU. NO. AMOUNT R7 1 7 5 i Oct JJ8_ 7 d ) 1924 ,T nn 4-7R 2 9 L Fell ARI n f) 1058 L_ Illustration XXV. Vendor's Index. Refer to illustration XXIV Voucher Check for the source of the entry shown in the circle. Voucher Distribution Book The Voucher Distribution Book is a recapitulation of the information contained on the Voucher Checks. All Voucher Checks are entered in this book each month so that a complete record of expenditures will be secured regardless of when the various items of expense are paid. The checks are listed in the book numerically. The payee of the check, the gross amount of the bills, the discount taken, and the net amount are next en- tered. The columns to the right of these first three money col- umns are for distribution purposes only and the amounts to be entered in these columns are shown on the lower right hand corner of the voucher check jacket, previously mentioned. A check requires as many lines in this book as there are accounts 126 IMPROVED METHODS IN being charged. It will be noticed that the columns in this book designate departments only and usually two and sometimes sev- eral accounts are represented by each column. It is, therefore, necessary in showing this distribution not only to place the amount to be distributed in the proper column but also to write the account number receiving the charge in the column mark- ed "Account Number." (losing and Posting Voucher Distribution Book After all checks have been entered the book is totaled. The amount in the "Gross Amount" column is not posted. It is used for control purposes and should equal the total of the next two columns, which are posted respectively to the credit of "Dis- counts Earned," and "Accounts Payable" in the General Ledaer. The amount of the "Gross Amount" column also equals the total of all columns to the right of the "Net Amount" column. These columns to the right of the "Net Amount" column are all debit postings, but before these amounts may be posted each column must be recapitulated, i. e., the amount appearing in each column must be segregated according to the various subaccounts which are involved. After this segregation or re- capitulation has been completed the postings -are made to the General Ledger, the department total being posted on the right hand opening of the ledger sheet as a debit and the distribution being spread over the various subaccounts, each having a special column, on the left hand opening of the ledger page. If the entries and recapitulation as shown in the Voucher Distribution Book, illustration page 127, and the entries as shown on page 131 of a typical expenditure account in the General Ledger are studied carefully, the method of handling these books will be better understood. Entering Voucher Checks Which Cover Advances to Payroll Account Voucher Checks which cover advances to the payroll fund are not entered in the usual manner. These checks are dis- tributed under the columnar heading "Payroll Account." When the final check covering the payroll for the month is drawn, this same column is credited with the amounts with which it 127-128 IMPROVED METHODS IN HOSPITAL MANAGEMENT 127-128 VOUCHER DISTRIBUTION BOOK VUUCMBR L CAPI TAL AC :ouh TS 1 11 •!! ADM "TH nistrati ON NUMRCR TO WHOM PAYABCK IMOUI " 1 ■ARNI D MOUNT AODITIC MB NT UIPMI MT A Rl ccou C1IV NTS IBLB BTOR rB TRATIVB • UPPU1BR Chi L dfif a Brought Forwafd 3 3 0 6 <• J 32 i 2 4 '7i / f >L Z/Z ' c 0 C c n Zr 7' T> S ' ff J / Jo I <) 3 d 7 r- ~r ' 'I / o 3 6 0 ) . { / .. ■ .. »• /'// /0J7 7 J O' 2 /fz 0 •• JL T / 0 3 ( Q-. A. f </f- r- f / ® 31 4 / - EEBMEirHBEWME Bl <■ IB ■iiib ibmib iBimmi IB ■ri /y /I / H 0 - II / it 6 ? ' f. « c ••' ■ / (. 3 / 3 ' - Jl$ » < v L-*-X 0 > ■y > -» Z 6t, >(. 3 (, 4 7'6 \ 3 1 J 4' 7> 71. p (. •■ 42* <X /1 , V/ ■ V \ a: Y, z' u-fc L -•T" !l -4 X/.../a. / 3 c //.* / 3 1 4 3y !! L- i p.± > :112- 3 C 4 C 3 ? 4 r t 111 'zJ c J. J 1 - 3.\ ft »-!•_* (/ <ll-lj °a - / <0 .( Z Z 3)3 3 .4,( 4' / ■T f? 1'3 1. 2? G 4 <U>Z u ss ° L /> - 3 3 fz 'i-i 61 7" 7/1 (, <•■ 'LpL V A - (,/>> 7US P M- f' V' / 0/ (t> /1 *£- _/ I 6 L 3 3. c 3 >'7J C si '.3 zU 'yZZ e (0' > C . 3< y s (■ f 0 6 </< 4 , cX M - < t'-To J Li>i / z 1 Jc -2i r7» 6 ;[ _4 r. 4/ y> / 3 > '4 , f Z 3 3$ L\. z> f.7 6 r 4 p 3 . r PP-ki - 3p > J 1! J- </( 4 9 7 r «- 'Jll loi 3/ yi. / 0 b / 0 3 - »■ z 2- !L 4-X r s / 3 33 / 3 v « / c ' 7< . '<; 7< Z J ,7. >■/ 3 /> <*1 A D Ph*- . • A .1/ J < 4. / ■X t /j H >*' □ ... 1 4 (f > 4u r ? ( *3? z. V /' - hi :3 6 ✓ 4/ X •7.4 p 'j.1 'u IL }LJ) &J <> 3 / 7fo Zj /z. /l~ *-1? 0 V 0 J ' i ,3t 6/' 4: a J Ll\ 9 / 4 L vV x Oz 6 ■< / 2: z; k44- (, Y-f 7 3 3 16 / / ,u. 6 C L >4 ){ ( / 3 7*/_ t, / *1 d 7' A U lyfj- * • ' , Tv zl 4/ 4 V-] o' Z / p 6 i s= , f-r - 7 z® 4 > A ' ._z 7 i-M yC'c- p /Z 13'6 Z / 7 /-- - 6 > >z 3. 4v«r ! / I - / ~)' 7 12 I z < P ... (- -1 (, 'y rr ?>L '7 r (. fej p. e L. > - L. I. 1 - t i r t. t: Illustration XXVI. Voucher Distribution Book. Left hand opening of page. Note entry of Voucher Check, illustration XXIV. 129-130 IMPROVED METHODS IN HOSPITAL MANAGEMENT 129-130 1" 1 .. 1 r ■iiiiamiituasB □11 laa si a a ■ ft 1 u. ibl ii a Si il 1 £1 IS 11 a i ft la ay II 7=' " r -7 = ' 7 <r ■> L b £ ' n 7 <1; ~Z / t I 1 <f(f C _L -F 1 /><: c > £ ■ J. /-/■ -i- hit-) 'i ' ?/ If c a '? / ? e 4 r *A f a r 6-< /■ t < 7< '/i r c t ! nt tic D L If b L> L- M I J'tT H3MVIS1M [ Moiivsncu imuw ONISMnM aaiAMsa AvviNidaa A35fM«VMtf ONIlVMldO 1 AMOAVNOaVl1 3V3IOO1OMXV | ■* XVMOflV'l V3 IN 1*13 r aa J 13HJA1I«BA« M1QMVO [| mavxaoiA ■QMAOMO ssNianina ONIMIBMIONI 1 aSMVMUMIVM Ml« MAN •• • • SXNlHXMVdia *** xxmxn ?i*ian<9 LU KU LU fiNiwiavdia 13IAW3S 1VH1N1O 1 "':" J 'C JO F 1 LISIOIAI 3H1 i dOJ - .• dSVd J Illustration XXVII. Voucher Distribution Book. Right hand opening of page. HOSPITAL MANAGEMENT 131 Dau- Detail Ref Debit Date * Detail Ref. Credit J/ 3> X 7 1 /V • 1 >4 W L ft ■Y-) ■/ (LJ _ / *7 O z - r" I!cherheez L_ ' M _jL 1 -- - "-. - - 6 i 3' i> 3 ) 6 3 3 3 £33- 3 iJ 3 3)1 k } iy ) i C k i 2> }. a ' 1 /a> IJ, f Z P .z» J x.J/f> oj, J<- - / TT l 3 ■ 7 7 </ "j O( >si3 311 :1 V* /k J. 1 J f' p 4- • • 1 'I t 7" C V '1J- ~~t' >■5 J o * > < '<k 1 ay» • ikf 2 z / o 1' 1 7 t.(( d f 7T A r • /■. 4 r rj u V7~ 1 1 k f 7* 4-1 H --r fc_ _ L-L - Illustration XXVIII. General Ledger, Expenditure Account. Refer to entry in circle, upper cut, and trace from Voucher Distribution Book, illustration XXVI and XXVII. 132 IMPROVED METHODS IN A ... No 5 / Name Sheet No / Dajr Detail Kef. | Debit / «? Detail Ref Credit cZ e z-'Cey z77 aU J f /? y JV; J u .. J -zk-J /7/I y th ci' - 2> J/ / 7 * -3 <» o I J J o i 0 JI 3 L~rt d / 3' ■4 0 1 T > n 3 t i 'fc | 3 | it> \y Ic -II ((Lfd l> -4- I- . 1 -I- -n S. H. C H. _ F"'"' X.. f Illustration XXIX. General Ledger. Earnings Account. Refer to illustration XIX Earnings and Rebate Record and trace entry shown in the circle above. The left hand opening of the page is not used as in illustration XXVIII. HOSPITAL MANAGEMENT 133 was charged through the entries of advance checks, and the total payroll for the month as represented by both the advance and final checks is distributed to the proper columns. This entry naturally occupies several lines, one line being devoted to each account receiving a charge. There is no total, therefore, to be posted to the ledger for the "Payroll Account" column. The black ink entries and red ink or credit entry, made when the final check is entered, cancel each other. Entering Voucher Checks in Cash Book The expenditure side of the Cash Book consists entirely of listing the amounts of the Voucher Checks as they are released for payment. These checks may each be entered indi- vidually or by summary. When entered by summary, only the first and last check numbers in a series are given and the amount is extended in the money column as one total only. After all checks being issued for the month are entered, the total of the expenditure column in the Cash Book is posted to the debit of "Accounts Payable" and to the credit of the "General Bank Account" in the General Ledger. It is unnecessary to have a specially designed Cash Book. A four column cash book, such as may be secured at any stationery store, may be used. The left hand opening of the page is used for the receipts and deposits of cash and where but one receiving bank account is used, only three of the four columns are necessary. On the right hand opening of the page, only one of the four columns is used as is explained above. Value of Expense Records The careful checking and approval of bills is a tedious task, yet expenditure records of the type outlined are their own reward. Any type of information is instantly available from the files of Purchase Orders, Voucher Checks with bills attached and the Vendor's Index. These records, together with the Stock Card file giving its valuable types of information, form a set of expenditure records which is very complete and is of continual guidance and assistance to the executive officer in charge. CHAPTER XL CONTROL OF INTER-DEPARTMENTAL TRANSACTIONS Each department of an institution is naturally more in- terested in its particular welfare and activities than it is in the affairs of the hospital as a whole. This interest should be fostered and stimulated as it will develop a better institution in this manner than where department identity is not recog- nized -and where the interests of the various departments arc continually submerged. It is stated that a chain is no stronger than its weakest link. A hospital, it may as well be said, is no stronger than its weakest department, for by such department will its standing and reputation be attacked. One of the best means of stimulating interest and economy is carefully to credit each department with the work it does for other units. This principle could be applied to a ridiculous degree, which, of course, is not intended, yet there are certain interdepartmental activities which it is well to control, and by such control interest is produced in the economical operation of each department. Foster Departmental Identity Food Requisition The department of subsistence and dietetics consumes by far the most supplies of any hospital unit. Often the amounts spent for single items such as meat, milk, and butter involve the expenditure of more money than the entire operating costs of certain other small units. Interest in the economical opera- tion of such a department is therefore highly desirable. Budget control, of course, has a tendency to guard expenditures and has been explained in Chapter III. It is discouraging, when efforts are made to run a department economically, to have its supplies available to other departments for their indiscriminate use. Such items as eggs to the laboratories, cereals to be used •as food for animals being experimented upon or supplies for parties held in the nurses' or employees' quarters make con- 134 HOSPITAL MANAGEMENT 135 ALL FOOD SUPPLIES FURNISHED BY THE SUBSISTENCE DEPARTMENT MUST BE REQUISITIONED ON THIS FORM i S' Sugar r> 8 S Salt Crackers Coffee H rt> w m m * r CO I Liquid Soft, I? r+ General Total Number of Patient n "I 1 m z cl 5. rV V i * Approved by * < it c. 1 v" ! 5 0 Y SUPPL IT CENSUS > z 4 z 5 AMOUNT m (A s 0 m H > Z o H > tx > a ISSUED o T1 0 0 0 X XI > r C A 3 \\s. ! \ g Eggnog Beef Juice Grape Juice VSPECIA M M </) Lemons Oranges Lemonade Orangeade Cream Milk DAILY Date o c 1 H 0 z > c. Pl K O CA H > 1 <d '" 0 X z o L SUPPL O 0 z X z □ C T T r Issued *> * z 0 AMOUNT m (A V 1 V & WANTED AMOUNT (/> 1 ISSUED V y" v' U) V) c 0 Illustration XXX. Diet and Food Requisition. 136 IMPROVED METHODS IN sidtrable inroads upon the food supplies of the kitchen and it is only fair that the cost of such items should not be borne by the subsistence and dietetic department. A Diet and Food Requisition such as is shown on page 135 will handle and control this situation. This form, as will be seen, is not limited to the requisition of supplies intended for use by various hospital departments, but may be used also for the requisition of food within the subsistence and dietetic department. Supplies ordered by the diet kitchens located in the several nursing units for special nourishments furnished to patients and for other purposes not enumerated may all be handled through the use of this form. When desirable, the officer in charge of the hospital may require approval of the food requisitions before issue. When the supplies leave the subsistence storeroom and are consumed for other purposes than for the meals and nourishments fur- nished patients and employees, these food requisitions may be priced and handed to the bookkeeper for attention. The total of these requisitions is entered each month in the Internal Requisition Distribution Book and is thereby credited to the subsistence department and charged to the one using the supplies. Handling of Food Supplies As stated, the costs of operating the subsistence department involve a considerable proportion of the total operating ex- penses of the hospital and purchases by this unit should receive particular attention and care. It is as important in this depart- ment as in the case of the storeroom to see that deliveries are properly inspected and weighed and that proper storage facili- ties are provided to prevent deterioration. Perishable articles should be provided special storeroom space and should never be handled, except when received, by the regular storeroom personnel. Supervision of Linen Supply The requisition of linen should be handled through a form similar to the one illustrated on page 137. In this manner super- vision of the use of linen may be secured as this form requests HOSPITAL MANAGEMENT 137 Note: May Be Issued Without Approval When Requests Do Not Exceed Authorized Amounts. SANTA BARBARA COTTAGE HOSP!' LINEN REQUISITION Date... Z.. N pal o. Patients or Persons ... J ITEMS Authorized Per Person 1 per week Hand Wanted Issued ITEMS Authorized Per Person ON Hand Wanted Issued Aprnns Mattress Pads as required Baby Dresses 1 Shirts 1 Napkins 1 D /r /f Bands 1 Bibs 1 Pillow Slips, Adult 1 O © yo Bags Hamper as required Children 1 Laundry? as required Binders' breast 1 Rags, Bundles as required Abdominal 1-2 Screen Covers as required Duoble T 1 Sheets, Adult 1 0 y* y/Q Single T 1 z / / Crib * Bath Robes, adult 1 per week Smocks as required Children 1 per week Spreads, Adult 1-2 0 Blankets, Adult 1-5 z ( - Children 1-2 Ch.ldren 1-5 Baby 1 Stupe Wringer as required Caps, 0. R. as required Towels, Hand 1 o 0 /< Headpiece as required Bath 1 0 /f / •>" Service 3 per room o 3 3 Cloths, Table 2 per week Nurses 4 per room 0 z d Wash 1 o / k Diet Kitchen 4 per room 0 Dish as required Doctors as required y' f Tray 2 Enema as required o 6 .Covers, Dresser as required ( / / Dish and Glass as required Table as required 6 5? Pot as required Tray, large as required 0 Tray, small as required x Water Bag as required $ To be put bi place by matron Bed Pan as required ( Window Curtains as required - Ice Cap as required Rugs as required Compress as required - Diapers 20 l-cegings as required Masks as required Night Gown« Adult 1-2 / uL Children 1 Requjdtioned by Approved by Issued by Detriment Head -- Superintendent " ' Y Illustration XXXI. Linen Requisition. 138 IMPROVED METHODS IN that in issuing linen both the number of patients being served and the supply on hand left over from the day before be con- sidered. Hoarding of linen in the various departments and nursing units tends to extravagance; all surplus clean linen should be stored in a central linen supply room and is available by requisition only. This central linen supply room should be equipped for the repair and marking of linen, the costs of operating this service being borne by the housekeeping depart- ment. All linen should bear some mark which identifies it as hospital property. If the name of the institution is not woven into the fabric of each article or the linen otherwise marked when delivered, a device for this purpose should be installed. The date new linen is put in circulation should be placed on each article as it is issued for the first time. The Linen Requisition is not a bookkeeping record as is the Diet and Food Requisition. Its primary function is to control the use of linen and it never becomes the basis of a bookkeeping entry. Engineering Department Work Order 1 he Engineering Department Work Order illustrated on page 139 is a most valuable form and assists the -administrator materially in the control of the activities of the hospital. It is also a bookkeeping record and is entered in summary form each month in the Internal Requisition Distribution Book. Through the means of this entry the engineering department is credited for all work performed during the month and the proper departments for which the work was done are charged. This form is always prepared in duplicate and is sent for •approval directly to the administrator's office by the depart- ment making the request. If approved, the originals are handed daily to the engineering department for action and the dupli- cates are retained on Hie as a record of all jobs in the hands of the engineer. The engineering department should return all orders when completed to the administrator's office. The dupli- cates on file are destroyed as the originals are returned -and the duplicate file of work orders is thereby kept active. This file HOSPITAL MANAGEMENT 139 CURTIS HOSPITAL ACCOUNTING FORM 29 ENGINEERING DEPARTMENT WORK ORDER Department to bi Charged Subs i stence Date August 1, Original and Duplicate to be SENT to Administrative Office Request™ that K','.~tchen jp lives be sharpened. Screen door oiled. Tea kettle lid repaired* - - ■ - ■ - -- Appro' t t v > : ~r f 9 Signed JAzWA, . E.NJ5NEER S REPORT This Space> for Date Completed Aug .3 > 1Signature ACCOUNTING DEPARTMENT Cost of Materiai s Charge Acc6unt 6222 Cost of Labor .75 Credit Engineering Department Supervision and Overhead A m o u n t *75 Total s_JL5 Illustration XXXII. Engineering Department Work Order. 140 IMPROVED METHODS IN of orders should be checked frequently with the chief engineer thus keeping the work of the department in progress. If this is done, few complaints will be received due to the fact that jobs are not being completed promptly. The fact that a Hie of incomplete jobs is kept will have a salutary effect upon the department doing the work. Before the job is reported as complete, the signature of the department making the request is secured and is placed opposite the words "Date Completed" and "Signature." This requires that the department inspect completed jobs and prevents complaints to the effect that the work was not done properly. The engineer should complete this form as to the cost of material, the cost of labor, and the amount of overhead charges. From this data on each requi- sition, the bookkeeping entry may be made. If instructions are issued that no requests may be made of the engineer other than through the means of this form, except in cases of emergency, the administrator is enabled to keep a check upon repairs and alterations. Abuse of buildings or equipment is thereby called to the administrator's attention and he is enabled to fix responsibility for breakages or misuse of equipment and plant. This is a valuable aid as one of the functions of the person in charge of an institution is to educate employees in the proper use and care of the property of the organization. Care of Property People vary greatly in their regard for public property. Some employees handle all property in their charge as if it were their own; others feel that property which belongs to an institution may be treated with little or no consideration. An appeal to the sense of justice is sometimes successful. Equip- ment abused is soon destroyed or its utility impaired to such an extent that others using the equipment are handicapped in their best efforts and the amount of service they are able to render is thereby diminished. The sense of order and neatness is highly developed in some employees and proper handling and care of equipment may be secured through tactful comments regarding the appearance of equipment, work tables, and rooms under 141-142 IMPROVED METHODS IN HOSPITAL MANAGEMENT 141-142 INTERNAL REQUISITION DISTRIBUTION BOOK . c »EDH S •«l AOMIf AM OUNT •T O.M BNAIM •MILA QIOU s«im« H via "•' ® 222- A CTABLI kROBN * JlllIH <OU«IK LiN ymji I ** UMOB V ABMIMI«T«A VI VC ACCO UKTIBB ICOIM AXE Aoecitrv L JJ L" v ' if '■ <t// f7 >t~AZV<Z n*-e-9 *-7aXZ/ j J> ~ 'J I L-, x _. / / d A P i7 ?7 / * / ~F y <-Z<y _ purr rvr-in |1 Zt 4 _ Hz t (,r, _ 0 > 1 0 > > d p - _ 1 Z/ ZzU*«/i e A J-i < o'. P -PP*- - / > P[ P. r •'L _ • j i/f z - - io ><Xxiu-xA_/ : //?< • s. Of* P - 1 P PPi t P Lr-t-J\S Zl _ - f ' 1 1 1\ 1 dA *. 1 / itLk _L 0 21 £« j iy •/ ( C // J.f 3 Z/ r+ ■ L.. -.. !■■ ■ ,11,. J 1. ■ :t = "" Illustration XXXIII. Internal Requisition Distribution Book. Left hand opening of page. 143-144 IMPROVED METHODS TN HOSPITAL MANAGEMENT 143-144 FOR THE MONTH OF 1 92 •/ PAGE (7 m ■■ -m- GEN ERAL SEf (VICE mr DEPARTMENTS UTT - Ml * «n PUBLIC UTILITY DEPARTMENTS ACCOUNT NUMBIR GIN! MAINT ARAL NANCB ■ NG BU G iTdin ING >S VIGI1 GAR ■ Ul BIST! NCK ■UNDRY «-..v SOLIC ATORY .OGICA1 OMB EDUCATION ■ RCN 1 £// / 6> U; (. 3>> i I ii > / M - I la 3 /1 >. I •/> C «4->> (, '-'•/' z A ? V, - / > r <c Z"Av 4 / r I V lb>)( fc r. \luv Ityy i/J> Lyy 3 C 3 3> 3 L 3 3 S' r. c / iC t ' ._ /,</!> / / L'W / o/ ._ 4 f. ( / d / f LQv~! 1 /f L s/1" /i - -' 7 d </7 2 F/J <o s'y'y' ~~ __ = 7 Z (,/:> /S/ C r</y- Tz. C -T f-p' Citi V 3 ' 3 ■I >4 nil Li- /. . U-. FT' /< n i ►-- z* .. L r -n 6 1 ■ F X_j- I ' - - l ■? t r i. . '3 1. I ■- -> r 7»_ » 1 Illustration XXXIV. Internal Requisition Distribution Book. Right hand opening- of page. HOSPITAL MANAGEMENT 145 their supervision. Other employees may be taught regard for property only through holding them directly accountable for all articles in their charge and in this case the Engineering Department Work Order does assist in placing responsibility for damaged property. To illustrate further, a work order for the repair of an awning may develop the fact that the awning was not properly adjusted and secured and as a result the wind damaged it. A work order calling for the replacement of a broken window may be the means of discovering that a piece of furniture was carelessly allowed to be pushed against it. Benefits Derived from Engineering Department Work Order This important form therefore accomplishes several things:-it acts as a means of charging each department for work performed in their behalf; it assists in keeping a check on the progress of all jobs of repair and construction; it pre- vents complaints regarding the unsatisfactory manner in which work is performed; the engineering department is assisted in the organization of its repair work; and most important of all the administrator is assisted in placing responsibility for dam- age done to equipment or plant through its abuse or improper use. Equipment Inventory It is sometimes desirable to have heads of departments sign an inventory of all equipment under their charge and to hold them individually responsible for the items covered by their signatures. Simple equipment cards showing type, con- dition and location of all articles may be utilized. In installing such a system, the cards may be made up from the original signed inventories and as new equipment is purchased and given out new cards may be added. Discarded equipment is closed off the cards and in this manner the equipment inventory by departments is kept perpetual and may be checked against the equipment on hand at any time. Such records are difficult to keep and sometimes arouse more antagonism than they are worth. However, they have been successfully employed in 146 IMPROVED METHODS IN SANTA BARBARA COTTAGE HOSPITAL JOURNAL VOUCHER Date August 1, 1924 ACCOUNT NUMBER GENERAL ACCOUNT NAME SUBSIDIARY AMOUNT POSTED DEBIT 626 General Maintenance Water 14 40 CREDIT 6352 Laundry Supplies and Expense 14 40 Explanation : One ton salt from Pacific Commercial Co. charged in error • Check #831 1 NUMBER By / Illustration XXXV. Journal Voucher. HOSPITAL MANAGEMENT 147 some hospitals. Their value does not consist in the actual charge made to department heads for loss or damage to property, but through the fact that such a system arouses a sense of responsibility in the minds of the departmental heads which creates the proper regard for hospital equipment. This same regard may be stimulated to a certain extent through the Engineering Department Work Order and it certainly is secured with much less effort than through the Equipment Inventory System. Internal Requisition Distribution Book The Internal Requisition Distribution Book illustrated on p-ages 141 and 143 which is a specialized journal form, has been mentioned as a book of entry for General Requisitions and En- gineering Department Work Orders. It may also be used for re- cording any other type of interdepartment requisition. If a gar- den is conducted, requisitions for vegetables may be entered in this book. All requisitions should be summarized before they are recorded in the Internal Requisition Distribution Book. To illustrate, the total of all Engineering Department Work Orders is secured each month and is entered under "Credits" in the column marked "Engineering Department." The charges are then posted from the summary to the proper debit columns, placing the account number in the proper column opposite each debit entry. The summary entries occupy as many lines as there are debit postings. This book is footed each month and posted to the proper accounts in the General Ledger. Journal Voucher A Journal Voucher is illustrated on page 146. This form is provided to take the place of the ordinary bound journal. Its use is self-explanatory, a separate form being utilized for each journal entry. The advantages of this voucher over the bound journal book-are that any papers of explanation may be attached to the Journal Voucher itself rather than having to copy exten- sively long descriptions and substantiating data into a book. These forms with the supporting papers attached, may be bound 148 IMPROVED METHODS IN periodically. Each journal entry is given a number for reference purposes and is kept filed in numerical order. Interdepartmental Bookkeeping Many hospitals do little if any interdepartmental book- keeping. Interest in departmental costs is not keenly appreciated unless departments are credited with work performed for others or supplies furnished other departments. This type of book- keeping may be carried to excess, however, and the forms and procedure recommended in this chapter are considered as offer- ing a medium ground where little work is involved and yet interest in departmental costs is maintained. CHAPTER XII. DISTRIBUTION OF OVERHEAD COSTS Elements Which Comprise Costs In departmental cost accounting for hospitals, the distribu- tion of overhead expense or "burden" is the final step in deter- mining exact cost data. The total cost of any article or service is usually made up of three items, namely: labor, material, and overhead. The first two of these items are called direct costs and the third item is called the indirect cost, overhead, or bur- den. The indirect cost is what we are primarily concerned with in this chapter. The diagram and formula below will furnish a better idea of the terms being employed. Labor + | Supplies | Direct Costs Direct Costs | + Burden J = Total Costs Difference Between Direct and Indirect Costs The direct costs of all departments are charged as operating expense as incurred. To illustrate, let us -assume that an X-ray department is being run by a technician whose sal-ary is $125 per month and by a physician on a part time basis whose salarv is $250 per month, and that the supplies consumed cost $200 per month. The total direct costs of the department are there- fore $575 per month. These direct costs are plainly shown each month by the expense accounts of the X-ray department. It is not safe to-assume, however, that if the income from the depart- ment is $700 a month, that a profit has necessarily been made, fhe indirect costs of the department may or may not exceed the apparent margin of profit of $125. These indirect costs or burden are such items as janitor service, light, heat, water, power, and a proportion of the departmental costs of such de- partments -as the office, engineering plant, laundry and Store- 149 150 IMPROVED METHODS IN room. Also a portion of the salary paid the administrator of the hospital is chargeable as indirect costs against the X-ray depart- ment. How to Handle Indirect Costs Indirect costs are not applicable to any one department but are incurred for the benefit or welfare of the institution as a whole. For convenience, these items of overhead are grouped from month to month under general maintenance accounts or under the expenses of operating certain general service depart- ments such -as the laundry, the engineering plant, and the kitchen. For purposes of bookkeeping and for ordinary statistical data, it is sufficient to allow such items of burden entered under the costs of these service departments to remain there, but at certain stated periods it is advisable and fundamental to distribute these indirect costs of operation over the departments for which the service is beinq performed. Preliminary Steps in Distribution of Indirect Costs In order to make this distribution, it is necessary first to dis- tinguish the primary functions of the institution and to group all departments fulfilling these functions under proper headings. A typical grouping of such functions and departments is as follows: Function I.-Care of the Sick. a. X-ray. b. Hydrotherapy. c. Pharmacy. d. Operating Room. e. Laboratories. f. Nursing Units. Function II.-Education of Nurses. a. Training School for Nurses. Function III.-Research Work. Function IV.-Dispensary or Free Clinic. HOSPITAL MANAGEMENT 151 All institutions will not have these four functions; other institu- tions may have additional ones, such as the conduct of a farm or the maintenance of a convent. After this grouping of departments according to function is arranged, a second grouping of general service departments should be made. Such a list follows: 1. Administrative Offices. 2. Accounting and Records. 3. Property and Supplies. 4. Storeroom. 5. Laundry. 6. Subsistence and Dietetics. 7. Housekeeping. 8. Engineering. Distribute Indirect Costs Annually The next step is to distribute the costs of conducting this second series of departments over the costs of operating the first list of functions and departments. This distribution need not be made monthly, but it should be done at least once a year, after the general ledger has been closed and the annual statement pub- lished. The distribution of overhead is not to be carried in the books but is to be set up as a purely supplementary statement to the regular annual report. If done in this manner, the desired results are accomplished with a minimum amount of book- keeping. Value Derived from Distribution of Indirect Costs In the supplementary statement, therefore, the direct and indirect costs of the various functions enumerated will be de- termined as well as the direct and indirect costs of each depart- ment under the several functions. From such data accurate costs of caring for hospital patients may be calculated. Statistics of the average hospital include in its patient day cost the expense of conducting research and educational activities. This is not proper accounting and is misleading and confusing, if not dan- gerous. From such data, also, it is easy to determine accurately 152 IMPROVED METHODS IN the financial status of such departments as the x-ray and operat- ing rooms. The information secured may lead to rate adjust- ments or complete abolition of a department which on the show- ing of direct costs alone was making a profit. Survey of Plant Forms Basis of Distribution The basis upon which the distribution of overhead is made must be determined by a survey of the plant. The floor space and cubic space of each department which is to receive charges for overhead must be figured out and this turned into a percent- age proportion of the total floor space and cubic space of the en- tire plant devoted to these departments. The water, light, and gas outlets of each department must be counted and also calculated on a percentage proportion of the outlets of the plant occupied by the departments over which burden or overhead is to be distributed. Such overhead expense as administration and storeroom costs may be distributed on the basis of direct operating costs. The costs of the accounting and records department may be distributed on the basis of the combined operating costs and earnings of the departments re- ceiving the overhead charge. Such a survey will occupy several days' time but once made it can be altered from year to year with considerable ease in order to meet the needs of a changing insti- tution. After such a survey is made and the percentage amounts determined, it is well to place the data in chart form for con- venience. Such a chart is appended and it is hoped will assist in clarifying this explanation of a rather complicated process. The accounts and departments listed at the left of the chart on page 153 are the ones the charges of which are to be distrib- uted. The columnar headings at the top of the chart indicate the departments receiving the overhead charge and the basis for dis- tribution is shown on the right of the page. The figures in the squares show the percentage of costs to be borne by the depart- ments receiving the overhead charge. To illustrate the manner of reading the chart, consider the first item of General Adminis- Chart Facts Secured in Survey HOSPITAL MANAGEMENT 153 ACCOUNT DISTRIBUTED Corporation Expense X-Ray Hydrotherapy Pharmacy Operating Room Laboratory Physiotherapy Out Patient Department Nursing Service School of Nursing Convent | Total BASIS OF DISTRIBUTION General Administration 13 02 06 17 | 05 | 02 1 oi ( 32 1 16 06 100 Gross Expense. Finance and Records 07 01 03 14 | 03 | 005 | 005 | 67 | 03 01 100 Gross Earnings. Property and Supplies 13 02 06 17 05 02 | 01 | 32 1 16 06 100 Gross Expense. General Maintenance 1 1 1 Salaries 01 02 01 04 01 | 005 | 005 | 68 | 05 17 100 Floor Space. Supplies and Expense 01 02 01 04 01 | 005 | 005 | 68 05 17 100 Floor Space. Fuel Oil 01 02 01 04 01 | 005 | 005 | 68 05 17 100 Floor Space. Gas 07 02 19 1 1 61 | 02 09 100 Outlets. Electricity 07 09 01 07 01 1 oi 1 | 55 | 03 16 100 Outlets. Water 01 06 01 08 01 1 01 | 67 | 03 12 | 100 Outlets. Telephone 02 01 02 03 1 01 1 1 | 82 1 01 08 100 Stations. Taxes 19 01 02 01 03 01 1 1 55 | 04 14 | 100 Floor Space and Direct Distribution Insurance 01 02 01 04 01 | 005 | 005 | 68 | 05 17 100 Floor Space. Rents 1 1 1 1 | 100 100 Direct. Interest - 01 02 01 04 01 | 005 | 005 | 68 | 05 17|100 Floor Space. Building Repairs and Alterations.. 01 02 01 04 01 | 005 | 005 | 68 | 05 17|100 Floor Space. Equipment Repairs and Alterations 13 02 06 17 05 02 | 01 | 32 1 16 06 100 Gross Expense. Engineering Building and Grounds. .. 01 02 01 04 01 | 005 | 005 | 68 | 05 17 100 Floor Space. Subsistence 00% 00%| 01 00% 72 17 09 100 Meals Served. Housekeeping 01 02 01 04 01 | 005 | 005 68 | 05 17 | 100 Floor Space. Linen Room 00% 00%| 21 66 03 09 100 Daily Issues. Illustration XXXVI. Overhead Distribution Chart. 154 IMPROVED METHODS IN tration 13 per cent of which costs is to be charged to the depart- ment of X-ray. The basis for determining this charge is direct operating costs or "Gross Expense." Each percentage illustrated on this chart means a computa- tion. If it is found from the annual statement that the costs of administration are $1300 for the year the amount allotted to the X-ray department is 13 per cent of this figure or $169. By making such computations of all percentages appearing under the columnar heading "X-ray," the total costs of overhead for this department may be figured and this total added to the direct cost of operation. Such calculations should be continued until the total operating costs of each department are figured -and all overhead, or burden, is distributed. Complete Cost Records Essential A critic might say that a survey of this sort is not 100 per cent accurate and, therefore, why make it? The only answer to such a criticism is that no bookkeeping is absolutely accurate and that an approximation of accuracy is better than no attempt at-all being made to secure complete costs. Distribution of bur- den, it is true, is a refinement of institutional cost accounting and is not attempted by many hospitals. It is attempted and religious- ly carried out by most successful business organizations and is a vital element to their welfare if the margin of profit is small. Why then should a hospital, which is a business of considerable magnitude, be satisfied with any but the best and most complete cost records available? CHAPTER XIII. FILING OF RECORDS Records Must Be Available to be Useful Records which cannot be found and utilized conveniently might as well be thrown away. Many people show a great dis- inclination to destroy any form of record once it is made and yet the only plan for keeping such records is to bundle them up and relegate them to some dark dusty attic where they are never used and where their only purpose seems to be to act as an unsightly pile of rubbish. It is the business of the custodian of such records to see that the ones of no value are destroyed periodically and those that have a permanent value are kept in such a manner that they are intelligible and available for reference purposes. Records Pertaining to Patients' Accounts The data supporting patients' ledger accounts is valuable only so long as the accounts they represent are unpaid. If accounts receivable are collected promptly, such records as Daily Financial Reports, duplicate copies of Cash Receipts and the Rate Agreement form may be destroyed after being on file for a period of about four years. Accounts which date back over a greater length of time are uncollectable or beyond the point of contesting the validity of the charge. It is unnecessary to keep the files of paid accounts longer than two or three years as seldom if ever do questions arise over accounts which have been paid and which antidate such a period of time. Interdepartment Records Records, such as involve interdepartment activities only, are not of any permanent value and such papers as Engineering Department Work Orders and General Requisitions may be destroyed after a brief time has elapsed keeping on hand a two years' accumulation of the most current records. 155 156 IMPROVED METHODS IN Expenditure Records The Voucher Check with copies of paid bills attached is a most valuable record. Years after a payment has been made, in- formation concerning prices paid is many times desirable. In order to make this record available and of the most value, it is well to keep the Vendor's Index file and Purchase Order file the same period of time. These three forms, therefore, are of per- manent value and should be kept indefinitely. Stock Records Stock Cards furnish useful information yet their value is of short duration and an accumulation of three years' cards is suffi- cient for all ordinary purposes. Payroll records are of value for a period of several years. The Employee Record card requires but a small amount of filing space and assists in furnishing d-ata regarding former em- ployees long after they have left the institution. Payroll Records Books of Record The Earnings and Rebate Record, the Voucher Distribu- tion Book, and the Internal Requisition Distribution Book should be kept as long or longer than the forms which support their entries. The General Ledger and the Journal Vouchers are records which should never be destroyed. Discard Records Systematically If some system of discarding records after they have served their purpose is adopted, the records which are kept can be con- solidated in files conveniently located and accessible for daily reference and use. Filing of Bookkeeping Forms Filing space for current ledger accounts with patients should be provided in the desk of the bookkeeper handling these forms. A box file which may be transferred to a vault or safe at HOSPITAL MANAGEMENT 157 night is a very convenient form of file. The transfer files for paid accounts should be accessible to this desk, and should not be allowed to accumulate indefinitely but destroyed each year as a new annual file is completed, keeping on hand only a three years' supply of paid accounts. The Daily Financial Reports should be filed chronological- ly as previously stated. The Rate Agreement form should be filed alphabetically. Both of these forms are practically value- less after accounts have been paid and audited. Purchase Orders and Voucher Checks should be filed numerically in the disbursing office and a three years' supply of past records kept instantly available. Records older than this can be placed in transfer cases less conveniently located. The vendors' alphabetical index should be a continuous file and cards removed to a transfer file only as completely filled out. Such transfer file should be as available as the current file. Chronological files of internal requisitions should be avail- able as long as kept and then destroyed. Payroll Checks and the duplicate carbon copies may be kept filed numerically for several years and never destroyed before audits of payroll records have been made -and responsi- bility for their accuracy been determined All books of original record should have transfer binders and the records of the old year transferred as the new year is begun. There should also be a transfer ledger for accounts of the General Ledger which become bulky. Journal Vouchers, as previously stated, should be bound annually and preserved indefinitely. File in Haste and Repent at Leisure Nothing is more exasperating to the administrator than a faulty tiling system. A year's records properly tiled are of more •assistance to the management of an institution than ten years of records poorly prepared and promiscuously dumped into tiling cabinets, cupboards, or attics. The system of filing in haste and searching at length is costly in time and is hard on the disposi- tion. A little time spent in planning a scheme of records is repaid in information secured with a minimum effort spent in its search. CHAPTER XIV. STATEMENTS AND STATISTICS The product of a system of accounts and records is the statistical data they furnish. Good records are necessary in order that each day's work may be done accurately and with dis- patch and in addition are of daily value for reference and work- ing purposes. A tabulated statement of operating statistics should be secured from the records each month showing the financial operations of the institution. These monthly tabulations, or statements, are of great value in the proper financial manage- ment and control of the organization. A suggested form of financial statement follows, which first sets forth the earnings of the institution in classified form by accounts and in total. From the gross earnings is deducted the free work leaving a figure which represents net earnings. Following this, the operating costs by departments are listed. The gross operating costs are then deducted from the net earnings leaving as a balance the profit or loss sustained for the period. This profit or loss is used as the balancing figure in the Asset and Liability Statement which follows. Financial Statements 158 HOSPITAL MANAGEMENT 159 INCOME AND EXPENDITURE STATEMENT HOSPITAL EARNINGS Hospital Service ..$11,704.75 Operating Room 898.50 Anesthetic 552.25 Surgical Supplies 209.75 Nurses' Board 528.00 Meals and Trays 70.00 Roentgen Department Picture Work $1,181.00 Treatment 327.00 1,508.00 Chemical Laboratory 1,004.39 Clinical Laboratory 508.25 Pathological Laboratory 70.00 Pharmacy Supplies 130.10 Consulting Fees 135.00 Telephone and Telegram 26.62 Laundry ' 113.90 Out Patient Department 15.60 Other Items 12.20 Uniforms and Breakage 43.35 Insulin 2,183.75 $19,714.41 Rebates General Relief1,079.90 Courtesy 121.60 Hill Fund 25.00 Research 40.00 Chemical Laboratory 271.60 Bad Debts 162.70 Insulin 1,359.25 3,060.05 Net Earnings $16,654.36 July, 1924 CURRENT EXPENSES Administrative Offices Salaries 749.99 Supplies and Expense 45.84 Publicity 115.65 911.48 160 IMPROVED METHODS IN Accounting and Records Salaries 578.16 Supplies and Expense 46.78 624.94 Property and Supplies Salaries 120.00 Supplies and Expense 1 6.65 126.65 General Alaintenance Supplies and Expense 138.90 Fuel Oil 201.60 Gas 51.66 Water 178.15 Telephone 101.83 Taxes 350.00 Insurance 125.00 Repairs to Buildings and Grounds 1,013.96 2,161.10 Engineering, Buildings and Grounds Salaries 508.00 Supplies and Expense 32.02 540.02 Work Done for Other Departments 136.10 403.92 Vegetable Garden Salaries 271.25 Supplies and Expense 6.70 277.95 Vegetables Furnished Kitchens 291.90 (credit) 13.95 Subsistence Salaries 1,229.49 Supplies and Expense 455.49 Milk and Cream 559.87 Meat 855.06 Butter 350.77 Eggs 217.36 Bread 87.92 Fruit and Vegetables 866.69 Groceries 535.48 Tea and Coffee 74.15 5,232.28 HOSPITAL MANAGEMENT 161 Housekeeping, Linen and Dormitories Salaries 835.79 Supplies and Expense 206.34 1,042.13 Laundry Salaries 782.00 Supplies and Expense 206.70 988.70 Roentgen Department Salaries 1,190.33 Supplies and Expense 275.69 1,466.02 Research Laboratory Salaries 2*406.67 Supplies and Expense 122.48 Laboratory Supplies 1,147.91 Library 36.00 Office Expense 46.89 3,759.95 Clinical Laboratory Salaries 185.00 Supplies and Expense 17.60 202.60 Operating Room Salaries 215.00 Supplies and Expense 353.10 568.10 Pharmacy Salaries 50.00 Supplies and Expense 1.34 Prescriptions 119.70 171.04 Dispensary Salaries 67.50 Supplies and Expense < 1.37 68.87 Nursing Service-General Salaries 528.26 528.26 162 IMPROVED METHODS IN First Floor Salaries - 14.16 Supplies and Expense 69.86 84.02 Second Floor Salaries 185.00 Supplies and Expense 59.90 244.90 Metabolic Wing Salaries 272.83 Supplies and Expense 51.33 324.16 Maternity Wing Salaries 181.53 Supplies and Expense 84.24 265.77 Children's Wing Salaries 331.50 Supplies and Expense 93.24 424.74 School of Nursing Salaries 396.00 Supplies and Expense 18.47 414.47 Internes Salaries 80.00 80.00 Research Supplies and Expense 23.36 23.36 20,103.51 Cash Discounts 20.40 Net Expenditures 20,083.11 RECAPITULATION Net Expenditures 20,083.11 Net Earnings 16,654.36 Operating Deficit for July 3,428.75 Donations, General 7,134.00 Donations, Special 8.073.34 Income on Endowments 225.00 15,432.34 Excess of Special Income over Operating Deficit12,003.59 HOSPITAL MANAGEMENT 163 STATEMENT OF ASSETS AND LIABILITIES July, 1924 Real Estate 19,760.45 Hospital Building .246,596.46 Alterations, Minor Surgery 1,102.85 Library 802.85 Electro-Cardiograph 400.35 Heating Plant 43,124.45 Laundry Building and Equipment .... 20,654.44 Nurses' Home Building 14,983.75 Dispensary Building and Equipment 2,876.98 Contagious Ward 1,992.43 Gardener's Cottage 900.00 Transformer Vault Building 161.98 Equipment 76,937.87 State Bank-General 17,077.70 State Bank-Research 14,291.77 National Bank-Dispensary Funds 9,097.18 Petty Cash 300.00 Accounts Receivable 22,552.81 Stores 11,824.40 Investments Control 93,021.81 Insurance 2,056.91 Interest Accrued on Securities 1,575.00 Donation for Dispensary Dental Work 18.20 Taxes Accrued 493.23 Accounts Payable 5,815.68 Donation for Dispensary Prescriptions 151.41 Donation for Dispensary Building 26,383.43 Donation for Special Research Work 112.00 Endowment Fund Income Control 1,322.97 Surplus 438,162.68 Endowment Funds 73,787.03 Reserve for Bad Debts 5,309.75 Gain-Six months 38,568.87 Gain-July 12,003.59 50,572.46 602,110.64 602,110.64 164 IMPROVED METHODS IN Many varieties of supplementary financial and statistical exhibits may be arranged from the information contained in the monthly statement as illustrated. From the patient census and the payroll records, it is not difficult to calculate the approximate number of meals served by the kitchens. The costs of operating this department as shown under expenditures, less the amount of earnings of this department for sale of special meals, trays and nurses' board, will give the net costs of supplying meals to patients and employees. This figure divided by the number of meals served gives the cost per meal and furnishes a comparison from month to month of the costs of conducting the subsistence department. The average cost per meal should be set up as an exhibit supplemental to the regular financial report. Likewise, the cost per piece of work done in the laundry may form another type of exhibit. This figure may be secured by dividing the count of linen washed in the laundry into the net operating costs of the laundry department. The costs per patient day and the earnings per patient day should be computed and set up as a third form of exhibit. Other types of exhibits may be found desirable and arc computed monthly from the statements and other supplementary data to be secured from the records. Exhibits Form Used for Long Financial Reports When a financial report carries a vast amount of detail, the vital elements of the report may be summarized in a brief state- ment of income and expenditure and the detail displayed in the form of schedules. An illustration of a summarized report sup- ported by schedules follows and is probably preferable for pur- poses of publication as most people are not interested in details and can gather the essentials from the first portion of the state- ment. If interested in detail, they may refer to the various sup- porting schedules which follow the initial summary. HOSPITAL MANAGEMENT 165 SUMMARY STATEMENT EARNINGS AND EXPENDITURES For Year Ending December 31, 1923 Expenditures of Hospital, Schedule A209,684.57 Earnings of Hospital, Schedule B182.047.42 27,637.15 Less Income on Endowment Funds 3,536.34 Deficit for Hospital 24,100.81 Expenditures for Research, Schedule C 47,170.73 Earnings for Research, Schedule D 19.636.03 Deficit for Research 27,534.70 Combined Deficit for Hospital and Research 51,635.51 166 IMPROVED METHODS IN BALANCE SHEET ASSETS Hospital Site 19,826.55 Hospital Building 251,751.49 Hospital Heating Plant 43,150.73 Hospital Laundry 20,654.44 335,383.21 Nurses' Hall Site 15,110.54 Nurses' Hall Building..113,005.82 Nurses' Hall Tunnel.... 4,466.31 Nurses' Hall Equipment 22,616.91 155,199.58 Employees' Building 19,021.40 Dispensary Building 2,876.98 Equipment-General. 82,857.96 Cash-General Account 9,415.26 Cash-Nursery Fund.... 26.20 Cash-Research 10,614.94 Cash-Dispensary Fund 9,634.78 Petty Cash 300.00 29,991.18 Accounts Receivable 20,152.95 Less Reserve Bad Debts 1,916.06 18,236.89 Storeroom Stock12,306.55 Investments, Schedule E.. 92,977.10 Insurance Prepaid 3,861.51 Accrued Interest-Endowment Funds1,077.68 753,790.04 December 31, 1923 LIABILITIES Accounts Payable 23,793.13 Donations for Dispensary-Prescriptions 139.01 Donations for Dispensary-Building 26,921.03 Surplus 702.936.87 753,790.04 HOSPITAL MANAGEMENT 167 ANALYSIS OF SURPLUS ACCOUNT Donations to Hospital, Schedule F, 1923207,003.84 Less Hospital Deficit, Earnings and Ex- penditure Statement, 24,100.81 182,903.03 Donations to Research, Schedule G, 1923.... 36,949.26 Less Deficit, Earnings and Expenditure Statement 27,534.70 9,414.56 Endowment Funds, Schedule H 73,787.03 Surplus December 31, 1922438,162.68 Less Deductions Due to Sale of Cottages.... 1,330.43 436,832.25 Surplus, December 31, 1923 702,936.87 168 IMPROVED METHODS IN FINANCIAL SCHEDULES SCHEDULE A-OPERATING EXPENSE OF HOSPITAL Administrative Offices Salaries 8,999.88 Supplies and Expense 945.59 Traveling 603.28 Publicity 1,482.99 12,031.74 Accounting and Records Salaries 6.996.40 Supplies and Expense-.2,147.82 9,144.22 Property and Supplies Salaries 1,340.00 Supplies and Expense 56.82 1.396.82 General Maintenance Supplies and Expense 1,241.14 Fuel Oil '. 4,018.00 Gas 1,025.36 Electricity 2,393.05 Water 2,120.70 Telephone 1,216.76 Taxes 4,272.57 Insurance 1,465.98 Interest 125.00 Building Repairs 2,952.07 20.830.63 Engineering, Buildings Salaries 7,800.06 Supplies and Expense 2,505.57 10,305.63 Work Done for Other Departments 2,795.58 7,510.05 Grounds and Vegetable Garden Salaries 2,976.09 Supplies and Expense 855.38 3,831.47 Vegetables Supplied Kitchens 2,041.38 1.790.09 HOSPITAL MANAGEMENT 169 Subsistence and Dietetics Salaries 15,585.12 Supplies and Expense 3,750.51 Milk and Cream 6,948.40 Meat, Fish, Poultry 10,924.79 Butter 4,093.62 Eggs 3,443.61 Bread 1,211.99 Fruit and Vegetables 8,118.09 Groceries 8,909.59 Tea and Coffee 1,064.64 64,050.36 Housekeeping, Linen and Dormitories Salaries 9,821.36 Supplies and Expense 3,336.54 13,157.90 Laundry Salaries 9,895.54 Supplies and Expense 1,677.25 11,572.79 Roentgen Department Salaries 14,072.75 Supplies and Expense 5,135.22 19,207.97 Clinical Laboratory Salaries 2,431.33 Supplies and Expense 921.80 3,353.13 Pathological Laboratory Supplies and Expense 144.51 144.51 Operating Rooms Salaries 3,674.16 Supplies and Expense 3,624.60 7,298.76 Pharmacy Salaries 583.33 Supplies and Expense 198.04 Drugs 1,772.35 Prescriptions 1,750.62 4,304.34 170 IMPROVED METHODS IN Dispensary Salaries 855.41 Supplies and Expense 326.85 1,182.2b Electro-Cardiograph Supplies and Expense 80.10 80.10 General Nursing Salaries 4,792.61 Supplies and Expense 67.60 4,860.21 First Floor Salaries 3,045.31 Supplies and Expense 742.74 3,788.05 Second Floor Salaries 3,636.97 Supplies and Expense 882.82 4,519.79 Metabolic Wing Salaries 2,978.60 Supplies and Expense 761.29 3,739.89 Maternity Wing Salaries 2,753.09 Supplies and Expense 958.01 3,711.10 Children s Wing Salaries 2,882.13 SuppliesandExpei.se 1,083.31 3,965.44 School of Nursing Salaries 5,494.62 Supplies and Expense 1,597.01 7,091.63 Medical Education Salaries .... 1,242.30 Supplies and Expense 18.40 1,260.70 HOSPITAL MANAGEMENT 171 Research Supplies and Expense 180.97 180.97 Total Expenditures 210,173.45 Cash Discounts 488.88 Expenditures Less Discounts 209,684.57 172 IMPROVED METHODS TN SCHEDULE B-EARNINGS OF HOSPITAL HOSPITAL EARNINGS Hospital Service 136,245.05 Operating Rooms 10,724.00 Anesthetics 6,718.55 Surgical Supplies 2,711.24 Nurses' Board 4,872.20 Meals and Trays 1,057.01 Roentgen Department Picture Work 14,374.25 Treatment 6,777.00 Radium 1,745.00 22,896.25 *Research Laboratory 1,220.59 Clinical Laboratory 5,182.11 Pathological Laboratory 552.50 Pharmacy Supplies 2,912.65 Consulting Fees 4,104.86 Telephone and Telegraph 345.34 Laundry 1,210.21 Dispensary 222.01 Other Items 240.48 Uniforms and Breakage 284.20 *Insulin 1,540.23 Electro-Cardiograph 112.00 203,151.48 Rebates General Relief 12,513.38 Courtesy 3,801.24 Hill Fund 363.95 King Fund 705.40 Harrington Fund 335.00 Matheus Fund 559.30 Randall Fund 12.55 Research 1,017.30 Bad Debts 1,795.94 21,104.06 Net Earnings 182,047.42 *Ten per cent of research laboratory earnings and of sales of insulin are considered hospital earnings. HOSPITAL MANAGEMENT 173 SCHEDULE C-OPERATING EXPENSE OF THE RESEARCH LABORATORIES Salaries 29,004.12 Supplies and Expense 4,321.85 Equipment Replacements 1,860.45 Laboratory Supplies 10,980.11 Library Expense 293.59 Office Expense 710.61 47,170.73 SCHEDULE D-EARNINGS OF RESEARCH LABORATORIES Laboratory Examinations 12,205.94 Sales of Insulin 15,402.32 27,608.26 Less 10% to Hospital 2,760.82 24,847.44 From Professional Sources 7,198.41 Gross Earnings 32,045.85 Rebates Chemical Laboratory 3,177.10 Rebates Sale of Insulin 9,232.72 12,409.82 Net Earnings 19,636.03 174 IMPROVED METHODS IN SCHEDULE E-INVESTMENTS Atchison, Topeka and Santa Fe Railway Company 5,000.00 City of Montreal 922.64 Commercial Trust and Savings Bank (Savings Account).... 720.74 Federal Land Bank 1,013.75 First National Bank (Savings Account) 704.15 Great Western Power Company 4,312.50 Hawkinsville and Florida Southern Railroad Company.... 5,000.00 Imperial Irrigation District Bonds 5,050.00 Imperial Irrigation District Bonds 4,040.00 Imperial Irrigation District Bonds 5,343.40 Imperial Irrigation District Bonds 3,556.40 Junior Orpheum First Mortgage Bonds 504.95 First Liberty Bonds 201.00 Second Liberty Bonds 1,566.59 Third Liberty Bonds 1,000.00 Fourth Liberty Bonds 1,013.13 Fourth Liberty Bonds 631.90 Building and Loan Association 400.00 Los Angeles Gas and Electric Company 3,860.00 Los Angeles Railway Company 6,000.00 Mortgage Guarantee Company of Los Angeles 6,924.95 Oakdale Irrigation District Bonds 4,475.00 Pacific Gas and Electric Company 492.50 Bell Telephone Company Bonds 2,750.00 Union Trust Company 2,500.00 Southern California Edison Company 179.00 Southern Counties Gas Company 7,328.25 Turlock Irrigation District 200.00 General Electric Power and Light Company17,286.25 Total 92,977.10 HOSPITAL MANAGEMENT 175 Illustration XXXVII. Graphic Chart, showing cost and earnings per patient day. 176 IMPROVED METHODS TN Explanation of Statement Schedules "F" and "G" referred to under "Analysis of Surplus Account" would call for a list of donations by name and amount. Schedule "H" would call for a list of Endowment Funds by name and amount. The use of this form of report, with as much supplementary data as may be desirable included in the form of schedules, in no way sacrifices the conciseness of the summary statement which appears under the headings "Earnings and Expenditures," "Bal- ance Sheet," and "Analysis of Surplus Account." Graphic Charts Many forms of statistics when published for comparative purposes adapt themselves to graphic charts. Such a chart is illustrated on page 175 and is suggested as a form, preferred by many people, of reporting statistics. Charts appeal to the eye of those who are not accustomed to reading financial statements. Yearly Reports Hospitals should publish yearly reports as they develop con- fidence in the management of institutions and are not expensive publicity. Such reports, in addition to containing a complete financial statement, should also contain written accounts of the activities of the more important and interesting departments. Pictures enhance the appearance of any report and should be carefully selected and included. Conclusion In conclusion it is hoped that some of the suggestions em- bodied in this book will be helpful in placing hospitals on a basis of management which will assist the hospital adminis- trator the better to organize and control his work together with the activities of the various departments under his supervision. The methods outlined are not theoretical but are the result of carefully planned procedures which have been modified and perfected through use and which will produce the information and routine necessary to operate properly the complicated modern hospital.