HSA525 health financial management

8.1 Consider the following 2011 data for Newark General Hospital (in millions of dollars):Static Flexible ActualBudget Budget ResultsRevenues $4.7 $4.8 $4.5Costs 4.1 4.1 4.2Profits 0.6 0.7 0.3a. Calculate and interpret the profit variance.b. Calculate and interpret the revenue variance.c. Calculate and interpret the cost variance.d. Calculate and interpret the volume and price variances on the revenue side.e. Calculate and interpret the volume and management variances on the cost side.f. How are the variances calculated above related?8.2 Here are the 2011 revenues for the Wendover Group Practice Association for four different budgets (in thousands of dollars):Flexible FlexibleStatic Enrollment/Utilization) (Enrollment) ActualBudget Budget Budget Results$425 $200 $180 $300a.
What does the budget data tell you about the nature of Wendover”s
patients: Are they capitated or fee-for-service? (Hint: See the note to
Exhibit 8.7.)b. Calculate and interpret the following variances:• Revenue variance• Volume variance• Price variance• Enrollment variance8.3 Here are the budgets of Brandon Surgery Center for the most recent historical quarter (in thousands of dollars):Static Flexible ActualNumber of surgeries 1,200 1,300 1,300Patient revenue $2,400 $2,600 $2,535Salary expense 1,200 1,300 1,365Non-salary expense 600 650 585Profit $600 $650 $585The center assumes that all revenues and costs are variable and hence tied directly to patient volume.a.
Explain how each amount in the flexible budget was calculated. (Hint
Examine the static budget to determine the relationship of each bud­ get
line to volume.)b.
Determine the variances for each line of the profit and loss statement,
both in dollar terms and in percentage terms. (Hint: Each line has atotal variance, a volume variance, and a price variance [for revenues and management variance [for expenses].)c. What do the Part b results tell Brandon“s managers about the surgery center”s operations for the quarter?8.4
Refer to Carroll Clinic”s 2011 operating budget contained in Exhibit
8.3, Instead of the actual results reported in Exhibit 8.4, assume the
results reported below:Carroll Clinic: New 2011 Results/. Volume:A. FFS 34,000 visitsB. Capitated lives 30,000 members Number of member-months 360,000Actual utilization permember-month 0.12Number of visits 43,200 visitsC. Total actual visits 77,200 visitsII. Revenues:A.FFS $28 per visitX 34,000 actual visits $ 952,000B. Capitated lives $ 2.75 PMPMX 360,000 actual member-months $ 990,000C.Total actual revenues $1,942,000III. Costs:A. Variable Costs:Labor $1,242,000 (46,000 hours at $27/hour)Supplies 126,000 (90,000 units at $1.40/unit)Total variable costs $ 17.72 ($1,368,000 / 77,200)B. Fixed CostsOverhead, plant,and equipment $525,000C. Total actual costs $1,893,000IV. Profit & Loss Statement:Revenues:FFS $952,000Capitated $990,000Total $1,942,000Costs:Variable:FFS $602,487Capitated 765,513Total $1,368,000Contribution Margin $574,000Fixed Costs 525,000Actual profit $49,000Construct Carroll’s flexible budget for 2011.What are the profit variance, revenue variance, and cost variance?Consider the revenue variance. What is the component volume variance? The price variance?Break down the cost variance into volume and management components.Break down the management variance into labor, supplies, and fixed cost variances.Interpret
your results. In particular, focus on the differences between the
variance analysis here and the Carroll Clinic illustration presented in
the chapter.