A dermatology clinic expects to contract with an HMO for an estimated 100,000 enrollees. The HMO expects 1 in 4 of its enrolled members to use the dermatology services per month.

At the end of the year, the dermatology clinics business manager looked at her monthly figures and saw that the number of enrolled members had increased by 5% over the budgeted amount and that 1 in 3 of the total HMO members had used the dermatology services per month.

Actual and budgeted statistics are presented below. The total variance is $70,000 and is unfavorable:

	Budgeted	Actual
Enrollees	100,000	105,000
Usage Rate	0.25	0.3333
Visits	25,000	25,000
Cost	$250,000	$337,500
Cost Per Visit	$10.00	$9.643

Question # 9

Determine the enrollment variance for the month.

Question # 10

Determine the utilization variance for the month.

Question # 11

Determine the efficiency variance for the month.

Variance	Dollar Amount
Enrollment	$12,500 U
Utilization	$87,500 U
Cost/Efficiency	$12,500 F
Total Variance (Actual less Budgeted) $337,500 - $250,000	$87,500 U

Question # 12

Your hospital has billed charges of $8,000,000 in February. If your collection experience indicates that 20 percent is paid in the month billed, 40 percent in the second month, 20 percent in the third month, and 5 percent in the fourth month, determine the following values:

Net patient revenue for February

Collections of February charges in February

Net accounts receivable at the end of March for February billings

You have been asked to establish a pricing structure for the radiology per procedure. Present budgetary data is presented below:

Budgeted Procedures 20,000

Budgeted Cost $800,000

Desired Profit $160,000

It is estimated that Medicare patients comprise 40 percent of the total radiology volume and will pay on average $38.00 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below:

Payer Volume % Discount %

Blue Cross 20 4

Unity PPO 15 10

Kaiser 10 10

Self Pay 5 40

50%

Question # 13

What rate must be set to generate the required $80,000 in profit in the preceding example?

Question # 14

You are reviewing your targets for short-term cash reserves next year. You wish to carry at least twenty days cash on hand. If annual budgeted cash expenses are $82,125,000, what amount of short-term cash reserves should be targeted?

Question # 15

Assume that a certain nursing home has two categories of payers. Medicaid pays $60.00 per day and private pay patients pay the established per diem, but approximately 20 percent of private-pay charges are not collected. If 50 percent of the patients are Medicaid and 50 percent are private pay, what rate must be set to generate $150,000 in profit? Variable costs are $60.00 per day and fixed costs are expected to be $1,000,000. The expected volume is 100,000 patient days.