C. Calculate the Revenue Quantity AND Revenue Price Variance for (a) Patient Fees and (b) Insurance Reimbursements for 2002. if these variances are favorable or
unfavorable.
1. Expenditure quantity variance for patients fees 2002
2. Expenditure price variance for patient fees 2002
3. What does this tell us about the patient revenues?
4. Expenditure quantity variance for insurance reimbursement 2002
Exhibit 1 St. Xavier Healing Touch Hospital Mission Statement To provide the best medical care in the country with a focus on patient care and after-care follow-up. Develop and support community partnerships for educating the community on health-risks and disease prevention Actively support research and investigation to find a cure for diseases like Cancer and AIDS Participate in the national initiative for teaching and resident training programs Operate a 24-hour senior citizen medical care services Recruit, train and supervise a corps of volunteers for health care initiatives Operate and manage a 350-bed referral hospital with best of class facilities in diagnostics and patient care Exhibit 2 St. Xavier Healing Touch Hospital Budget Statement ($ million) 2001 2001 2002 2002 budget actual budget actual Revenue Patient Fee 2.6 2.8 3.3 3.5 Medicaid 1.1 1.0 1.4 1.3 Insurance Reimbursements 11.0 9.8 13.0 10.0 Federal Grants 3.2 3.2 3.2 2.0 Total Revenue 17.9 16.8 20.9 16.8 Expenses Nursing and Admin Wages 2.2 2.5 3.0 3.2 Doctors Salaries 4.0 4.5 4.0 4.0 Rent 1.0 1.0 1.0 1.0 Leases 2.4 2.5 2.5 2.6 Consultants fees 2.5 3.0 3.0 4.0 Supplies 1.0 2.0 1.1 1.5 Utilities 0.5 0.5 0.5 0.8 Misc. 0.5 1.0 0.5 0.5 Total Expenses 14.1 17.0 15.6 17.6 Operating Profit/(Loss) 3.8 (0.2) 5.3 (0.8)Exhibit 3 St. Xavier Healing Touch Hospital Operating Data 2001 2001 2002 2002 budget actual budget actual # of patients treated 11,000 16,000 12,500 15,500 # of doctors 49 52 50 52 Days of operation 360 361 360 362 Insurance reimbursement/patient 1,000 613 1,040 645 Legal 1,000,000 400,000 Average cost of supplies/unit 25 40 30 45 Supply units consumed 40,000 50,000 36,666 33,333 Salary per doctor 81,633 86,538 80,000 76,923 Fee per patient 236 175 264 226Exhibit 4 St. Xavier Healing Touch Hospital Radiology Department Annual Overhead Costs Building Rem $400,000 Cleaning and maintenance $100,000 Equipment Leases $200,000 Medical supplies $100,000 Total $800,000 Additional Cost Data Procedure Number per Year Staff Hours per Procedure Hourly Cost X-Ray 5,000 0.5 $20 MRI 1.0 $20 CT Scan 300 2.0 $20 Schedule of Current Charges Procedure Charge X-Ray $150 MRI $195 CT Scan $40Exhibit 5 St Xavier Healing Touch Hospital Balance Sheet as at December 2002 Assets Liabilities Cash at bank 225,000 Short-Term Debt 5,000,000 Accounts receivable 2,260,000 Long Term Debt 1,000,000 Inventories 3,100,000 Accounts Payable 1,200,000 Fixed Assets 4,000,000 Retained earnings 2,385,000 Total Assets 9,585,000 Total Liabilities 9,585,000 Notes to accounts: 1. The Healing Touch Pension Trust manages the pensions for 10,000 employees (past and present). The pension fund assets are invested in S&P mutual funds with a current value of $30 million invested. Based in a retirement age of 60 years and future returns of 10 percent per annum, the Hospital's actuaries estimate future liabilities at $37 million. 2. The Healing Touch Hospital is battling a medical malpractice suit medical negligence in two kidney transplant cases. The probability of the Hospital winning the case is 60 percent and the Hospital will likely appeal the decision in case of an adverse judgment. Past history of similar malpractice cases suggests that the Hospital will need to pay out an average award of $2.5 million, which would most likely occur in 2004. 3. Supplies in stock include medical and other surgical supplies which have a fixed shelf life of six months. One-third of the inventory in stock is already more than six months old, and another one-third of inventory in stock has an average age of 1.2 years. 4. The Hospital guarantees home mortgages for employees with a service span of more than five years. As at March 31", $20 million of such loans were outstanding. Historical average default rate has been four percent.Exhibit 6 St. Xavier Healing Touch Hospital DRAFT Balanced Scorecard Balanced Score Card for Healing Touch Hospital Strategy Map Objective Measure Target Initiative Balance Budgets Grow +23% Increase prices Financial Revenue Reduce overheads Control +10% Cost Use ABC costing Best Diagnostics Customer 100%% Relationship Customer retention rate management Best quality program with technology New customer General population 10% Practitioners Patient Feedback surveys Innovation in Leader in No. of research 2/doctor/year Awards for best Internal healthcare Medicine papers research Tests and Clinical Yield rate for Trials residents hired 95% or more Research Grants for residents No. of clinical tests for new Support drugs Research into 10/year Joint Venture with cure for new drug companies diseases Learning and Hire best Employee Improve salaries Growth employees turnover Benefits and Employee Retain Insurance Plan employees
