Case study 4.12: Payroll variances

In anticipation of ICE-10 implementation you plan to contract with a coding consultant to provide coding services for your outpatient endoscopy and heart-center procedures and have included this in your annual budget. It is expected that this service will be needed for two months while staff become familiar with ICD-10 coding, but you reserve the right to shorten or extend the contract based on circumstances at the time. Payment will be at the rate of $3.50 per chart. The projected volume for the period of 365 charts per week.

Two weeks after ICD-10 is implemented, you realize that the coding staff can take on the outpatient and heart center procedures earlier than originally anticipated. You give the consultant two weeks notice that you will be returning the workload to in-house staff.

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At the conclusion of the consultant's service you receive this invoice:

Week 1: 377 charts coded

Week 2: 363 charts coded

Week 3: 358 charts coded

Week 4: 372 charts coded

Total: 1,470 charts coded at $3.50 per chart= $5,145.00

Criteria and questions to be answered:

*You anticipate changes coming to, or affecting, the situation

*You calculate budget variance

*You explain budget variances

****Explain what type of budget variance this situation is