healthcare finance book:
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8.4 Refer to Carroll Clinic's 2004 operating budget contained in Table 8.3. Instead of the actual results reported in Table 8.4, assume the results reported below: Carroll Clinic: New 2004 Results I Volume A. FFS B. Capitated lives 34,000 visits 30,000 members Number of member months Actual utilization per 360,000 member-month 0.12 Number of visits Total actual visits 43,200 visits 77,200 visits C. II. Revenues A. FFS S 28 per visit 34,000 actual visits S 952,000 B. Capitated lives 2.75 PMPM X 360,000 actual member months s 990,000 C. Total actual revenues $1,942,000 III. Costs A. Variable Costs: Labor Supplies $1,242,000 126,000 S1,368,000 (46,000 hours at $27/hour) (90,000 units at $1.40/unit) Total variable costs Variable cost per visit 17.72 ($1,368,000/77,200) 247 Chapter 8: Planning and Budgetins Open with ediuicare iae an introduction to accounting and financial manage Chapter 8: Planning and Budgeting 247 B. Fixed Costs: Overhead, plant, and equipment S 525,000 C. Total actual costs $1,893,000 IV. Profit and Loss Statement Revenues: FFS $ 952,000 990,000 Capitated Total Costs: Variable FFS s 602,487 765,513 $1368,000 S574,000 525,000 $ 49,000 Capitated Total Contribution margin Fixed costs Actual profit a. Construct Carroll's flexible budget for 2004. b. What are the profit variance, revenue variance, and cost variance? c. Consider the revenue variance. What is the component volume variance? The price variance? d. Break down the cost variance into volume and management components. e. Break down the management variance into labor, supplies, and fixed costs variances. f. Break down the labor variance into rate and efficiency components g. Break down the supplies variance into price and usage components. h. Interpret your results. In particular, focus on the differences between the variance analysis here and the Carroll Clinic illustration presented in the chapter Open With hcare Finance 8.3 Here are the budgets of Brandon Surgery Center for the m historical quarter (in thousands of dollars): Flexible Actual Number of surgeries Patient revenuc Salary expense Non-salary expense Profit Static 1,200 $2,400 1,200 1,300 $2,600 1,300 650 1,300 $2,535 1,365 585 600 650 585 S 600 The 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 a total 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? Refer to Carroll Clinie's 2011 operating budget contained in Exhibit 83 Instead of the actual results reported in Exhibit 8.4, assume the resulbs 8.4 reported below: Carroll Clinic: New 2011 Results I. Volume: A. FFS B. Capitated lives 34,000 visits 0 00n
