Total variance Revenue variance Enrollment variance Rate variance Cost variance Volume variance...

Question

Total variance Revenue variance Enrollment variance Rate variance Cost variance Volume variance Enrollment variance Utilization variance
Management variance Fixed cost variance Staffing variance
Rate variance Efficiency variance Supplies variance Price variance
Usage variance
= Actual profit — Static profit = Actual revenue — Static revenue = Flexible (enrollment) revenue — Static revenue = Actual revenue — Flexible (enrollment) revenue = Static costs — ACtual costs = Static costs — Flexible (enrollment/utilization) costs = Static costs — Flexible (enrollment) costs = Flexible (enrollment) costs — Flexible (enrollment/ utilization) costs = Flexible (enrollment/utilization) costs Actual costs = Actual fixed costs — Flexible fixed costs = Actual staffing costs — Flexible (enrollment/utilization) staffing costs = (Static hourly labor rate — Actual hourly labor rate) x Actual number of hours per episode x Actual utilization rate x Actual enrollment = (Expected number of hours per episode — Actual number of hours per episode) x Expected hourly labor rate x Actual utilization rate x Actual enrollment = Flexible (enrollment/utilization) supplies costs —Actual supplies costs = (Static price — Actual price) x Actual units = (Flexible units — Actual units) x Static price
Note: Not all of the above equations are necessarily useful to all product lines.

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Robert · Accepted Answer

Question 1 
For the year 2013, the aggregate variance amounted to -$329,366. This indicates that is an 
unfavorable variance of 79%. The given results should deeply concern the hospital as the 
given variance is very large and clearly reflect the serious lapses in the budgeting and control. 
It is imperative that rectifying measures need to be undertaken to improve estimation of 
expected figures and also operations. 
Question 2 
The total variance in profit for the various product lines is reflected as indicated below.
It is evident from the above that the managed care provided has faced immense difficulties 
for controlling Medicare reimbursement which is reflected in more than 200% unfavorable 
variance. The minimum unfavorable variance has been suffered by commercial patients of 
Pacific Care as it amounts to 26%.  In comparison, the commercial patients of Stealth Health 
have an unfavorable variance of 132%.  This clearly indicates that there is a need to improve 
the overall budgeting by the concerned institutions in order to prevent these huge variations. 
Question 3 
The requisite variances are indicated below.
Revenue Variance Analysis 
With regards to revenue, it is apparent that except commercial patients for Pacific Care, all 
the other segments have favorable variances which augers well for the future revenue 
projections. The generation of higher Medicare revenues is positive for the industry as the 
underlying cost associated with serving this has gone up in the recent years. The aggregate 
revenue realized was 2% higher than the corresponding budgeted value which reflects an 
outperformance in revenue terms. 
Cost Variance Analysis 
Clearly, the cost variances are unfavorable and significantly higher than revenue variances 
leading to unfavorable profit variances. This is especially true for Seattle Health and it is 
imperative that the organization improves the service cost production in 2014 so as to ensure 
lower variances and higher overall efficiency in service delivery. 
Question 4 
The requisite variances are indicated below.
With regards to enrollments, it is apparent that the superior performance of Pacific Care was 
a critical blow to Seattle Health especially in the commercial patient segment.  For Pacific 
Care,  2,536,

Total variance Revenue variance Enrollment variance Rate variance Cost variance Volume variance Enrollment variance Utilization variance Management variance Fixed cost variance Staffing variance Rate...

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