7.2 The audiology dept. at Randall Clinic offers many services to the clinic’s patients. The three most common, along with cost ant utilization data, are as follows: Annual Direct Annual # Service...

7.2 The audiology dept. at Randall Clinic offers many services to the clinic’s patients. The three most common, along with cost ant utilization data, are as follows:
Annual Direct Annual #
Service V.C. per service Fixed Costs of Visits
Basic examination 5.00 $ 50,000.00 3,000
Advanced examination 7.00 $ 30,000.00 1,500
Therapy session 10.00 $ 40,000.00 500
7.3 Allied Laboratories is combining some of its most common tests into one price packages One such package will contain three test that have the following variable cost:
Test A Test B Test C
Disposable syringe 3.00 3.00 3.00
Blood vial 0.50 0.50 0.50
Forms 0.15 0.15 0.15
Reagents 0.80 0.60 1.20
Sterile bandage 0.10 0.10 0.10
Breakage. Losses 0.05 0.05 0.05
7.4 Assume that Valley Forge Hospital has only the following three payer groups:
# of Aveg Rev VC
Payer Admissions per Admission of Admission
PennCare 1000 5000 3000
Medicare 4000 4500 4000
Commercial 8000 7000 2500
a. What is the hospital’s net income?
b. What PMPM rate will the hospital have to charge to retain its Part a net income?
c. What overall net income would be produced if the admission rate of the capitated group were reduced from the commercial level by 10 percent?
d. Assuming that the utilization reduction also occurs, what overall net income would be produced if the variable cost per admission for the capitated group were lowered to 2,200?
8.1 Consider the following 2011 data for Newark General Hospital (in millions of dollars):
Static Flexible Actual
Budget Budget Results
revenue 4.7 4.8 4.4
costs 4.1 4.1 4.2
profits 0.6 0.7 0.3
a. Calculate and interpret the profit variance.
b. Calculate and interpret the revenue variance
c. Calculate and interpret the cost variance
d. Calculate and interpret the volume and price variance on the revenue side
e. Calculate and interpret the volume and management variance on the cost side.
a. Revenue variance = actual revenue- static revenue
8.2 Here are the 2011 revenue for the Wendover Group Practice Association for four different budgets.
static Flexible Flexible actual
budget enroll/utilize enroll results
425 200 180 300
.
a. What does the budget data tell you about the nature of Wendover’s patients: are they capitated or fee-for-service?
b. Calculate and interpret the following variance:
Revenue variance
Volume variance
Price variance
Enrollment variance
Utilization variance
8.3 Here are the budges of Brandon Surgery Center for the most recent historical quarter.
static flexible actual
Number of surgeries 1200 1300 1300
patient revenue 2400 2600 2535
salary expense 1200 1300 1365
non salary expense 600 650 585
Profit 600 650 585
a. Explain how each amount in the flexible budget was calculated.
b. Determine the variance for each line of the profit and loss statement, total variance, a volume variance, and a price variance.
c. What do the Part b result to Brandon’s managers about the surgery center’s operations for the quarter?