Healthcare Financing: Variance Reporting Factors

Introduction

Among the aspects I should contemplate when writing my variance report to the vice president include the hospital’s size and hospital services utilization. Variance analysis comprises two important steps: specifying a suitable entire cost model inform of definitional relationship or identity and change decomposition (Cleverley & Cleverley, 2017). Decomposition is changed among two cost totals into two discrete cost variances or changes, one for each factor or cost model component. In the variance analysis procedure, the costs are alienated into ancillary and direct costs, whereby the manufacturing costs are operated as adjustable and static costs. The variable analysis method examines all costs depending on the production volume.

Standard costing relies on a pre-determined rate of operations, a method that also captures the total quantity used for factory, material, and labor expenses used to manufacture. Standard costing assigns costs depending on engineering requirement and the efficient manufacturing of forecasts and quantity standards of future market tendencies for price morals with a fixed sum of overhead labor and materials for approximating production quantity. Standard costing signifies attainable goals and aid in building up budgets and obtaining product prices (Cleverley & Cleverley, 2017). The essential aim of standard costing is to assist departmental heads by describing and identifying the variances they have control in.

We'll create an entirely exclusive & plagiarism-free paper for $13.00 $11.05/page 569 certified experts on site View More

Under each standard costing scheme, the cost is prearranged for every element, including labor, material, and overhead for each streak of commodity manufactured or services rendered. The standard costing organization includes setting morals, ascertaining initial costs, comparing the standard and actual costs to fix the variance, examining alterations, and performing suitable actions where necessary (Frank, 2021). Variance analysis is vital for managing control function since it aids in understanding why price fluctuations occur and the necessary steps required to decrease adverse variances, hence, helping in the budgeting process.

The Relationships Between Interpreting Operational Variance Report Budget Goals and Actual Results of Performance

The relationship between the actual and budget amounts is that some variances are controllable while others are uncontrollable. Managers can take proper actions and correct variances, i.e., hospitals adopt flexible budget variances, focusing on the volume of patients treated in the hospital. Managers create budgets depending on the volume of patients they anticipate treating within that period. If the doctors fail to attain the volume they anticipate, the budgeted revenues and actual revenues then differ.

Variance Analysis Report

Variance analysis, similarly described as scrutiny of modification or ANOVA, assesses the alteration between two statistics. It is an element applied to operational and financial data to recognize and regulate the origin of the alteration (Frank, 2021). In applied figures, there are different forms of adjustment investigation. In project administration, variance analysis aids in maintaining control over a scheme’s expenses by nursing planned versus real costs.

Table 1: Variance Analysis Report

Receive an exclusive paper on any topic without plagiarism in only 3 hours View More
Actual ($) Budget ($) Variance ($)
Revenue 140000 150000 10000
Expenses
Regular Salaries 42000 37000 -5000
Overtime Salaries 800 900 -100
FICA 2200 2500 300
FICA 250 260 -10
Life Insurance 89 80 -9
Fringe 139 159
Total Employment Cost 45478 40899 -4818
PT Care Supplies 2000 1800 -200
Office Forms 430 550 120
Meetings 120 49 -71
Non-capital Equipment 230 70 -163
Maintenance 30 67 37
Miscellaneous 0 45 45
Interdepartmental 550 490 -60
Total Supplies and materials 3360 3071 -292
Total operating cost 48838 43970 -5110
Contribution 188838 193970 4890

In the above analysis, the regular wages were budgeted to be $ 37000, but it was initially $ 42000, an unfavorable variance of $5000, equivalent to 11.9% extra on the budgeted amount. The revenues were budgeted to be 150000 while they were initially 140000, an equivalence variance of 10000. The total operating costs are budgeted to be 43970, a variance of -5100 from its actual cost of 48838. Various reasons could have contributed to the variances including, permanent employers taking more sick leaves than expected, employees are getting reassigned and substituted by new workers at high costs. Quantity and price variances indicate the price and relationship between material outputs and inputs (Cleverley & Cleverley, 2017). The modification can be separated for three major reasons: more or few activity units (lab tests, patients, among others) than expected, lower or higher prices paid for possessions consumed or fewer or more resources used per unit of action.

Benefits of Variance Analysis

Managers use variance analysis as a crucial tool to take appropriate remedial actions of attaining desired goals if actual performance differs. It performs like the barometer businesses use to measure their efficiency because it enables the ascertaining of weak spots in unvarying variance analysis and the necessary actions to be taken (Zheng et al., 2021). In addition, variance analysis helps frame additional future accurate budgets that can be applied in comparing the performance of an organization.

Effective variance analysis can be important to a firm in spotting issues, trends, threats, and opportunities for long-term or short-term success. Through variance analysis, budgets can be managed by controlling the budget against the actual costs (Zheng et al., 2021). For instance, in project management, fiscal management data is assessed at important key intervals. For example, a monthly closing report can give qualitative data concerning revenue, inventory levels, and expenses. The variance between actual costs and planned can adjust an organization’s strategy, objectives, or goals.

Variance Issues to Be Addressed in Accordance with the Health Care Organizations (HCO)

The issues that are arising in this compound healthcare system need to be addressed in accordance with the Health Care Organizations (HCO). These issues include special-cause and common cause variances; common cause variations are natural challenges caused by historical variations and usual quantifiable in a system. Special cause variations are output shifts caused by specific factors such as process input attributes and environmental conditions. Managers in healthcare facilities, individual patients, and scientific professionals treat complexity personally to attain different objectives (Zheng et al., 2021). Since managers have a comparatively short time frame, and the changes they deal with are holistic and realistic, these issues require justification since they are over the action threshold.

Get your 1st exclusive paper 15% cheaper by using our discount! Use a Discount

In most cases, their mission is to develop successful and efficient systems. Managers’ challenges are scientifically integrated into the analytical strategies of computational process control. Professionals in the healthcare service might be involved in the value of treatment-seeking uniformity. Healthcare professional methods, such as study design, enhance them to seek control variability (Zheng et al., 2021). Constant treatment and its advancement are momentary, and improvement is an essential element in their case. As they progress with their work, details are gathered to address the fundamental issues in their workplaces. The difference between special-cause and common cause variance is vital when responding to some of the arising issues.

Common cause variability happens in all measures from healthcare systems as natural variations. Special-cause variations, on the other hand, exist due to factors external to the major job processes. However, management can reduce this unpredictability in accordance to the Health Care Organization by enhancing simple discoveries for special cause variance. The management can also improve healthcare procedures by promoting proposals for clinical practice (Zheng et al., 2021). On the other hand, experts in health services may use regression analysis as their main tool for discovering explainable variability between results and treatment procedures. Data that both research groups can use can be obtained or averaged with time.

References

Cleverley, W., & Cleverley, J. (2017). Essentials of Health Care Finance (8th ed., pp. 1-92). Cleverley & Associates.

Frank, W. (2021). Approaches & techniques: A managerial accounting analysis of hospital costs. Web.

Struggle with a task? Let us write you a plagiarism-free paper tailored to your instructions 569 certified experts on site View More

Zheng, J., Liu, X., Yu, B., & Liu, Y. (2020). The employment intention in primary healthcare unit of medical undergraduates and corresponding learning and psychological influencing factors. Chinese Journal of Medical Education Research, E002-E002. Web.

Cite this paper

Select a referencing style

Reference

AssignZen. (2022, November 6). Healthcare Financing: Variance Reporting Factors. Retrieved from https://assignzen.com/healthcare-financing-variance-reporting-factors/

Work Cited

"Healthcare Financing: Variance Reporting Factors." AssignZen, 6 Nov. 2022, assignzen.com/healthcare-financing-variance-reporting-factors/.

1. AssignZen. "Healthcare Financing: Variance Reporting Factors." November 6, 2022. https://assignzen.com/healthcare-financing-variance-reporting-factors/.


Bibliography


AssignZen. "Healthcare Financing: Variance Reporting Factors." November 6, 2022. https://assignzen.com/healthcare-financing-variance-reporting-factors/.

References

AssignZen. 2022. "Healthcare Financing: Variance Reporting Factors." November 6, 2022. https://assignzen.com/healthcare-financing-variance-reporting-factors/.

References

AssignZen. (2022) 'Healthcare Financing: Variance Reporting Factors'. 6 November.

Click to copy

This report on Healthcare Financing: Variance Reporting Factors was written and submitted by your fellow student. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly.

Removal Request

If you are the original creator of this paper and no longer wish to have it published on Asignzen, request the removal.