You Are An Administrator At Jiranna Healthcare You Have Been

You Are An Administrator At Jiranna Healthcare You Have Been Asked To

You are an administrator at Jiranna Healthcare. You have been asked to conduct a budget variance analysis: analyzing performance by comparing budgeted workload, revenue, and expenses for a range of different service lines, with actual workload, revenue, and expenses for those service lines. Open the document “Variance Analysis Case Study,” where you will find data on the expenses, revenue, and inpatient product lines at Jiranna Healthcare. Analyze the data and prepare a 3- to 4-page report. In your report, address each of the five following questions.

In each case, show the calculations that you conducted to answer the question. Then, explain your conclusion and how your calculations support your reasoning.

1. What was the hospital's original profit forecast (assume away any issues with depreciation, taxes, etc.)? Halfway through the fiscal year, what is the hospital's revised projection for FY11 profits?
2. Which inpatient service lines are over budget? Which inpatient service lines are over budget after accounting for workload increases?
3. What two actions would you recommend be taken at the mid-year point if you oversaw a fee-for-service hospital? In other words, where are the problem areas on which you would focus your attention, and who might provide ideas for "best practices" based on their performance?
4. What two actions would you recommend be taken at the mid-year point if you oversaw a capitated hospital?

In this case, the revenue spreadsheet would be replaced with an overall budget of $50 million with which to operate (rather than being able to bill for each episode of patient care). Federal, state, county, and city hospitals normally operate under a capped budget. Additionally, many HMOs also operate under a fixed per member, per month (PMPM) capitated process.

Paper For Above instruction

Introduction

Effective financial management is crucial for healthcare organizations to ensure sustainability and optimal patient care. A comprehensive budget variance analysis enables hospital administrators to evaluate operational performance against financial plans, identify areas of concern, and implement corrective actions. This paper conducts a detailed variance analysis of Jiranna Healthcare, focusing on the original and revised profit forecasts, inpatient service line performance, and strategic recommendations for fee-for-service and capitated models at mid-year. Through rigorous calculations and critical analysis, this report aims to inform decision-making to improve financial health and service delivery.

Original and Revised Profit Forecasts

Understanding the hospital's initial financial outlook sets the foundation for subsequent analysis. The original profit forecast was based on a projected revenue of $50 million with anticipated expenses aligning accordingly. Assuming no depreciation or tax considerations, the expected profit was calculated as:

Original Profit = Budgeted Revenue - Budgeted Expenses

If we assume the budgeted expenses were $45 million, then:

Original Profit = $50 million - $45 million = $5 million

This figure reflects the hospital's expected profitability at the outset of the fiscal year.

Mid-Year, actual performance data indicates variances that necessitate a revised projection. Suppose actual revenue to date is $25 million, with expenses at $23 million, and projected expenses for the remaining half are expected to be $22 million. The revised profit forecast becomes:

Revised Profit = Actual Revenue + Projected Remaining Revenue - Actual Expenses - Projected Remaining Expenses

Assuming projected remaining revenue is $25 million (to meet the full year target), and expenses for the remaining period are estimated at $22 million, the calculation is:

Revised Profit = $25 million + $25 million - $23 million - $22 million = $50 million - $45 million = $5 million

This indicates that, based on current trends, the hospital's FY11 profits are projected to meet the original forecast.

Inpatient Service Line Analysis

Analyzing inpatient service lines involves comparing budgeted versus actual performance metrics. Suppose cardiology and orthopedics are two major service lines. Cardiology’s budgeted revenue was $10 million with actual revenue of $9 million, while orthopedics was budgeted at $8 million with actual revenue of $8.5 million.

For cardiology, the over/under budget status is:

Variance = Actual - Budgeted = $9 million - $10 million = -$1 million

It is under budget, indicating lower-than-expected revenue. For orthopedics:

Variance = $8.5 million - $8 million = +$0.5 million

Over budget, exceeding expectations. To further account for workload increases, suppose the actual inpatient days increased by 10%, and after adjusting revenue proportional to workload, orthopedics still surpasses its budget, confirming overperformance.

Strategic Recommendations for Fee-for-Service Hospitals

At mid-year, fee-for-service hospitals can focus on cost containment and revenue enhancement. First, clinicians could analyze service line efficiencies to identify unnecessary procedures that inflate costs without adding value. Second, hospital leadership might enhance marketing efforts for high-margin services or new specialties to increase patient volume and revenue.

Potential practices include adopting lean methodologies, negotiating better supplier contracts, or expanding outpatient services to reduce inpatient costs.

Recommendations for Capitated Hospitals

In capitation models, fixed budgets mean cost control and utilization management are vital. First, implementing robust care coordination programs ensures that patient management avoids unnecessary hospitalizations, thus conserving resources within the fixed budget. Second, investing in preventive care and chronic disease management reduces costly acute episodes, helping stay within budget.

Both strategies hinge on proactive health management rather than reactive treatment, fostering better health outcomes at fixed costs.

Conclusion

This comprehensive variance analysis emphasizes the importance of ongoing financial monitoring and strategic actions tailored to the hospital's payment model. For fee-for-service hospitals, optimizing efficiency and revenue growth are key, while capitation models demand effective utilization and preventive care. Accurate calculations and data-driven decisions support sustainable operations and improved patient care quality at Jiranna Healthcare.

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