Budgeting and Variance Analysis

Budgeting is an important activity within every health care organization. The particular challenges encountered, however, can vary depending on the type of organization. A state or federally funded organization, for example, will likely have a budget that is allocated to it, and it needs to follow specific guidelines on how the money can be used. A for-profit organization, by contrast, will typically have more influence and flexibility in setting up its budget and making choices on matters such as how much to spend on marketing, patient care, or incentives for employees. In addition to preparing budgets, as a health care administrator, you must also be able to evaluate whether or not you have achieved your budget using variance analysis. This is important because variance analysis measures the differences between the budget and actual results, and provides administrators with a starting point for correcting financial performance. For this Assignment, you conduct a variance analysis for a health care organization. Determine the total variance between the planned and actual budgets for Surgical Volume. Is the variance favorable or unfavorable? Determine the total variance between the planned and actual budgets for Patient Days. Is the variance favorable or unfavorable? Determine the service-related variance for Surgical Volume. Determine the service-related variance for Patient Days. Prepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actual Surgical Revenues. Prepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actual Patient Expenses. Determine what variances are due to change in volume and what variances are due to change in rates. Zelman, W. N., McCue, M. J., Glick, N. D., & Thomas, M. S. (2014). Financial management of health care organizations: An introduction to fundamental tools, concepts and applications (4th ed.). San Francisco, CA: Jossey-Bass. Chapter 5, “Working Capital Management” (pp. 209–243) Chapter 10, “Budgeting” (pp. 465–493) Chapter 11, “Responsibility Accounting” (pp. 521–544) Chapter 12, “Provider Cost-Finding Methods” (pp. 551–571) Esquibell, T., & Spivey, K. (2015, 01). Budgeting best practices. Health Facilities Management, 28(1), 22–25. https://www.thebalancesmb.com/financial-budget-small-business-393574