Budgeting and Variance Analysis
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.
To prepare for this Assignment:
Review the Week 9 Assignment document provided to you by the Instructor. Examine the budgeted and actual revenues and expenses for a hospital. Reflect on concepts of budgeting and variance. Refer to Chapter 5, Chapter 11, and Chapter 14 of Gapinski’s Understanding Healthcare Financial Management.
The Assignment:
Using the “Week 9 Assignment Budget and Variance Excel Template” address the following:
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.
By Day 7
Submit your Assignment.
Submission and Grading Information
To submit your completed Assignment for review and grading, do the following:
Please save your Assignment using the naming convention “WK9Assgn+last name+first initial.(extension)” as the name.
Click the Week 9 Assignment Rubric to review the Grading Criteria for the Assignment.
Click the Week 9 Assignment link. You will also be able to “View Rubric” for grading criteria from this area.
Next, from the Attach File area, click on the Browse My Computer button. Find the document you saved as “WK9Assgn+last name+first initial.(extension)” and click Open.
If applicable: From the Plagiarism Tools area, click the checkbox for I agree to submit my paper(s) to the Global Reference Database.
Click on the Submit button to complete your submission.
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