Budget Management Analysis: Community Hospital
A community hospital amplifies healthcare in a community. According to many empirical studies, people that receive care in community health centers receive more preventive services than the general population does (Wang, Gusmano, & Cao, 2011, p. 38). These services come at a price, however, and community hospitals' budget management process often involves handling cost variances from the original budgeted amounts that occur for various reasons. A cost variance is a metric that shows the difference between projected and actual costs ("Cost Variance (CV)," n.d.). In budget development, a hospital must make explicit assumptions about what its membership levels, inpatient/outpatient use rates, visits per member, patient mix, and costs per case will be, but these assumptions "often are not as straightforward as they seem" (Miller & Ryan, 1995). Cost-variance analysis enables hospital administrators to look past the differences in cost and identify the underlying causes of variance (Miller & Ryan, 1995).
Specific cost variances identified in a hospital budget by Miller and Ryan (1995) include the following figures, which resulted in an unfavorable total cost variance of $3.9 million:
|Costs |Budget |Actual |
|Inpatient |$12,568,500 |$16,531,200 |
|Outpatient |5,431,500 |5,372,640 |
|Members |42,000 |41,000 |
|Outpatient visits |16,800 ...