You have been asked by management to explain the variances in costs under your i

ID: 2360960 • Letter: Y

Question

You have been asked by management to explain the variances in costs under your inpatient capitated contract. The following data is provided.

Budget Actual

Inpatient Costs $12,568,500 $16,618,350

Members 42,000 42,000

Admission Rate 0.070 0.095

Case Mix Index 0.90 0.85

Cost per Case (CMI = 1.0) $4,750 $4,900

Problem 1: What dollar amount of the total variance is attributed to Enrollment Variance?

Problem 2: What dollar effect did the increased admission rate have on cost?

Problem 3: The intensity of care delivered dropped from a budgeted case mix of 0.90 to an actual case mix of 0.85. What dollar effect did this have on actual costs?

Problem 4: Costs per case increased to $4,900 from a budgeted value of $4,750. This increased actual total costs by what amount?

a) $400,000

b) $570,000

c) $970,000

d) $600,000

e) cannot calculate with given information

Explanation / Answer

Total variance Actual costs incurred $16,618,350 Budgeted costs 12,568,500 Total variance $4,049,850 Admission rate diffrence 0.095-0.070 2. 0.025 The dollar affect on increased admission rate have on cost (42,000 * 0.025) $1,050 3. The intensityof care delivered dropped from a budgeted case mix of 0.90 to an actual case mix of 0.85 The difference in case mix 0.05 The dollar affect on actual cost (42,000*0.05 2,100 costs per case increased to $4,900 from a budgeted value 4,750 Difference in cost per case $150 (42,000*$150) 6,300,000 4. cannot calculate with given information Total variance Actual costs incurred $16,618,350 Budgeted costs 12,568,500 Total variance $4,049,850 Admission rate diffrence 0.095-0.070 2. 0.025 The dollar affect on increased admission rate have on cost (42,000 * 0.025) $1,050 3. The intensityof care delivered dropped from a budgeted case mix of 0.90 to an actual case mix of 0.85 The difference in case mix 0.05 The dollar affect on actual cost (42,000*0.05 2,100 costs per case increased to $4,900 from a budgeted value 4,750 Difference in cost per case $150 (42,000*$150) 6,300,000

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You have been asked by management to explain the variances in costs under your i

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