The subsequent two spreadsheets provide workload (expressed as relative weighted products (RWPs) for inpatient care), revenue, and expense data for Schumpert Medical Center covering their fiscal years 2010 and 2011. The data includes FY10 actual workload, revenues, and expenses; FY11 forecasted workload, revenues, and expenses; and FY11 year-to-date workload, revenues, and expenses. The Inpatient Product Lines worksheet provides further details on the types of services provided within each major service line. Using the available data, perform a variance analysis on Schumpert Medical Center and answer the following questions:

Schumpert Medical Center
Revenues Worksheet, Mid-Year Review
Inpatient
Inpatient Product Line	Price/RWP		Forecasted RWPs For FY11	Projected IP Revenue For FY11	Actual RWPs (FY11 YTD)	Actual IP Revenue (FY11 YTD)
CIRC	$ 6,010.65		724	$ 4,351,711	421	$ 2,530,676
DIGEST	$ 6,021.65		1,161	$ 6,988,125	636	$ 3,830,402
ENT	$ 6,001.65		130	$ 780,215	72	$ 433,948
GYN	$ 6,013.65		219	$ 1,313,983	116	$ 697,128
MENTAL HEALTH	$ 502.99		1,351	$ 679,539	736	$ 369,949
NERVOUS	$ 6,103.65		228	$ 1,391,632	112	$ 682,744
NEWBORN	$ 7,014.71		733	$ 5,141,782	433	$ 3,033,900
OB	$ 5,713.65		1,501	$ 8,576,189	868	$ 4,960,622
ORTHO	$ 6,084.18		631	$ 3,839,118	274	$ 1,664,658
OTHER	$ 6,018.14		2,152	$ 12,951,037	800	$ 4,813,961
RESP	$ 6,118.73		677	$ 4,142,380	197	$ 1,202,960
Total Inpatient Earnings			9,506	$ 50,155,710	4,664	$ 24,220,949
Actual IP Revenue (FY11 YTD)
$ 2,530,676
$ 3,830,402
$ 433,948
$ 697,128
$ 369,949
$ 682,744
$ 3,033,900
$ 4,960,622
$ 1,664,658
$ 4,813,961
$ 1,202,960
$ 24,220,949

Schumpert Medical Center
Expenses Worksheet, Mid-Year Review
Inpatient
Inpatient Product Line	Budget/RWP (FY10)	Actual RWPs (FY10)	IP Expenses (FY10)	Forecasted RWPs (FY11)	FY11 Budget (FY10+6% Inflation)	Actual RWPs (FY11 YTD)	Actual IP Expenses (FY11 YTD)
CIRC	$ 5,475.81	690	$ 3,778,309	724	$ 4,202,356	421	$ 2,472,822
DIGEST	$ 5,476.81	1,105	$ 6,051,875	1,161	$ 6,737,188	636	$ 4,356,173
ENT	$ 5,477.81	124	$ 679,248	130	$ 754,842	72	$ 462,822
GYN	$ 5,478.81	208	$ 1,139,592	219	$ 1,268,947	116	$ 777,322
MENTAL HEALTH	$ 498.78	1,287	$ 641,930	1,351	$ 714,283	736	$ 400,730
NERVOUS	$ 5,478.81	217	$ 1,188,902	228	$ 1,324,119	112	$ 675,173
NEWBORN	$ 5,478.81	698	$ 3,824,209	733	$ 4,256,926	433	$ 2,971,020
OB	$ 5,478.81	1,430	$ 7,834,698	1,501	$ 8,717,115	868	$ 5,472,892
ORTHO	$ 5,478.81	601	$ 3,292,765	631	$ 3,664,557	274	$ 1,771,063
OTHER	$ 5,478.81	2,050	$ 11,231,561	2,152	$ 12,497,823	800	$ 4,662,277
RESP	$ 5,478.81	645	$ 3,533,832	677	$ 3,931,704	197	$ 1,233,771
Total Inpatient Expenses			$ 43,196,922	9,506	$ 48,069,860	4,664	$ 25,256,062

Actual RWPs (FY11 YTD)	Actual IP Expenses (FY11 YTD)
421	$ 2,472,822
636	$ 4,356,173
72	$ 462,822
116	$ 777,322
736	$ 400,730
112	$ 675,173
433	$ 2,971,020
868	$ 5,472,892
274	$ 1,771,063
800	$ 4,662,277
197	$ 1,233,771
4,664	$ 25,256,062

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?

Answer:

2. Which inpatient service lines are over budget? Which product lines are over budget after accounting for workload increases?

Answer:

3. What actions would you take at the mid-year point if you were 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?

Answer:

4. What actions would you take at the mid-year point if you were 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.