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Cascades Mental Health Clinic

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by

Brian Richards

on 5 December 2014

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Transcript of Cascades Mental Health Clinic

Cascades Mental
Health Clinic:
A Variance Analysis

Cascades Mental Health Clinic
Variance Analysis
Total Profit
Variance
Revenue Variance
Enrollment Variance
Rate Variance
Cost Variance
Volume Variance
Enrollment Variance
Utilization Variance
Management Variance
Staffing Variance
Rate Variance


Clinic's Variance =
($329,366)
(Static Profit - Actual Profit)
PC-Commercial =
($73,540)
PC-Medicare =
($36,651)
SH-Commercial =
($124,826)
SH-Medicare =
($94,206)
Product Line Profit Variance:
Clinic's Variance =
$57,734
Product Line Variances:
PC-Commercial =
($50,650)
PC-Medicare =
$13,600
SH-Commercial =
$61,184
SH-Medicare =
$33,600
(Actual Revenue - Static Revenue)
(Static Cost - Actual Cost)
Clinic's Variance =
($387,100)
Product Line Variances:
PC-Commercial =
($23,032)

PC-Medicare =
($50,251)
SH-Commercial =
($186,010)
SH-Medicare =
($127,806)
(Flexible (Enrollment) Revenue - Static Revenue)
Flexible (Enroll) Revenue =
(Static Premium * Actual Enrollments)
Clinic's Variance =
($123,239)
Product Line Variances:
PC-Commercial =
($204,307) (91%)
PC-Medicare =
$13,600 (103%)
SH-Commercial =
$33,828 (109%)
SH-Medicare =
$33,600 (120%)
(Actual Revenue - Flexible (Enrollment) Revenue)
Flexible (Enroll) Revenue =
(Static Premium * Actual Enrollments)
Clinic's Variance =
$181,013
Product Line Variances:
PC-Commercial =
$153,013
PC-Medicare = $0
SH-Commercial =
$27,356
SH-Medicare = $0
PC-Commercial =
($115,070)
PC-Medicare =
($81,951)
SH-Commercial =
($177,227)
SH-Medicare =
($45,853)
Purpose:
COMPARE:
static/budgeted
vs.
actual operating performance
to identify variances due to
volume or price/rate within an organization
Goal:

1) determine differences between revenues and expenses from budgeted operating functions to actual performance outcomes so that

2) make recommendations to increase profit for the following fiscal year.

Non-profit, multidisciplinary

Inpatient & outpatient

Capitated basis for members of managed care plans

Funding: state & local government
Contracts with two large
managed care organizations

Pacific Care (PC)
Commercial
Medicare
Seattle Health Plan (SH)
Commercial
Medicare

Four Product Lines
Clinic's Total =
($420,101)

Product Line Variances:
Static Cost per Admit*[(Static Enroll*Admit Rate)-(Actual Enroll*Admit Rate)]
(Actual Enroll*Admit Rate)*(Static Cost per Admit-Actual Cost per Admit)
Clinic's Variance =
$33,001
Product Line Variances:
PC-Commercial =
$92,037
PC-Medicare =
$31,699
SH-Commercial =
($8,782)
SH-Medicare =
($81,953)
Static Cost - Flexible (Enrollment) Cost
Flexible (Enrollment) Cost =
Actual Enroll*Static Admit Rate*Static Cost per Admit
Clinic's Variance =
$111,221
Product Line Variances:
PC-Commercial =
$179,371
PC-Medicare =
($12,995)
SH-Commercial =
($25,311)
SH-Medicare =
($29,844)
PC-Commercial =
($294,435)
PC-Medicare =
($69,230)
SH-Commercial =
($151,914)
SH-Medicare =
($16,011)
Clinic's Variance =
($531,590)
Product Line Variances:
Flexible (Enrollment) Cost =
Actual Enroll*Static Admit Rate*Static Cost per Admit
Flexible (Enroll/Util) Cost=
Actual Enroll*Actual Admit Rate*Static Cost per Admit
Flexible (Enrollment) Cost - Flexible (Enroll/Util) Cost
PC-Commercial =
($92,033)
PC-Medicare =
($31,702)
SH-Commercial =
($8,785)
SH-Medicare =
($81,951)
Clinic's Total =
($32,999)
Product Line Variances:
PC-Commercial =
($165,854)
PC-Medicare =
($34,107)
SH-Commercial =
$28,233
SH-Medicare =
$16,947
Clinic's Variance =
($154,781)
Product Line Variances:
(Static Pay Rate-Actual Pay Rate)*
Actual Hours per Case*Actual Admit Rate*Actual Enrollment
PC-Commercial =
$257,578
PC-Medicare =
$65,807
SH-Commercial =
($37,040)
SH-Medicare =
($98,897)
Clinic's Variance =
$187,448
Product Line Variances:
Efficiency Variance
(Static Hours per Case-Actual Hours per Case)*
Static Pay Rate*Actual Admit Rate*Actual Enrollment
The funding agencies cover overhead and capital expenses

Drugs, supplies & administrative expenses billed to HMOs at cost

Cascades' profitability: the ability to
generate revenues
that
exceeds the cost of labor

Operating budget focuses on:
Enrollment
Member premiums
Utilization
Labor costs
Cascades expected aggregate profit FY2013: $419,379

Q1: high utilization + low enrollment = lower profits :-(

Midyear changes to commercial premiums

FY 2013 profits end up much lower than anticipated


Group Rho:
Saeed Alshehri
Caroline Evans
Kate Naper
Brian Richards

Key Learning Points
In a capitated payment system revenue is a (relatively) fixed item. The cost of care is a variable cost and has a dynamic effect on profitability.

A midyear budget evaluation can be the difference between being less profitable than expected and losing money.

Doing the variance analysis can identify your root causes for under-performing.
Summary
Recommendations
Increase revenue

Control wages

Reduce length of stay

Reduce utilization
Actual Staffing Cost-(Actual Enrollment*Actual Admit*Static Cost per Admit)
Full transcript