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CAMC Case 2 C2

1. Franklin Health uses responsibility accounting where each physician is responsible for generating a set level of revenue. Creating cost centers where physicians are also responsible for keeping costs below a target could be a better approach to improve overall profitability. 2. The variance analysis for family practice and internal medicine doctors should consider factors like the number of office hours worked, number of office visits, and revenue generated compared to targets. Lower than expected office hours and visits resulted in less revenue. 3. The percentage deviation from expected contribution will be calculated for each department using year-to-date and prorated budgets for 2004-05 and 2005-06.

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23 views

CAMC Case 2 C2

1. Franklin Health uses responsibility accounting where each physician is responsible for generating a set level of revenue. Creating cost centers where physicians are also responsible for keeping costs below a target could be a better approach to improve overall profitability. 2. The variance analysis for family practice and internal medicine doctors should consider factors like the number of office hours worked, number of office visits, and revenue generated compared to targets. Lower than expected office hours and visits resulted in less revenue. 3. The percentage deviation from expected contribution will be calculated for each department using year-to-date and prorated budgets for 2004-05 and 2005-06.

Uploaded by

Skirata75
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CAMC Case 2: Franklin Health

Half-cohort C2: Answer sheet


Team members present:
Team members absent:

Assignment: Using the details in the Case provided, please answer the following questions in
this document. If you want to use tables from a spreadsheet keep the destination style. Do not
paste as image or use scanned images.

Questions:
1. Franklin Health uses responsibility accounting and each physician is a revenue
centre. This implies each physician is expected to generate a specific level of
revenues. Discuss if creating a cost centre (each physician is responsible for
keeping costs below a certain level) would be a better approach.
2. Provide a variance analysis for the doctors in family practice and Internal
medicine. Make sure you include all factors that can influence differences between
the total revenue they were expected to generate and actually generated. Discuss.
3. Calculate the % deviation from the expected contribution for each department. Use
the YTD (year-to-date) budget for 2004-05 and the Prorated budget 2005-05.

Condit Expected Actual Difference

Number of office hours in May 128 80 -48


Number of office visits in May 512 413 -99
Revenue $17,920 $13,778 -$4,142

Visit volume variance: (413-512)*35 = -3,465

Fuson Expected Actual Difference

Number of office hours in May 128 87 -41


Number of office visits in May 512 242 -270
Revenue $17,408 $8,543 -$8,865

Visit volume variance: (242-512)*34 = -9,180


Prior Expected Actual Difference
Number of office hours in May 92 70 -22
Number of office visits in May 368 207 -161
Revenue $14,720 $7,721 -$6,999

Visit volume variance: (207-368)*40 = -6,440

Record Expected Actual Difference

Number of office hours in May 92 68 -24


Number of office visits in May 368 182 -186
Revenue $12,512 $7,433 -$5,079

Visit volume variance: (182-368)*34 = -6,324

After computing the differences in office hours, office visits and revenue generated in
May by Condit, Fuson, Prior and Record, we notice a global trend. For each provider, the
difference between expected and actual office hours in May is always negative. The same
conclusion can be drawn from office visits. Furthermore, the revenue generated by each
provider is also always negative, thus generating an average loss of $6,271.25.

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