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Budget Information and Resources

Student’s Name
Institutional Affiliate
Course Name
Instructor’s Name
Date
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Background Information
Pendo Medical Center is a healthcare facility established in 2014 in Denton, Texas. With

a passionate focus on high-quality care, innovative services, and commitment to community-

mission to keep patients out of the hospital, Pendo Medical Center has transformed health care in

the region and built a new industry model for the rest of the nation. The healthcare facility is a

non-profit organization with over ten thousand employees spread across four facilities in

different cities within Texas State. The hospital offers several medical services such as surgery,

mental health care, dental care, nutritional support, cancer treatment, and primary care services.

The hospital has an average revenue of $50M as of the end of 2020, and its current financial

situation is stable.

Part II

Outlined below is the budget information for Pendo Medical Center for 2018.
The table above shows Pendo Medical Center’s 2018 operating budget with the actual results for

2018. Also calculated are the variances in dollars and percentages. From the budget variance

analysis table above, with an expected profit of $520,000 and an actual profit of $465,000, the

facility’s variance is a negative $55,000. The negative amount could signify bad results for the

facility for 2018.

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Pendo Medical Center Budget Information for 2018

Variance
Simple Actual Dollar/ Percentage
Budget Results Visit %
Volume (Number of Visits)

Payer M 7,500 9,000 1,500 20%

Payer N 11,000 10,500 (500) (4.5)
Total 18,500 19,500 1000 5.4
Reimbursement (per visit)
Payer M $200 $205 $5 2.5%
Payer N $85 $80 ($5) (5.9)
Costs
Variable Costs:
Supplies $500,000 $510,000 ($10,000) (2.0 %)
Fixed Costs:
Labor $1,500,000 $1,520,000 ($20,000) (1.3)
Overhead 700,000 750,000 ( 50,000) (7.1)
Total $2,200,000 $2,270,000 ($70,000 (3.2)
Forecasted P&L statement
Revenues:
Payer M $2,000,000 $2,150,000 $150,000 7.5%
Payer N $1,220,000 $1,095,000 $125,000 (10.2)
Total revenues $3,220,000 $3,245,000 $25,000 0.8
Variable costs $500,000 $510,000 $10,000 (2.0)
Fixed costs $2,200,000 $2,270,000 $70,000 3.2
Total costs $2,700,000 $2,780,000 $80,000 2.9
Profit $ 520,000 $ 465,000 ($ 55,000) (10.6)

The profit variance is calculated as

Actual value-Budgeted value

$465,000-$520,000

= -$55,000

This means that the facility’s 2018 profitability was $55,000 below expectation, which

should have been a great concern for the facility’s management. Further analysis is needed to
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determine the cause of the loss relative to the profit expectations. The negative variance may

have been caused by a shortfall in revenue or cost variances.

The revenue variance is calculated as below (Gapenski & Reiter, 2016)

Revenue variance= actual revenue- budgeted revenue

=$3,245,000-3,220,000

=$25,000

The variance in cost is calculated as below

Cost variance= actual cost-budgeted cost

=$2,780,000-$2,700,000

=$80,000

With revenues $25,000 more than budgeted and costs $80,000 more than budgeted, it is

clear that the primary cause of the healthcare facility’s poor financial performance in 2018 was

due to costs rather than revenue. Based on this analysis, the healthcare facility management

would look for better ways to minimize the facility’s total costs and identify ways to generate

more revenue for the healthcare center. This would result in a positive variance when the budget

expectations are compared to the actual values.

Part III

1. Waitzberg, R., Quentin, W., Webb, E., & Glied, S. (2021). The Structure and Financing

of Health Care Systems Affected How Providers Coped With COVID‐19. Milbank

Quarterly, 99(2), 542–564. https://search-ebscohost-

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com.libraryresources.columbiasouthern.edu/login.aspx?

direct=true&db=edb&AN=151158337&site=eds-live&scope=site

The article made a comparison of the structure systems of healthcare and the economic

implications of the coronavirus pandemic, a current in healthcare. The comparison was on the

financial implication of the pandemic on providers of health care services in countries such as

U.S, Germany, Israel, and England. Given the prevalent use of activity-based payment in the

U.S, the nation was the most affected financially (Waitzberg et al., 2021). In a pandemic,

activity-based payment usually reverses the conventional payers and providers’ financial position

preventing providers from having to prioritize public health to avoid loss of revenue.

2. Syed, N., Desai, M., Bethards, D., Razeghi, S., & Clarke, K. (2021). Redeploying

gastroenterologists during the COVID-19 pandemic: early experience with telehealth

including clinical access and financial implications. Gastroenterology Report, 9(3), 276–

278. https://doi-org.libraryresources.columbiasouthern.edu/10.1093/gastro/goab017

In the wake of the pandemic, technology was adopted by various healthcare facilities, including

telehealth, to limit the spread of the virus. The article discusses telehealth clinical access and

financial implication over a given period. It was integrated at the Penn State Milton Medical

Center’s gastroenterology and hepatology division (Syed et al., 2021). The article demonstrates

the positive aspects of telehealth services on revenue stream and patient satisfaction.

3. Reese, E. C. (2020). 2020 vision: What to expect in healthcare finance over the next

decade. Hfma. https://www.hfma.org/topics/hfm/2020/january/healthcare-2020s-views-

on-healthcares-changing-landscape-from-thought-leaders.html
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The article covers the organizational strategies that leaders in the healthcare sector in the U.S

have planned for 2020-2030. As they make such strategies, they must be aware of the trends in

the industry. Examples of the trends to look forward to in the decade as described by the

healthcare leaders include a shift from fee-for-service to the value-based system of payment.

This transition would be motivated by pressure for better affordability and improved outcomes,

more investment in new care delivery models running on new platforms of technology and

consumerism, and margin management (Reese, 2020).

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References
Gapenski, L.C., & Reiter, K. L. (2016). Healthcare finance: An introduction to accounting and

financial management (6th ed.) Health Administration Press.

Barnett, M. L., Mehrotra, A., & Landon, B. E. (2020). Covid-19 and the upcoming financial

crisis in health care. NEJM Catalyst Innovations in Care Delivery, 1(2).

Reese, E. C. (2020). 2020 vision: What to expect in healthcare finance over the next decade.

Hfma. https://www.hfma.org/topics/hfm/2020/january/healthcare-2020s-views-on-

healthcares-changing-landscape-from-thought-leaders.html

Syed, N., Desai, M., Bethards, D., Razeghi, S., & Clarke, K. (2021). Redeploying

gastroenterologists during the COVID-19 pandemic: early experience with telehealth

including clinical access and financial implications. Gastroenterology Report, 9(3), 276–

278. https://doi-org.libraryresources.columbiasouthern.edu/10.1093/gastro/goab017

Waitzberg, R., Quentin, W., Webb, E., & Glied, S. (2021). The Structure and Financing of

Health Care Systems Affected How Providers Coped With COVID‐19. Milbank

Quarterly, 99(2), 542–564. https://search-ebscohost-

com.libraryresources.columbiasouthern.edu/login.aspx?

direct=true&db=edb&AN=151158337&site=eds-live&scope=site