You are the administrative assistant to the president of BCC Health Plan, a small HMO located in the Midwest. The…

You are the administrative assistant to the president of BCC Health Plan, a small HMO located in the Midwest. The president has presented you with the following selected information regarding the organization’s operating results for the previous quarter. The president has asked you to review the data and prepare a summary report of the variances (e.g., enrollment and utilization) for next week’s board meeting.

Data for the Quarter Ended September 30, 2011
Budgeted Actual
Enrollees 10,000 12,000
Inpatient days per 1,000 enrollees 600 650
Total inpatient days 6,000 7,800
Outpatient visits per member 5.0 4.0
Total outpatient visits 50,000 48,000
Cost per inpatient day $1,000 $1,200
Cost per outpatient visit $65 $60

Inpatient costs $6,000,000 $9,360,000
Outpatient costs $3,250,000 $2,880,000
Total costs $9,250,000 $12,240,000

Per member per year costs $925 $1,020

Write your summary report of the variances.

1. Do you think the budget was flawed? Explain your answer.
2. What might account for the increase in the number of enrollees? Could it have been foreseen?
3. What might account for the increase in the number of inpatient days and decrease in outpatient visits? Could these have been foreseen?
4. What might account for the increase in cost of inpatient days and decrease in cost of outpatient visits? Could these have been foreseen?
5. What research may be done to explain these variations?