Healthcare facilities in business usually prepare their budget reconciliation report that gives the healthcare managers a synopsis that bridges between the expected and actual operations expenditures. The report is useful in helping to identifying the critical areas to scrutinize to allow making an informed decision and also pointing out areas that the hospital is doing well in terms of performance and expenditures. It is during the normal operations that a variance occurs because of the adjustment in the hospital operating environment, and because standards or budgets are either too flexible or rigid (StratisHealth, 2019).
Variance Report, Factors to Consider
Accuracy and reliability of the provided figures is the first factor to look into when preparing variance report. Indeed, errors in accounting for recording actual revenues and costs and recording budget could lead to variance in places where there are no errors. Materiality is the second factor to be considered. Materiality is about the volume of the variance, which indicates the level of the problem and the likely profits originating from its correction.
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It is also important to look at the variances’ interdependences. There are cases where variance in one angle is connected to a variance in another area. For example, variance in favorable raw material prices originating from buying a low-class material may cause serious labor inefficiencies since it is very difficult to work with low-quality material. Before doing any survey, it would be important to consider these two variances jointly. Whether negative or positive, correlations remain essential in business planning.
Another factor to emphasize when preparing variance report is the probability of a correction. In case a profit or cost is not within the manager’s powers (for example, the raw materials world market price), then there is no need to consider it. Let’s assume the cost of correcting the challenge is likely to be higher compared to the advantage; then, there is no need to take on further investigations (Cesta and Tahan, 2003).
Business trend forecasting is also an essential factor that employes the past business data patterns for the creation of a theory regarding future performance. Through the placement of the variance data into a concept, an analyst makes the identification of factors as to the origin of either negative or positive variances. For example, observing the monthly sales pattern of computers might indicate a positive sales trend. As a result, the proprietor might increase the inventory by a certain percentage after being informed by the sales patterns of the past.
Relationship between Variances
There may be some relations between the direct labor variances and the direct material variances. The chances are that there could be good relations between several of the variances. Assume the company management purchases a low costing material to achieve a favorable materials price variance, in case the material has some characteristics that are not useful in production, and then there is the possibility that the company will experience the use of an unfavorable material variance. If the characteristics of the materials demand more hours of labor, then the company will experience unfavorable direct labor efficiency variance. In case the materials demand a highly experienced labor that the company does not have, then the possibility is that the labor rate variance will be experienced (Neuhauser, Provost, & Bergman, 2011).
Variance issues to be addressed following Health Care Organizations (HCO)
Variation management is critical for enhancing quality. The quality improvement relates to two types of variations as described by HCO include the common-cause and special-cause variations. The common-cause variation is an irregular or random variation that exists in the healthcare processes. Special-cause variation, on the other hand, is unpredictable that originates from outside causes that are not an intrinsic part of the business operation processes. Implementation of best practices and performance benchmarks is the work of healthcare managers. In so doing, they need to understand variations in patient populations, so that the process is efficient and time-sensitive.
The justification for variation management is dependent on the perspectives and priorities of the enhancements introduced by the managers and the intended generalization of the results of the enhancement efforts. Patients, healthcare managers, and medical researchers have their objectives, techniques, and methodological approaches and timelines in managing variations. By use of the data that has been collected and arranged in an orderly manner, most fundamental mental management questions re successfully answered. The manager is able to tell if the present healthcare provision is better or worse than the past, ad the likelihood of better outcomes in the future. Therefore, understanding the types of variations is critical in healthcare.
References
Cesta T.G. and Tahan H. A. (2003). Case Manager’s Survival Guide: Winning Strategies for
Clinical Practice, Second Edition. Mosby, Inc.
Neuhauser, D., Provost, L., & Bergman, B. (2011). The meaning of variation to healthcare
managers, clinical and health-services researchers, and individual patients. BMJ quality & safety , 20 Suppl 1 (Suppl_1), i36–i40. https://doi.org/10.1136/bmjqs.2010.046334
StratisHealth, (2019). Patient Care Coordination Variance Reporting. Access 18 Feb
https://www.stratishealth.org/documents/HITToolkitcoordination/4-Patient-Care-Coordination-Variance-Reporting.pdf
