Applying variance analysis to understand California hospitals’ expense recovery status by patient groups

Research output: Contribution to journalArticle

Abstract

SYNOPSIS: I apply variance analysis, a management accounting tool, to examine California hospitals’ expense recovery status in 2012, as compared with 2004, for three mutually exclusive groups of patients. For every $100 total operating expense incurred in 2012, as compared with those incurred in 2004, California hospitals received $3.2 more from public programs (a $0.7 rate effect and a $2.6 proportion effect), $3.0 more from private programs (a $7.8 rate effect and a -$4.8 proportion effect), and $2.2 less from uninsured patients (a -$3.1 rate effect and a $1.0 proportion effect). These results imply that (1) hospitals were able to charge increasingly higher prices to private insurers, and (2) hospitals received less revenue from uninsured patients, a possible consequence of the passage of California’s Hospital Fair Pricing Act in 2006. My study highlights the applicability of variance analysis in understanding the temporal change in financial status for patient groups in the hospital industry.

Original languageEnglish (US)
Pages (from-to)211-223
Number of pages13
JournalAccounting Horizons
Volume30
Issue number2
DOIs
StatePublished - Jun 1 2016
Externally publishedYes

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Expenses
Variance analysis
Proportion
Insurer
Analysis of variance
Revenue
Charge
Fair pricing
Management accounting
Industry

Keywords

  • Expense recovery
  • Hospital
  • Patient group
  • Variance analysis

ASJC Scopus subject areas

  • Accounting

Cite this

Applying variance analysis to understand California hospitals’ expense recovery status by patient groups. / Bai, Ge.

In: Accounting Horizons, Vol. 30, No. 2, 01.06.2016, p. 211-223.

Research output: Contribution to journalArticle

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