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Formulate your answer based on the below information
Formulate your answer based on the below information. The intensity of care delivered dropped from a budgeted case mix of 0.90 to an actual case mix of 0.85. What dollar effect did this have on actual costs?
You have been asked by management to explain the variances in costs under your inpatient capitated contract. The following data is provided. Use the following data to calculate the variances.
Actual Budget
Impatient costs $12,568,500 $16,618,350
Members $42,000 $42,000
Admission rate 0.070 0.095
Case Mix Index 0.90 0.85
Cost per Case(CMI= 1.0) $4,750 $4,900
Expert Solution
Effect on Actual cost in dollar= (Budget case mix index - Actual case mix index) x Actual Members
= (0.90 - 0.85 ) x 42000
= 0.05 x 42000
= 2100 Favorable
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