Question 1: Variance Analysis

A: The variance analysis over revenue and expenses indicates that St. Xavier Healing Touch Hospital expected more revenue from its operation but the actual results were not in favor to the company. It could be possible that St. Xavier Healing Touch Hospital took inappropriate assumptions while making the budgets for revenue or expense.

The outcomes indicate that the high revenue variance was due to the inappropriate budget of insurance reimbursement. It could be possible that the insurance segment of the company did not operate effectively. Furthermore, on the side of consultant fees, the company expected less but in actual it could demand for more fees which would increase the overall operational costing.

The quantity variance of doctors’ salaries indicates the unfavorable outcome for the St. Xavier Healing Touch Hospital. It could be possible that the hospital recruits unskilled doctor, which leads to inefficiency in their operations. Therefore, additional doctors are required by the hospital whereas, the revenues are declining.

On the other hand, the price variance of doctors’ salaries indicates the unfavorable variance which could be due to the hospital’s inefficient negotiation with the doctors over their costing. Differences in the quantity supplied is not favorable to the hospital, as it might lead to excessive stock.

Whereas, the price variance of supplies provides the heavy favorable outcome for the hospital. This influences due to the weak market conditions as indicated in the case. In addition to this, better procurement options amiable to the hospital might result in favorable variance.

The St. Xavier Healing Touch Hospital Harvard Case Solution & Analysis

Changes in the patients’ fees is favorable to the hospital, which could be due to more patients in the hospital. The promotional strategy looks quite worthy for the hospital. On the other hand, the price differences is not favorable for the hospital, as it might take place due to the reduction in prices by the management.

Overall, the revenue from reimbursement reduced due to the heavy reduction in reimbursement per patient. As a result, there was huge difference in the price, however the company has different types of insurances.

D. The variance analysis indicates that the hospital’s performance is not good and it is consequently losing its funds. Majority differences appear to be unfavorable to the company however, it can be argued that the management fails to formulate appropriate budget but in addition it lacks the ability to limit expenditures stay in the budget.

The most severe problem faced by the company is due to the heavy reduction in insurance reimbursement per patient. This would lead to working capital problems and the hospital has to raise short term financing...............

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