Resumen de Applying variance analysis to understand California hospitals' expense recovery status by patient groups

Ge Bai

• 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.