How do you calculate revenue variance for different types of healthcare services?

1 The basic formula

The basic formula for revenue variance is:

Revenue variance = Actual revenue - Expected revenue

You can also express it as a percentage of the expected revenue:

Revenue variance (%) = (Actual revenue - Expected revenue) / Expected revenue * 100

This formula applies to any type of revenue, whether it is from a single service, a department, or the whole organization. However, the actual and expected revenue may depend on different factors for different types of healthcare services.

2 Inpatient revenue variance

Inpatient revenue is the revenue generated from patients who stay in the hospital for more than 24 hours. The actual inpatient revenue is usually based on the number of patient days, the average daily rate, and the payer mix. The expected inpatient revenue is usually based on the budgeted or forecasted number of patient days, the budgeted or forecasted average daily rate, and the budgeted or forecasted payer mix.

To calculate the inpatient revenue variance, you need to compare the actual and expected values of these factors. You can also break down the inpatient revenue variance into three components: volume variance, rate variance, and mix variance.

Volume variance is the difference between the actual and expected number of patient days. Rate variance is the difference between the actual and expected average daily rate. Mix variance is the difference between the actual and expected revenue per patient day based on the payer mix.

3 Outpatient revenue variance

Outpatient revenue is the revenue generated from patients who do not stay in the hospital overnight. The actual outpatient revenue is usually based on the number of visits, the average charge per visit, and the payer mix. The expected outpatient revenue is usually based on the budgeted or forecasted number of visits, the budgeted or forecasted average charge per visit, and the budgeted or forecasted payer mix.

To calculate the outpatient revenue variance, you need to compare the actual and expected values of these factors. You can also break down the outpatient revenue variance into three components: volume variance, rate variance, and mix variance.

Volume variance is the difference between the actual and expected number of visits. Rate variance is the difference between the actual and expected average charge per visit. Mix variance is the difference between the actual and expected revenue per visit based on the payer mix.

4 Ancillary revenue variance

Ancillary revenue is the revenue generated from services that are not directly related to the primary diagnosis or treatment of a patient, such as laboratory tests, imaging, pharmacy, or therapy. The actual ancillary revenue is usually based on the number of units, the average charge per unit, and the payer mix. The expected ancillary revenue is usually based on the budgeted or forecasted number of units, the budgeted or forecasted average charge per unit, and the budgeted or forecasted payer mix.

To calculate the ancillary revenue variance, you need to compare the actual and expected values of these factors. You can also break down the ancillary revenue variance into three components: volume variance, rate variance, and mix variance.

Volume variance is the difference between the actual and expected number of units. Rate variance is the difference between the actual and expected average charge per unit. Mix variance is the difference between the actual and expected revenue per unit based on the payer mix.