Week 5 Discussion Response- Account for Managment Decision Making

Account for Management Decision Making

Week 5 Discussion Response

Colleague 1

Maria Espenida

While preparing this discussion post, I found it challenging to identify specific examples of variances from my professional experience as a nurse. Although I understand the concept of variances and their importance in decision-making, specific examples may not be accurate and readily available. Executives do not give exact details on costs and possible variances in healthcare.  Instead, we hear terms like hourly rate, labor costs, overtime pay, and FTEs that are related to labor variance analysis. I instead searched for articles that can be related to this topic and how it can be applied in healthcare. Usually, the first-level managers are typically responsible for the daily operation of the unit, focusing on meeting the financial requirements while ensuring efficient and quality patient care, but oftentimes, they do not have very much training about finances (Welch, T. D., & Smith, T., 2020). Charge nurses are typically not fully trained on the financial side of healthcare. 

In nursing workforce management, the Full-Time Equivalent (FTE) metric plays a critical role in analyzing labor variance and aligning staffing with financial performance. Nurses are paid per hour worked. For a full-time nurse, 1.0 FTE means the employee will work 80 hours (Welch, T. D., & Smith, T., 2020). As the manager provides a staffing plan based on the standard number of patients and FTE. If the census is below the standard number and the FTE is high, it results in unfavorable variance.  As a manager, you will check why the unfavorable variance occurred. Could it be because of nursing workload, patient acuity, or skill mix? The first-level manager with clinical expertise and business skills makes him/her an effective patient advocate and the bridge between quality of care and allocation of financial resources (Welch, T. D., & Smith, T., 2020).

Another example is the variation in charges in admission and the number of admissions, planned and actual; healthcare often uses variance analysis to explain the variances between planned and actual costs and charges (Dove & Forthman, 1995). Price variance can become unfavorable when the forecasted admission is not met. Other factors affecting price variance are reimbursement rates, length of stay, transition to a different level of care, documentation that can lead to under-coding or claim denials, or regulatory/policy changes. A favorable price variance may occur in a rehabilitation facility when a higher-acuity patient mix leads to increased reimbursement rates. Additionally, thorough and accurate documentation by therapists and nurses enables correct coding, which can further contribute to higher reimbursement rates.   

Key stakeholders in terms of staffing and labor variances in clinical areas are the nurses and nurse assistants, who are directly impacted by staffing decisions, workload distribution, and labor policies. Nurse managers are responsible for scheduling and budget adherence. Patients and families who are the recipients of care are greatly affected by the staffing and labor variances. In terms of price variances, the key stakeholders also include the operational side of the healthcare – executives who oversee budget performance and strategic planning, the finance department, and the human resources. Other key stakeholders are the regulatory and compliance committees.

Knowing the favorable and unfavorable variances would help me become financially competent and develop my critical thinking skills. Gaining insight into the financial aspects of healthcare will enable me to excel as a leader by enhancing not only my clinical expertise but also my ability to develop effective strategies and plans that contribute to the unit’s overall success.

References

Dove, H. G., & Forthman, T. (1995). Helping financial analysts communicate variance analysis. Healthcare Financial Management, 49(4), 52-4.  https://www.proquest.com/trade-journals/helping-financial-analysts-communicate-variance/docview/196370750/se-2 Links to an external site.

Franklin, M., Graybeal, P., & Cooper, D. (2019). 8.3 compute and evaluate labor variances. In Principles of Accounting, volume 2: Managerial accounting. OpenStax.  https://openstax.org/books/principles-managerial-accounting/pages/8-3-compute-and-evaluate-labor-variances Links to an external site.

Welch, T. D., & Smith, T. (2020). Understanding FTEs and Nursing Hours Per Patient Day. Nurse Leader, 18(2), 157–162.  https://doi.org/10.1016/j.mnl.2019.10.003 Links to an external site.

Colleague 2

Angela Eaker

Variance analysis plays a vital role in managerial decision-making by allowing leaders to compare actual performance against budgeted or standard expectations. This comparison helps identify areas where costs can be controlled and operational efficiency can be improved (Franklin, Graybeal, & Cooper, 2019). In my professional experience at the Southeastern Community College, I encountered both highly favorable and unfavorable variances. A favorable variance occurred when digital learning tools reduced the need for printed materials, resulting in supply costs being 20% below budget. Conversely, an unfavorable variance emerged when student attendance dropped unexpectedly, leading to underperformance on grant-funded benchmarks. These variances significantly impacted stakeholders such as program funders, instructional staff, and students. Funders were concerned about performance metrics, while staff had to adjust schedules and instructional strategies. Understanding these variances more thoroughly could have helped me make better decisions by reallocating resources proactively and communicating more effectively with stakeholders. As Walden University (2024) emphasizes, formalizing the variance analysis process enhances transparency and supports strategic planning. Additionally, recognizing the difference between fixed and variable costs—such as staffing versus materials—can help managers focus on areas where efficiency gains are most achievable (Franklin et al., 2019). Overall, variance analysis is not just a financial tool but a strategic resource for improving organizational performance and stakeholder satisfaction.

References

Franklin, M. A., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 2: Managerial accounting (2nd ed.). OpenStax. https://openstax.org/books/principles-managerial-accounting/pages/preface

Walden University. (2024). Variance analysis and decision-making. Walden University Blackboard.

Account for Management Decision Making

Week 5 Discussion Response

Colleague 1

Maria Espenida

While preparing this discussion post, I found it challenging to identify specific examples of variances from my professional experience as a nurse. Although I understand the concept of variances and their importance in decision-making, specific examples may not be accurate and readily available. Executives do not give exact details on costs and possible variances in healthcare.  Instead, we hear terms like hourly rate, labor costs, overtime pay, and FTEs that are related to labor variance analysis. I instead searched for articles that can be related to this topic and how it can be applied in healthcare. Usually, the first-level managers are typically responsible for the daily operation of the unit, focusing on meeting the financial requirements while ensuring efficient and quality patient care, but oftentimes, they do not have very much training about finances (Welch, T. D., & Smith, T., 2020). Charge nurses are typically not fully trained on the financial side of healthcare. 

In nursing workforce management, the Full-Time Equivalent (FTE) metric plays a critical role in analyzing labor variance and aligning staffing with financial performance. Nurses are paid per hour worked. For a full-time nurse, 1.0 FTE means the employee will work 80 hours (Welch, T. D., & Smith, T., 2020). As the manager provides a staffing plan based on the standard number of patients and FTE. If the census is below the standard number and the FTE is high, it results in unfavorable variance.  As a manager, you will check why the unfavorable variance occurred. Could it be because of nursing workload, patient acuity, or skill mix? The first-level manager with clinical expertise and business skills makes him/her an effective patient advocate and the bridge between quality of care and allocation of financial resources (Welch, T. D., & Smith, T., 2020).

Another example is the variation in charges in admission and the number of admissions, planned and actual; healthcare often uses variance analysis to explain the variances between planned and actual costs and charges (Dove & Forthman, 1995). Price variance can become unfavorable when the forecasted admission is not met. Other factors affecting price variance are reimbursement rates, length of stay, transition to a different level of care, documentation that can lead to under-coding or claim denials, or regulatory/policy changes. A favorable price variance may occur in a rehabilitation facility when a higher-acuity patient mix leads to increased reimbursement rates. Additionally, thorough and accurate documentation by therapists and nurses enables correct coding, which can further contribute to higher reimbursement rates.   

Key stakeholders in terms of staffing and labor variances in clinical areas are the nurses and nurse assistants, who are directly impacted by staffing decisions, workload distribution, and labor policies. Nurse managers are responsible for scheduling and budget adherence. Patients and families who are the recipients of care are greatly affected by the staffing and labor variances. In terms of price variances, the key stakeholders also include the operational side of the healthcare – executives who oversee budget performance and strategic planning, the finance department, and the human resources. Other key stakeholders are the regulatory and compliance committees.

Knowing the favorable and unfavorable variances would help me become financially competent and develop my critical thinking skills. Gaining insight into the financial aspects of healthcare will enable me to excel as a leader by enhancing not only my clinical expertise but also my ability to develop effective strategies and plans that contribute to the unit’s overall success.

References

Dove, H. G., & Forthman, T. (1995). Helping financial analysts communicate variance analysis. Healthcare Financial Management, 49(4), 52-4.  https://www.proquest.com/trade-journals/helping-financial-analysts-communicate-variance/docview/196370750/se-2 Links to an external site.

Franklin, M., Graybeal, P., & Cooper, D. (2019). 8.3 compute and evaluate labor variances. In Principles of Accounting, volume 2: Managerial accounting. OpenStax.  https://openstax.org/books/principles-managerial-accounting/pages/8-3-compute-and-evaluate-labor-variances Links to an external site.

Welch, T. D., & Smith, T. (2020). Understanding FTEs and Nursing Hours Per Patient Day. Nurse Leader, 18(2), 157–162.  https://doi.org/10.1016/j.mnl.2019.10.003 Links to an external site.

Colleague 2

Angela Eaker

Variance analysis plays a vital role in managerial decision-making by allowing leaders to compare actual performance against budgeted or standard expectations. This comparison helps identify areas where costs can be controlled and operational efficiency can be improved (Franklin, Graybeal, & Cooper, 2019). In my professional experience at the Southeastern Community College, I encountered both highly favorable and unfavorable variances. A favorable variance occurred when digital learning tools reduced the need for printed materials, resulting in supply costs being 20% below budget. Conversely, an unfavorable variance emerged when student attendance dropped unexpectedly, leading to underperformance on grant-funded benchmarks. These variances significantly impacted stakeholders such as program funders, instructional staff, and students. Funders were concerned about performance metrics, while staff had to adjust schedules and instructional strategies. Understanding these variances more thoroughly could have helped me make better decisions by reallocating resources proactively and communicating more effectively with stakeholders. As Walden University (2024) emphasizes, formalizing the variance analysis process enhances transparency and supports strategic planning. Additionally, recognizing the difference between fixed and variable costs—such as staffing versus materials—can help managers focus on areas where efficiency gains are most achievable (Franklin et al., 2019). Overall, variance analysis is not just a financial tool but a strategic resource for improving organizational performance and stakeholder satisfaction.

References

Franklin, M. A., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 2: Managerial accounting (2nd ed.). OpenStax. https://openstax.org/books/principles-managerial-accounting/pages/preface

Walden University. (2024). Variance analysis and decision-making. Walden University Blackboard.