DNP 840 Module 7 Variance Analysis and Benchmarking Example

Behind the Numbers at Six Months: Variance Analysis and Benchmarking for a Nurse-Led Dementia Care Program

Student Name

Doctor of Nursing Practice Program, Aspen University

DNP 840: Strategic Planning and Financial Management

Instructor Name

Month Day, Year

Behind the Numbers at Six Months: Variance Analysis and Benchmarking for a Nurse-Led Dementia Care Program

Every budget is a forecast, and actual results never match it exactly. Variance analysis measures those differences and, more importantly, separates them into parts that point to their causes: whether the service saw more or fewer patients than planned, paid more or less per unit of resource, or used more or fewer resources per patient (Finkler et al., 2013). Benchmarking adds a second view by comparing performance with standards and with peers. This paper reports both for the composite health system's dementia care program at the end of its first six months.

Revenue Variance

The program budgeted an average enrollment of 120 patients over the first six months, at a planned average navigation payment of $180 per patient per month, for revenue of $129,600. Actual average enrollment was 96 and the actual average payment was $172, producing $99,072, a shortfall of $30,528.

The shortfall has two parts. The volume variance, the effect of serving fewer patients at the budgeted rate, is 24 fewer patients times six months times $180, or $25,920 unfavorable. The rate variance, the effect of the lower payment on the patients actually served, is $8 times 96 patients times six months, or $4,608 unfavorable. Most of the problem is volume. The lower rate occurred because more patients than expected were assigned to the lower-complexity payment tier; a chart review found that about one in eight had documented needs that would have qualified them for a higher tier.

Care Manager Cost Variance

The largest expense line, registered nurse care managers, shows why a flexible budget is needed. The static budget planned an average of three care managers for the six months, or 3,120 hours at an average cost of $47.12 per hour, for $147,000. Actual cost was $158,400 for 3,000 hours at an average of $52.80 per hour, an overall variance of $11,400 unfavorable. That single figure hides three different stories.

Restating the budget at the volume actually served is the job of a flexible budget. During startup, the budget's staffing standard was 26 care manager hours per enrolled patient over the half year, well above the steady-state caseload of 100 families per nurse, because every new family needs an intake home visit, a full assessment and a first care plan. At that standard, 96 patients should have required about 2,496 hours, costing $117,600. Comparing the flexible and static budgets gives the volume variance: $29,400 favorable, because fewer patients should have needed fewer hours. Comparing actual hours with flexible hours at the budgeted rate gives the efficiency variance: 504 extra hours times $47.12, or $23,746 unfavorable. Comparing actual and budgeted rates on actual hours gives the rate variance: $5.68 more per hour times 3,000 hours, or $17,054 unfavorable.

Explaining the Variances

Numbers identify where to look; the explanations come from the program. The efficiency variance does not mean care managers worked slowly. Staff were hired for a caseload of 120 that did not arrive, and a nurse cannot be partly employed while enrollment catches up, so each care manager averaged about 33 enrolled families instead of the 40 the startup budget assumed. The hours were real, but some capacity went unused. The rate variance came from one care manager vacancy that was filled for three months by an agency nurse at a higher hourly cost.

Enrollment lagged because referrals depended on primary care clinicians remembering to refer during busy visits. In the two practices where a nurse reviewed the schedule each week and flagged patients with a dementia diagnosis, enrollment met its target; in the others it ran well below.

Actions

The variance analysis leads to four actions. First, extend the weekly schedule review to all participating practices and add an electronic referral prompt for patients with a dementia diagnosis, so that the volume variance, the main problem, is addressed at its cause. Second, have care managers use their unfilled caseload capacity for outreach calls to eligible families, which converts idle hours into enrollment. Third, fill the vacant position with a permanent hire and end the agency contract. Fourth, train care managers to document the needs that determine payment tier, and review tier assignments monthly. The program will not reduce care manager staffing, because the volume shortfall is expected to close and hiring back would take months.

Benchmarking Quality

Financial variance tells only part of the story. Benchmarking is often misunderstood as simply comparing indicators; in fuller form it is a collaborative process in which organizations share measures, visit one another and adopt the practices behind better results, as part of continuous quality improvement (Ettorchi-Tardy et al., 2012). As a first step, the program compared its care with national dementia management quality measures developed by neurology, geriatrics and other professional groups, which include assessing cognition, function and neuropsychiatric symptoms, screening for depression, counseling on safety, advance care planning and caregiver education and support (Odenheimer et al., 2013).

A review of 120 enrolled patients' records found strong performance on caregiver education and support (94%), depression screening (88%) and neuropsychiatric symptom assessment (90%), but weaker performance on advance care planning (61%) and safety counseling, including driving (78%). The program has set targets of 85% for both and joined a regional network of dementia care programs that shares emergency department visit rates and caregiver strain scores, so that future benchmarking can compare outcomes as well as processes.

Conclusion

Six months into the dementia care program, variance analysis shows a revenue shortfall driven mainly by lower enrollment and a care manager cost overrun made up of unused capacity and temporary agency costs, not poor productivity. Benchmarking shows good performance on most dementia care measures and clear gaps in advance care planning and safety counseling. Used together, the two tools direct leaders to fix referrals, protect staffing and strengthen specific parts of care rather than cutting the service to match a volume that is still growing.

References

Ettorchi-Tardy, A., Levif, M., & Michel, P. (2012). Benchmarking: A method for continuous quality improvement in health. Healthcare Policy, 7(4), E101-E119. https://doi.org/10.12927/hcpol.2012.22872

Finkler, S. A., Jones, C. B., & Kovner, C. T. (2013). Financial management for nurse managers and executives (4th ed.). Elsevier Saunders.

Odenheimer, G., Borson, S., Sanders, A. E., Swain-Eng, R. J., Kyomen, H. H., Tierney, S., Gitlin, L. N., Forciea, M. A., Absher, J., Shega, J., & Johnson, J. (2013). Quality improvement in neurology: Dementia management quality measures. Neurology, 81(17), 1545-1549. https://doi.org/10.1212/WNL.0b013e3182a956bf