Managerial Accounting Final MBa Program - June 2009

1. VARIANCE & COST ANALYSIS
HARVARD VANGUARD MEDICAL ASSOCIATES
POST OFFICE SQUARE
147 Milk Street
Boston, MA 02109
Denise Cook | Allison MacDonald| Tara McKay | Brian Ramos | Betty Seed
Managerial Accounting – Final Presentation

2. Introduction
 Post Office Square Site Information:
 Evaluation of P&L and variance  Patient base significantly younger than
analysis vs. budget. HVMA average.
 Sources of Info:  Busiest departments: Allergy, OB/GYN,
 P&L 2007 & 2008 and Behavioral Health.
 IM & ENT Visit & Budget data  Few specialty services available on-site.
 Interview with Site Administrator  Limited hours; no evening or weekend
hours; busiest from 12PM to 2PM.
 Small Medicare population.
 Massachusetts General Hospital is largest
competitor though MGH is currently closed
to new primary care patients.

3. P&L Variances >10%
REVENUE % Under Budget Recommendations
Rent 24% Rent all space throughout 12-month period; raise rent to cover
overhead. Ensure accurate bookkeeping.
EXPENSES % Over Budget Recommendations
Overtime 195% Budgeted expense should be based on historical data.
Temporary Help Not Budgeted Budgeted expense should be based on historical data.
Medical Supplies 49% Initiate JIT ordering processes to reduce inventory.
More accurate budgeting to reflect increases in cost.
Office Supplies 74% Initiate JIT ordering processes to reduce inventory.
Ensure staff order “standard” supplies to realize greater savings.
Employee Events 69% Continue to invest in employee events but budget accordingly.
Cleaning Services 28% During budget process communicate expected needs to Purchasing.
Building Maintenance 105% Develop long-term plan with Real Estate Dept. to address building
maintenance needs.
Equipment Repairs 19% Develop 5-year equipment replacement plan based on useful life.
Postage 72% Increase enrollment in MyHealth (secure email) to 65% from 14%.
Physician Parking 165% Allocate expense to correct departments.

4. Operating at a Loss
 Post Office Square budgeted for a $2.2 million net
loss because:
 75% of current business is in departments (IM, BH, OB/GYN)
that do not generate significant revenue.
 Few revenue generating specialty departments.
 High cost of occupancy due to downtown location.
 Although POS operates at a loss:
 Important to maintain downtown presence.
 Area is medically underserved.
 Feeds visits to specialty and ancillary services within HVMA.

5. Recommendation #1
Internal Medicine Department Growth
 Grow site membership from 19,000 to 30,000 patients.
 Hire 1 MD/year for 5 years.
 Hire additional clinical & administrative staff to
support increase.
 No build-out expense [utilize existing space].
 Projected capital expense after five years of: $48k.
 Projected net contribution after five years: $1.8 million.
 Growth of IM practice will also increase higher revenue
generating specialty visits within HVMA.

6. Recommendation #2
Ear Nose & Throat Specialty Department
 Recognized need for additional on-site specialty
services and reduce outside utilization expense which
is a direct cost to practice.
 ENT selected to enhance services offered to patients
in POS’ “booming” allergy department.
 Hire 1 ENT MD.
 Hire additional clinical & administrative staff to
support new practice.
 Projected capital expense of: $25k.
 Projected net contribution $333k/year.

7. Conclusion
 Overall POS is an important component of HVMA.
 Opportunities to improve bottom line:
 Capture more of market place through primary care.
 Initiate JIT ordering to reduce inventory costs.
 Utilize existing vacant space.
 Renegotiate leases with existing tenants.
 Recommendations seek to:
 Increase site membership to target of 30k.
 Compliment existing Allergy Department by adding
a related revenue generating surgical department.