Final answer:
Two flexible budgets must be constructed to calculate volume variance for a group practice with changes in capitated enrollees: one based on expected capitated patients and another for actual capitated patients. This allows differentiation between enrollment and utilization variances.
Step-by-step explanation:
To calculate the volume variance for a group practice that has both capitated and fee-for-service (FFS) patients and where the number of capitated enrollees has changed over the budget period, two flexible budgets must be constructed. The first flexible budget would be based on the expected number of capitated patients, while the second flexible budget would be created for the actual number of capitated patients. The utilization component can be analyzed based on the actual usage of medical services by the fee-for-service patients as compared to the expected usage. The enrollment component of the variance focuses on the differences in expected and actual numbers of capitated patients, while the utilization component of the variance considers the differences in actual medical services used by patients compared to what was expected. This breakdown into enrollment and utilization components allows the practice to pinpoint the source of the variance and make informed decisions.