This case deals with funding, budgeting, and performance measurement in public hospitals. Data from the Orthopedic Unit at St George Hospital is used to examine efficiency and effectiveness of management in meeting budgeted targets. The Orthopedic Unit provides treatment for two common diagnosis-related group (DRG) treatments: hip replacement surgery, commonly performed on older patients with arthritic pain or hip fractures; and arthroscopy surgery for soft tissue knee injuries, commonly a result of sporting injuries in the younger population. As a business consultant, you will help Vera Jones, a newly graduated accountant, to develop a flexible budget, and calculate price, cost, and patient volume variances. You will then review the results in conjunction with St George Hospital's balanced scorecard to determine the quality of public sector service delivery and the ability to meet patient demands within the bounds of budgetary constraints.