Deck 10: Managing Costs and Revenues

Question 1

Financial accounting's primary purpose is to communicate financial information and performance to all of the following external users, except:

A) patients.
B) stockholders.
C) the government.
D) lenders.
E) insurers.

Answer 1

A

Question 2

For-profit, investor-owned health care organizations generally raise money from all of the following sources, except:

A) selling stock.
B) lenders.
C) patient revenue.
D) community fundraising.

Answer 2

D

Question 3

The primary function of the Governing Body or Board of Directors in a health care organization is to ensure which of the following?

A) The employees within the company are treated fairly
B) The chief operating officer position is properly filled
C) The proper use of resources
D) The recruitment of staff is successful
E) None of these is correct.

Answer 3

C

Question 4

All the following are examples of fixed costs, except:

A) rent.
B) electricity.
C) supplies.
D) depreciation.

Question 5

ABC stands for:

A) assuming basic competence.
B) assuring best care.
C) accounting-based compliance.
D) activity-based costing.

Question 6

Opportunity costs include all of the following, except:

A) breaking a leg.
B) time sacrificed in acquiring services.
C) the perceived value.
D) money spent.

Question 7

The meaning of contractual allowance is

A) Ensures the hospital or provider will get paid 100% of billed charges for services rendered.
B) The minimum amount an insurance carrier will pay a hospital or provider for services rendered.
C) The contract set up between the patient and provider for allowable patient charges
D) The maximum amount an insurance company will pay a hospital or provider for services rendered.
E) None of these is correct.

Question 8

The Controller of a hospital typically reports to the:

A) treasurer.
B) chief executive officer.
C) internal auditor.
D) chief operating officer.
E) chief financial officer.

Question 9

Capitation is a reimbursement model in which providers are compensated by which of the following?

A) Billing charges, which are typically paid at a contractual amount
B) Based on quality measures and patient satisfaction
C) A defined dollar amount per each day care is provided
D) A fixed amount per enrollee "member" per month

Question 10

Variable costs consist of all the following, except:

A) supplies.
B) salary employees.
C) hourly employees.
D) medication.

Question 11

Which department is responsible for managing an organization's master budget?

A) The accounting department
B) The operations department
C) The purchasing department
D) The finance department

Question 12

Most often, in larger health care organizations, budget planning calendars are utilized for:

A) scheduling organizational events.
B) scheduling when to hire or lay off employees.
C) scheduling activities surrounding the completion of the budget.
D) planning the purchase of supplies.

Question 13

The operating budget within a health care organization generally looks at which of the following components?

A) Balance sheet
B) Revenues and expenses
C) Investments
D) Assets, liabilities, and equity

Question 14

Which of the following is the formula used to calculate ending cash?

A) Ending cash = beginning cash - cash outflows + investment income
B) Ending cash = cash inflows - cash outflows
C) Ending cash = cash inflows - beginning cash - cash outflows
D) Ending cash = beginning cash - cash inflows - cash outflows

Question 15

When it comes to capital budgeting, capital budgets typically take into consideration all the following, except:

A) the increase in employee satisfaction.
B) estimated useful life.
C) funding amounts.
D) depreciation expense.
E) Capital budgets take all of these into consideration.

Question 16

Managerial accounting is most often provided for and used by external users.

Question 17

For-profit health care organizations may issue stock to raise capital.

Question 18

The chief operating officer (COO) is responsible for the financial management function of an organization.

Question 19

In some organizations, the chief operating officer (COO) and chief financial officer (CFO) may be the same person.

Question 20

A major focus in health care finance is the managing of third-party reimbursement.

Question 21

The most common retrospective reimbursement method is fee-for-service.

Question 22

CMS stands for Centers for Medicare & Medicaid Services.

Question 23

The most common type of prospective reimbursement is capitation.

Question 24

CPT stands for Current Procedural Terminology

Question 25

Payments to providers/hospitals from insurance companies are generally paid within a day or two.

Question 26

ICD stands for Internal Class of Diseases.

Question 27

The U.S is currently using ICD-9 codes.

Question 28

Supply chain management is the practice of managing clinical and non-clinical goods and inventory.

Question 29

Government-owned health care organizations generally pay taxes on profits.

Question 30

Capitation shifts the risk of coverage from the insurer to the provider of health care.

Question 31

Charges and actual prices refer to the same phenomenon in health care organizations.

Question 32

Virtually all financial experts define working capital as "total current assets."

Question 33

The end result of working capital management is to increase revenues and reduce expenses.

Question 34

The method for stocking inventory in which each supply item is categorized as belonging to one of three groups, largely based on costs, is called the ABC Inventory Method.

Question 35

There should always be a mechanism in the decision process to purchase some capital acquisitions "no matter what."

Question 36

Financial principles are not affected by external factors such as policy changes, the economy, etc.

Question 37

A for-profit health care organization may participate in political campaigns and influence legislation.

Question 38

Private health plans normally only use one method of reimbursement to providers.

Question 39

The World Health Organization (WHO) manages ICDs.

Question 40

Cost allocation is necessary to ensure that patients are only paying for the services they are using.

Question 41

Distinguish among the following costs:

A) Fixed
B) Variable
C) Semivariable
D) Controllable
E) Direct

Question 42

In healthcare services delivery, what are the differences among prices, charges, and costs?

Question 43

Compare and contrast managerial and financial accounting methods, including who is responsible for

Question 44

To speed up results and improve patient counseling in his new solo family practice, Dr. Jones decides to buy an in-office, point of care hemoglobin A1C test kit. He goes online and finds a document on point of care testing (Attachment A). He thinks this could be a good investment for his practice.
It looks as if this might be a win-win for Dr. Jones and his patients and he's ready to buy it, but his wife is a health care financial manager. She knows that a break-even analysis is the best way to determine if the purchase will be worthwhile to the practice. She decides to do some research, too. She finds lots of information, too. (Attachment B).
Dr. Jones rents a small suite of offices in an old house in Smallville, Kansas. He has an exam room, a bathroom, a waiting room, a front desk, and an office. Dr. Jones employs one part-time (20 hours per week) certified medical assistant who earns $20,000/year or about $400/week or about $20/hour.
At this point in his career, Dr. Jones has 1000 patients in his files, and about 20% (200) have diabetes mellitus (DM). Of the 200, about 100 have poorly controlled DM and 100 have well-controlled DM.
Using the information above, answer the following questions.
What types of costs and revenues does Mrs. Jones include in her break-even analysis?
Based on the documents and the number of patients with DM, how many patient tests does Mrs. Jones estimate will be feasible in the first year of owning the machine?
Which of the costs are fixed, variable, and semivariable?
What are the low and high estimates for costs on this purchase?
What hidden costs might there be that are not in these documents?
What are the low and high estimates for revenues on this purchase?
Based on her findings, what does Mrs. Jones recommend to Dr. Jones about this purchase?