Question 1

You, as the nurse manager, have done the budget on an annual basis for the last 5 years. What data should you consider in order to forecast your pro-rated share of the organization's utilities costs?

Accepted Answer

In order to forecast your pro-rated share of the organization's utilities costs, you should consider the average of all of your utility cost changes over the last 5 years. These changes will most likely be increases, rather than decreases. For example, if you notice that your share of the organization's utility costs has increased at the rate of 7% over the last 5 years, it is reasonable to believe that this trend will continue. You can then project, or forecast that next year's cost will be about 7% more than the previous year.

Question 2

You have just begun the role of the Director of Emergency Services in a new Los Angeles community hospital. How can you best project, or forecast, expenses for this department after having 5 years of experience in a similar role located in Tampa, Florida?

Accepted Answer

The best way to project, or forecast, expenses for this department after having 5 years of experience in a similar role located in Tampa, Florida is to systematically and objectively collect data from similar departments of similar size in your new geographic area until historical data is available. Many expenses, including salaries, utilities, supplies, and equipment, vary across the country so your proximate geographic area is the best source for these kinds of expense data, not a distant area like Tampa, Florida. Over time, you will have collected your own historical data to use.

Question 3

Budgets must be attainable, reasonable and realistic. Accurate expense and revenue forecasting facilitates:

Accepted Answer

Accurate expense and revenue forecasting facilitates attainable budgets without variance. Budgets are not attainable, but instead filled with variances, when expenses and revenues are not forecasted accurately. Forecasting is essential to the budgeting process.

Question 4

Which complex skill is necessary for accurate expense forecasting?

Accepted Answer

Accurate expense forecasting is dependent upon the ability of the financial manager to use complex data collection and analysis skills. The expense forecasting process is data driven and not based on inductive reasoning, intuition or evidence based clinical practices. It is a complex analytical process.

Question 5

Your hospital is in a rural area where the construction of a nuclear power plant has been recently completed. This plant will be fully operational in January of next year. What expenses can you reasonably forecast for next year?

Accepted Answer

You can reasonably forecast increased staff relating to the increased community needs that result from the presence of the new power plant. The introduction of this new plant will increase both expenses and revenues for this rural hospital. Some increased expenses can be increases in staff salaries, the cost of new decontamination equipment (capital expense), and additional personal protective equipment, as required by OSHA (operating expense). You can also forecast that increased revenues will be generated when the plant workers utilize your hospital's resources.

Question 6

What part of Medicare covers the cost of durable medical equipment like wheelchairs and blood glucose monitors?

Accepted Answer

Medicare Part B covers the cost of durable medical equipment such as wheelchairs and blood glucose monitors. Other pieces of durable medical equipment include glucose testing strips, oxygen, patient lifts, commodes, walkers, hospital beds and nebulizers that are ordered by the doctor for use in the home. Some of these pieces of equipment are purchased; others are rented. The patient is responsible for 20% of the cost, and Medicare covers the other 80% of the cost.

Question 7

Medicare reimbursement is a type of what type of reimbursement?

Accepted Answer

Medicare reimbursement is considered a prospective reimbursement system. Health care facilities are reimbursed at a fixed amount according to the patient's diagnosis, any necessary procedures, and the acuity level of the patient. Medicare reimbursement is NOT based on the actual costs of services provided to the patient. Prospective reimbursement aims to contain costs.

Question 8

A major difference between Medicare and Medicaid is that Medicare:

Accepted Answer

Medicare covers individuals over 65 years of age and also those less than 65 years of age, provided that they have a well-documented, permanent, and serious disability. Medicaid provides funding for, and access to, health care services for low income and/or indigent families and individuals. Medicare and Medicaid are considered both regulatory and accreditation bodies. Medicare and Medicaid regulate health care facilities receiving these funds, and they also accredit, or approve, health care facilities in terms of their ability to be compliant with established standards, thus making them eligible for this governmental health care funding.

Question 9

Which health care services are reimbursed according to resource utilization groups?

Accepted Answer

Resource utilization groups, or RUGS, are the basis of reimbursement for long-term care facilities. RUGs reflect the amount of care and service that is needed for each resident in a long-term care setting. The facility is given a daily prospective payment based on the resident's specific RUG.

Question 10

The established standards and guidelines used by the Centers for Medicare and Medicaid Services (CMS) are referred to as:

Accepted Answer

The established standards and guidelines used by the Centers for Medicare and Medicaid Services (CMS) are referred to as Conditions of Participation (CoP). These standards ensure the quality of care and services provided and the safety of those covered with Medicare and Medicaid.

Question 11

A budget variance can be interpreted, or analyzed, as something that:

Accepted Answer

A budget variance can be interpreted, or analyzed, as something that can be both controllable and uncontrollable. For example, budget expense variances can be related to patient census and acuity levels (uncontrollable factors) and lower productivity as well as overtime (controllable factors). Although some budget variances may be the result of incompetent budgeting, most budget variances arise from both controllable and uncontrollable factors.

Question 12

Your department's total assets of $ 405,900, when compared to your department's total liabilities of $412,987, indicates that your department has an Asset/Liability Ratio of 0.98. How would you interpret this data?

Accepted Answer

Your department has very little liquidity when the Asset/Liability Ratio is 0.98. The assets of $405,900 reflect the value of inventory, revenue, and money owed to the department, among other things. The $412,987 in liabilities reflects things that have to be paid by the department. Some of these things are employee salaries and debts that have to be paid to a supplier or vendor, among other things. The higher the ratio, the better the financial status of the department. This ratio of 0.98 indicates that liabilities have to be decreased and/or assets have to be increased in order to ensure financial health.

Question 13

Your department's Asset/Liability Ratio is 0.87. You belong to a community nursing administrators' group where you learn that the mean, or average, Asset/Liability Ratios for all departments like yours is 2.27. What are the implications of this comparative data?

Accepted Answer

The implications of this comparative data includes the fact that you should further explore this data and determine what things you can do in order to increase your Asset/Liability Ratio. This data indicates that similar departments in your geographic area are in significantly better financial health than yours. The greater the Asset/Liability Ratio, the better the financial state is. Your Asset/Liability Ratio of 0.87 is far less than your community's average of 2.27.

Question 14

You observe a positive variance in terms of your operating expenses during your monthly review of the departmental budget. After analysis, you have determined that the source of the variance is patient care supplies. What should you do?

Accepted Answer

You should praise the staff because they have successfully conserved patient supplies. A positive variance means that the amount of money actually spent is LESS than the amount that was anticipated. A negative variance indicates that the amount of money actually spent is MORE than the amount that was anticipated. In this scenario, a positive variance in the patient supplies area indicates that you are spending less than expected, or forecasted.

Question 15

Select a type of variance that is paired with a possible corrective action.

Accepted Answer

A negative variance warrants corrective actions that can increase efficiency. Other corrective actions can include measures to increase productivity. Although positive variances should also be explored to ensure continued, and upward, financial success, it is negative variances that require corrective action.

Quiz 6: Finances