Exam 1 Flashcards
What are some of the industries in the healthcare sector?
Health services, Health Insurance, Medical Equipment and supplies, Pharmaceuticals and Biotechnology, and others
Healthcare Finance
How you deal with the finance of a healthcare facility. You also have to deal with deductions and third party payers
What are the two broad areas of healthcare finance?
Financial Management and Accounting
What is the difference between a business and a pure charity?
A business sustains itself by selling its goods or services; a pure charity gets its funds contributions
The role of finance in the health services industry.
Have a plan for how funds will be used, acquire,
and to use these resources to have maximum efficiency and value. Increased because of decreased reimbursements.
Hospitals
They give diagnostic and therapeutic services to individuals who require more than several hours of care (inpatient)
Ambulatory care
They work on an outpatient basis to provide quick same day services
Home health care
A range of health care that can be administered at your own home.
Long-term care
Entails the provision of healthcare services, as well as some personal services, to individuals who lack some degree of functional ability.
Integrated delivery systems
Combines hospital care, ambulatory care, long term care, and business support services into a single entity
What are the benefits attributed to integrated delivery systems?
- Patients are kept in the corporate network of services
- Providers have access to managerial and functional specialists
- Information systems
- Better access to capital
- Better recruit and retain management
- Complete package of services (“one-stop shopping”)
- Incentives can be created that encourage all providers in the system to work together for the common good of the system, which has the potential to improve quality and control costs
What role does regulation play in the health services industry?
It helps to protect the health, safety, and welfare of the public.
What is the structure of the finance function within health services organizations?
CEO - CFO - Two senior managers (Controller/Treasurer) - Patients Accounts Manager (Controller) and Cash Manager (Treasurer)
If it is small then a Business Practice Manager
What is the primary legal issue, facing providers today?
Malpractice (Professional Liability)
What are the major current concerns of healthcare managers?
Reimbursement from CMS and bad debt losses
Advantages/Disadvantages of Proprietorship
Advantages - Less tax, more control over business, no corporate tax
Disadvantages - Personally liable for debts/obligations, difficult to sell interest, life of business limited to owners
Advantages/Disadvantages of Partnership
Advantages - Low cost, ease of formation, taxation on personal income
Disadvantages - Personally liable for debts/obligations, difficult to sell interest, life of business limited to owners
Advantages/Disadvantages of Corporation
Advantages - Unlimited life, easy to transfer ownership, limited liability
Disadvantages - Double taxation (once at the corporate level and then again at the personal level), Setting up a corporation, and then filing the required periodic state and federal reports, is more costly and time consuming
Investor Owned (For Profit)
Stockholders vote on who’s on the board and other major things that will effect the entire company
Not For Profit
Stakeholders, who have a great interest in the company
They do not pay taxes; they can accept tax-deductible contributions, and they can issue tax-exempt debt
Primary goal of investor-owned corporations
Shareholder wealth maximization or stock price maximization
Primary goal of most not-for-profit healthcare corporations
Fulfill the mission statement
Differences between the finance goals of investor-owned and not-for-profit corporations
For profit want to keep the shareholders happy, while not for profit have a much higher focus on a mission statement that will lead them to a financial soundness.
In both kinds, if they aren’t financially sound, then they will fail
Agency problem
Principals hire on agents to make decisions. The problem arises when the agents begin to act out of self-interest and not what would be best for the company.
Why are tax laws important to healthcare finance?
Taxes reduce usable cash flows
What three major advantages do tax laws give to not-for-profit corporations?
- No income or property tax
- Lower/exempt debt/interest payments
- Contributions made to the corporation are tax deductible to the donor
Form 990
They report on a not-for-profit organization’s governance structure and community benefit services, to IRS
Major third-party payers
Private Insurers - Blue Cross/Blue Shield, Commercial Insurers, Self Insurers
Public Insurers - Medicare/Medicaid
What are the primary characteristics of managed care plans?
They strive to combine the provision of healthcare services with the insurance function into one single entity.
Types of managed care plans.
1) Health Maintenance Organization (HMO) – they aim to reward providers for treating patients and give little incentive to prevention or rehabilitation services
2) Preferred Provider Organization (PPO) – patients aren’t required to use a certain provider but are given incentives to do so. The insurance company has contracts with these providers.
3) Point of Service (POS) plan – they require the patient to get service from certain locations or pay a lot more to be treated.
Difference between fee-for-service reimbursement and capitation
Fee for service - you pay for the number/type of services provided
Capitation - reimbursement methodology that is based on the number of covered lives as opposed to the amount of services provided.