Finance Flashcards
Accounts payable
Amounts an organization owes to suppliers and other trade creditors for merchandise and services purchased from them, but for which the organization has not yet paid.
Accounts receivable
Amounts due to an organization from patients and insurers for services the organization has already provided. The concept of accounts receivable is often now called revenue cycle, a multidisciplinary approach to reducing the amount in accounts receivable by effectively managing the production and payment cycles.
Accrued expenses payable
Liabilities for expenses that have been incurred by the hospital but for which the hospital has not yet paid, such as compensation to employees.
Any-willing-provider statutes
Patient protection laws that allow patients to receive care from providers outside a network.
Asset efficiency ratios
Ratios that measure efficiency by comparing revenue to assets.
Balance sheet
A statement that shows an organization’s financial position at a specific point in time
Break-even analysis
An analysis to determine the volume point at which a project will cover its costs; can be helpful to organizations considering new projects, developing a business plan, or formulating a pricing strategy.
Budgeting
The process of converting the operating plan into monetary terms.
Capital budgeting
The process of converting the operating plan into budgets for capital expenditures.
Capital structure ratios
Ratios that measure an organization’s long-term liquidity by measuring a variety of relationships to capital.
Capitated price
A fixed monthly payment to providers from a third-party payer for each person enrolled in the payer’s plan, regardless of whether any given individual receives care. Also known as capitation, this payment model incentivizes a healthcare organization to keep its population from using more healthcare services than necessary because it profits only if the total cost of treating the population is less than the total capitated price.
Charges
The amount patients are expected to pay for services; also called prices or rates.
Comprehensive budgeting
Integration of all budgets into one document.
Continuous budgets
Budgets that are updated continuously so that year end never occurs.
Current assets
Resources that an organization expects to consume within one year.
Current liabilities
Economic obligations, or debts, that are due within one year.
Current Procedural Terminology
A set of medical codes used to report medical, surgical, and diagnostic procedures and services.
Deferred revenue
Money received by the hospital but not yet earned, such as registration fees for an educational program not yet provided.
Diagnosis-related group
A grouping of similar healthcare cases that should require similar resource consumption; Medicare uses diagnosis-related groups to calculate prospective payments.
Differential costing
A method of assembling costs (and sometimes revenues) to alternative decisions; also known as incremental costing or relevant costing.
Direct contracting
The practice of an employer making a contractual agreement directly with an integrated delivery system to deliver health services to employees.
Discrete budgets
Budgets that apply to a fixed period of time, usually a year.
Excess of revenues over expenses
Operating income plus nonoperating income minus total expenses.
Fixed budgets
Budgets that assume volumes, related revenues, and variable expenses remain constant during the year.
Flexible budgets
Budgets that take into account fluctuations in volumes, at least within ranges expressed as probabilities, and adjust variable expenses accordingly.
Four ways to finance capital expenditures
Funded depreciation, philanthropy, operating surpluses, and debt.
Fraud and abuse
Fraud is an intentional misrepresentation of fact designed to induce reliance by another; abuse is an unintentional misrepresentation of fact.
General ledger
Technically, the record of all of a firm’s transactions; often refers to the fixed and collective assets, such as depreciation, that must be allocated to operational units.
Gross revenue
An entry to the patient ledger of the charge for a specific healthcare service; no longer a meaningful measure.
High-deductible health plan
A health insurance plan with higher deductibles and lower premiums than traditional health plans.
Incremental budgeting
Budgeting only for changes, such as new equipment; the assumption in incremental budgeting is that the current budget is already optimal.
Internal rate of return
The minimum return one needs to break even on an investment; it is the necessary net present value of an investment that, when added to the final market value of the investment, equals the current cost of the investment.
Limited-in-scope budgeting
Budgeting that segregates the budgets.
Liquidity ratios
Ratios that measure an organization’s ability to meet short-term obligations.
Managed care organization
An organization that controls the access to, and cost and quality of, healthcare.
Managerial accounting
A process of restructuring transaction data to support monitoring, planning, setting expectations, and improving performance of accountability centers.
Medicaid
A program created by the federal government, funded by the federal and state governments, and administered by the state government, to provide free or low-cost healthcare to low-income recipients.
Medicare
A federally funded program that provides health insurance to Americans at age 65.
Net assets
The difference between assets and liabilities in a not-for-profit organization, which represents the owner’s and others’ financial interests in the organization.
Net patient services revenue
Money generated by providing patient care minus the amount an organization will not collect as a result of discounting charges per contractual agreement and providing charity care.
Net present value
The present value of the future cash flow of an investment; net present value takes into account the fact that future cash flows are “discounted” to determine their present value.
Net revenue
Income actually received, as opposed to that initially posted; equal to gross revenue minus adjustments for bad debts, charity, and discounts to third parties.
Noncurrent assets
Economic resources that have a life of one year or more (i.e., the organization expects to consume them over a span longer than one year)
Nonoperating revenue
Income generated from non-patient-care activities, including investments in securities and earnings from unrelated businesses.
Operating expenses
Resources used on operations to generate revenue in support of an organization’s mission statement.
Operating income
Money earned from providing patient care services; it includes the total revenue, gains, and other support minus the total operating expenses.
Operating revenue
Net patient services revenue minus provisions for bad debt plus premium revenue and other operating revenue.
Patient ledger
Account of the charges rendered to an individual patient.
Payment cycle
Print bill, submit bill, follow up on bill, collect bill (or bill resolution).
Per-diagnosis rate
A method of paying for healthcare in which the hospital is paid a flat fee for each given diagnosis, regardless of the actual service provided.
Pro forma
A forecast of financial statements establishing the future financial position of an organization for a given set of operating conditions or decisions.
Production cycle
Patient seeks care (obtain demographic data, obtain insurance data, verify insurance coverage, obtain authorizations, obtain deductibles, obtain copays), care is provided (record charges, maintain medical record, review utilization), care is completed (transfer medical record, analyze medical record, abstract medical record, code medical record, transcribe dictation).
Productivity measures
A variety of ratios that measure employee productivity during a shift, day, week, or month and by employee or employees.
Profitability ratios
Ratios that measure an organization’s ability to exist and grow.
Resource-based relative value scale
A Medicare reimbursement system that provides a flat, per-visit fee to physicians rather than reimbursing them according to their customary charges.
Revenues
The amounts earned by an organization or sometimes donated to it.
Sarbanes-Oxley Act
Federal corporate accountability legislation passed in 2002 in the aftermath of the Enron bankruptcy and intended to improve governance and corporate practices.
Sensitivity analysis
Analysis that changes key assumptions upward and downward to ascertain the effects on breakeven.
Strategic financial plan
The link between the strategic plan, which looks three to ten years out, and the operating plan, which looks one year out; in essence, the quantification of a series of strategic planning policy decisions that will answer whether an organization can make progress toward accomplishing its strategic plan over the next ten years.
Temporarily restricted net assets
Donor-restricted net assets that an organization can use for the donor’s specific purpose after the organization has met the donor’s restriction, such as the passage of time or an action by the organization.
Third-party payer
An agent of the patient (the first party) that contracts with a provider (the second party) to pay all or a portion of the bill to the patient.
Time value of money
The concept that money available at the present time is worth more than the same amount in the future because the value of money diminishes over time as a result of inflation, risk, and uncertainty of returns from investments.
Transfer pricing
The “price” charged for intraorganization trade (i.e., the sale or transfer of goods and services within an organization).
Unrestricted net assets
Net assets that have not been externally restricted by donors or grantors, such as the excess of revenues to expenses from operations.
Value-based programs
Programs that reward healthcare providers with incentive payments for the quality of care they deliver to Medicare beneficiaries.
Working capital
The amount of cash required to support operations for the period of delay in collecting revenue.
