Financial Management 2

Question 1

What is a Risk Adjustment Factor (RAF) program?
A. The RAF is used by malpractice payors to determine insurance rates for providers.
B. The RAF is used by commercial payors to determine the amount of risk for a particular clinical procedure.
C. The RAF is used by CMS to adjust payments made to providers to reflect the severity of their enrolled populations.
D. The RAF is used by CMS to adjust payments to providers to reflect the rate of medical errors in their practice.

Answer 1

C, The RAF is used by CMS to adjust payments made to providers to reflect the severity of their enrolled populations.

Question 2

Which of the following is an effective tool for analyzing accounts receivable?
A.	Gross collection rates.
B.	Statement of cash flow.
C.	Aged trial balance.
D.	Net collection rates.

Answer 2

C, Aged trial balance.

Question 3

Which coding system is used to report durable medical equipment provided to a patient?
A. Current procedural terminology (CPT).
B. Health Care Financing Administration Common Procedural Coding System (HCPCS).
C. International Classification of Diseases(ICD-9-CM).
D. Medicare National Correct Coding Initiative (NCCI).

Answer 3

B, Health Care Financing Administration Common Procedural Coding System {HCPCS}.

Question 4

Relative to a flexible budget, which of the following is true?
A. A flexible budget cannot be adjusted to reflect actual volume levels.
B. A flexible budget requires less time and effort to prepare and monitor.
C. A flexible budget cannot be used to analyze volume related variances in the budget.
D. A flexible budget can be a substitute for management or administrative oversight

Answer 4

A, A flexible budget cannot be adjusted to reflect actual volume levels.

Question 5

Which of the following data are required to build a cash budget for a medical group?
A. Beginning cash balance, projected cash receipts and projected cash operating expenses.
B. Beginning cash balance, cash borrowing, debt repayment plans and value of company equity.
C. Projected cash receipts, projected cash operating expenses and number of employees in the practice.
D. Beginning cash balance, projected cash receipts and value of fixed assets.

Answer 5

A, Beginning cash balance, projected cash receipts and projected cash operating expenses.

Question 6

A cash budget includes planned cash receipts and which of the following?
A.	Planned cash disbursements.
B.	Planned non-cash disbursements.
C.	Unplanned cash disbursements.
D.	Planned accounts receivable.

Answer 6

A, Planned cash disbursements.

Question 7

The capital budget of a medical practice does NOT include which of the following?
A. Pricing of a new mammography unit.
B. Cost of operating lease of MRI equipment.
C. Purchase of electronic medical record software.
D. Cost of leasehold improvements.

Answer 7

B, Cost of operating lease of MRI equipment.

Question 8

Which of the following is NOT an example of the information needed to develop a revenue budget?
A. The prior year’s payer mix and fee schedule.
B. The prior year’s actual revenue.
C. Growth projections for the coming year.
D. Anticipated changes in payer mix and fee schedule

Answer 8

A, The prior year’s payer mix and fee schedule.

Question 9

What is an example of a variable cost?
A.	Benefits.
B.	X-ray equipment.
C.	Rent.
D.	Loan principle payments.

Answer 9

A, Benefits.

Question 10

Which of the following is NOT associated with a break-even analysis equation?
A.	Fixed costs.
B. 	Contribution margin.
C. 	Annual profit.
D.	Revenue or sales.

Answer 10

C, Annual profit.

Question 11

Which of the following is a correct definition of variable costs?
A. Costs directly proportional to output.
B. Costs independent of output.
C. Costs directly related to capital development.
D. Costs of an additional unit of service.

Answer 11

A, Costs directly proportional to output.

Question 12

In a fee-for-service setting, after reaching the break-even point in a break-even analysis, what variable needs to be increased to add profit? 
A. 	Cost
B.	Volume
C.	Time
D.	Fixed overhead

Answer 12

B, Volume

Question 13

Recording revenue when services are performed or when products are delivered is called what?
A.	Accrual basis accounting.
B.	Cash basis accounting.
C.	Modified cash accounting.
D.	Balance sheet accounting.

Answer 13

A, Accrual basis accounting.

Question 14

Which of the following is used to best match the timing of revenues and expenses?
A.	Cash basis accounting.
B.	Income basis accounting.
C.	Book basis accounting.
D.	Accrual basis accounting.

Answer 14

D, Accrual basis accounting.

Question 15

Cost accounting can be used for all of the following reasons EXCEPT to:
A. 	determine unit costs for a service.
B. 	determine departmental overhead.
C.	quantify variable expense.
D. 	quantify collection ratios.

Answer 15

D, Quantify collection ratios.

Question 16

In a cash-based accounting system, accounts receivable is:
A. not recorded on the balance sheet.
B. recorded as an asset on the balance sheet
C. recorded as a liability on the balance sheet.
D. recorded as income on the balance sheet.

Answer 16

A, Not recorded on the balance sheet.

Question 17

What is operating income?
A. Gross charges minus contract adjustments, variable and fixed costs.
B. Gross charges minus depreciation expense.
C. Fixed costs plus variable costs.
D. Net revenue plus fixed costs.

Answer 17

A, Gross charges minus contract adjustments, variable and fixed costs.

Question 18

Which of the following is a major problem created by relying on a cash-only accounting system?
A. Revenues and expenses are usually mismatched among one or more accounting periods
B. Cash accounting for tax purposes may not be permitted under Internal Revenue Service (IRS) guidelines for the size of the medical group.
C. Physicians may be discouraged by low compensation following a high production month.
D. Long-lived assets must be purchased rather than leased for the system to work properly.

Answer 18

A, Revenues and expenses are usually mismatched among one or more accounting periods.