Financial Management Nowicki chapter 1 Flashcards
What is Financial accounting?
A type of accounting that provides historical accounting information to external users through the development of financial statements.
What is managerial accounting?
A type of accounting that provides accounting information, generally current or prospective in nature, to internal users for decision making purposes
4 basic financial statements prepared for external users
- Consolidated balance sheet
- Statement of operations
- Statement of changes in equity
- Statement of cash flows
Average daily census
The average number of patients, excluding newborns, receiving care each day during the reporting period
Average Length of stay (ALOS)
Number derived by dividing the number of inpatient days by the number of admissions
Occupancy Rate
The ratio of average daily census to the average number of statistical beds ( set up and staffed for use).
Managerial accounting requires no prescribed format and therefore…
Managerial accounting varies from organization to organization
Cost accounting is often considered either synonymous or a subset of…
Managerial accounting
Cost accounting is the study of
Costs, including methods for classifying, allocating and identifying costs
The purpose of finance…
Is to analyze the information provided by managerial accounting to evaluate past decisions and make sound assessments regarding the future of the organization
Ratio analysis
Quantitative method of determining an organization’s financial performance by computing the relationships of important line items in financial statements
Capital investment analysis
A budgeting procedure to determine the potential profitability of a long term investment
6 major objectives of healthcare financial mgmt
1.generate income
2. Respond to regulations
3. Facilitate relationships w/ 3rd party payers
4. Influence the method and amount of payment
5. Monitor physicians
6. Protect tax status
Operating income
The difference between collected revenue and expenses
What is the most important objective of healthcare financial mgmt?
To generate a reasonable operating income ( by investing in assets and putting asset to work)
what is the definition of a 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.
What is a prospective payment system?
A payment system in which a healthcare organization accepts a fixed, predetermined amount to treat a patient, regardless of the true ultimate cost of the treatment.
DRGs (diagnostic-related groups) are part of what type of payment system
prospective payment
APCs (ambulatory payment classifications are part of what type of payment system?
prospective payment system
Nursing homes used to use what type of prospective payment system until 2019?
(RUGs) Resource Utilization groups
Capitated Pricing is…
Is when a third party payer pays a price per head (per subscriber) before the service is provided. The organization assumes the risk of the cost of care and the utilization and intensity of care.
Utilization review of physicians
the physician’s service ordering patterns are consistent with the actual needs of the patient and minimize the organization’s exposure to legal liability through possible negligent actions of the physician.
How do organizations use financial management to help protect tax status
For-profit organizations seek ways to reduce tax liability and not-for-profit organizations try to protect their tax-exempt status
Proactive strategy to quality financial assessment attempts to adopt what type of view of quality?
a comprehensive view of quality.
Reactive strategy to quality financial management attempts to …
limit views of quality to views developed by others.
Direct measures of quality assume what?
that the organization can define and measure quality itself
What are 4 direct measures of quality (proactive strategy)
- Goal based measures
- Responsive measures
- Decision-making measures
- Connoisseurship measures
Goal based measures (direct measure/ proactive) assess quality by …
the progress made toward the goals of the strategic and operating plans.
WHat is the key advantage of goal based measures?
that they focus attention on success or failure
Responsive measures (proactive strategy-direct measure) assess quality by…
customer opinion
What is the key advantage of responsive measures (proactive/ direct measure of quality)?
That they understand quality from the customer’s point of view
Decision-making measures (proactive strategy/ direct measure) assess quality by:
evaluating decisions.
The key advantage of decision-making measures (proactive strategy/ direct measure) is that
they direct accountability to the decision maker
Connoisseurship measures (proactive strategy/ direct measure) assess quality by:
allowing quality to be assessed by expert opinion, such as accreditation.
The key advantage of connoisseurship measures is that
they inspire high credibility
Indirect measures of proactive strategy of financial management assume what?
that the organization cannot define and measure quality itself but can define and measure the results of quality
4 Measures of indirect quality (proactive strategy)
- resource measures
- Outcome measures
- Reputational measures
- Value-added measures
resource measures (proactive/ indirect measures) assume what?
that price reflects quality.
What is the key advantage to resource measures (proactive/ indirect measure)
that they provide quantitative data that are readily available.
Outcome measures (proactive/ indirect) assume what?
assume that results reflect quality.
What is key advantage of outcome measures in quality measurement?
the emphasis is on results.
Reputational measures of quality (proactive/ indirect measure) assume what?
that public perception reflects quality
what is the key advantage of reputational measures of quality?
that they produce ratings for the public
Value added measures (proactive/ indirect measures) assume what?
that process reflects quality
What is the key advantage of value added measures?
That after adjusting for input and output, they focus on process, which the organization can control.
Reactive strategy of quality is when an organization has responded in several ways to accrediting agencies and quality consultants, including…
- ensuring quality by centralized quality efforts (a dept. created), then decentralizing quality to the clinical departments and then further decentralizing quality efforts to all depts.
- ensuring quality by studying clinical outcomes, then clinical processes, then studying all outcomes and all processes and then finally studying key outcomes and key processes.
- improving quality by continuous attention & total mgmt.
- assessing quality by identifying key processes and key outcomes
The joint commission standards require accredited hospitals to
- make doctors tell their pts. when they have received substandard care (care that differs significantly from expected outcomes)
- implement organization-wide pt. safety programs w/ procedures for immediate response to medical errors
- report to hospital’s governing body at least once annually on the occurrence of medical errors
- revise pt. satisfaction surveys to ask patients how the organization can improve patient safety
NPSG (National Patient Safety Goals)
A set of goals by the Joint Commission to address safety areas of special concern for hospitals.
The 2020 Joint Commission NPSG (national Patient Safety Goals) include …
- Improve the accuracy of patient identification.
- Improve the effectiveness of communication among caregivers.
- Improve the safety of using medications.
- Reduce the harm associated with clinical alarm systems.
- Reduce the risk of healthcare associated infections.
Identify patient safety risks. - Prevent mistakes in surgery.
There is proof (Deming 1982) that shows a positive relationship between quality and
Profitability
WHo represent the utilitarian view of ethics (concerning resources), the view “the greatest good for the greatest number”?
managers: allows them to sacrifice the use of resources for one patient to maintain resources for other patients (a group vs an individual), assuming that resources are limited.
Who represents the deontological view of ethics, their decisions are governed by their duty to their patients,
clinicians - taking precedence over the ends-based decisions of their managers.
Does the managers utilitarian view (ethics) and the clinicians deontologial view (ethics) keep resource allocations somewhat balanced?
YES (generally)
Conflict of Interest
when an individual owes duties to 2 or more persons or organizations and when meeting a duty to one somehow harms the other (Darr 2018). often for “personal gain”
financial management is of value for:
- Planning
- Organizing
- staffing
- Influencing
- Controlling
The value of financial Planning is
(the operating budget often provides the incentives to plan properly)
The value of financial management in Organizing is
(identifies cost centers vs revenue centers which makes managers accountable for revenues & expenses)
The value of financial management in Staffing is
(finance often staffs nontraditional dept like admitting, materials mgmt., billing, acct.)
The value of financial management in Influencing is
(financial mgmt. provides rewards & penalties to motivate others to accomplish the organizations goals)
The value of financial management in Controlling is
(a method of monitoring and taking corrective actions when performance is unsatisfactory)
What is the objective that all financial managers for an organization have?
to survive and grow
What is the objective of healthcare management?
to accomplish the organization’s purposes
The 5 MANAGEMNT FUNCTIONS
- Planning
- Organizing
- Staffing
- Influencing
- Controlling
Management Connective Processes
- Communicating
- Coordinating
- Decision making
