Healthcare finance glossary Flashcards
What is an Accountable Care Organization?
A network of healthcare providers joined together for the purpose of increasing patient service quality and reducing costs.
What is accounting?
The field of finance that involves the measuring and recording of events, in dollar terms, the reflect and organization’s operational and financial status
What is accounting breakeven?
The volume required to produce revenues sufficient to cover all accounting costs; in other words, zero profitability.
What is an accounting entity?
The entity (business) for which a set of financial statements applies.
What is an accounting period?
The period (amount of time) covered by a set of financial statements - often year, but sometimes a quarter or another time period.
What is accrual accounting?
The recording of economic events in the periods in which the events occur, even if the associated cash receipts or payments happen in a different period.
What are accrued expenses?
A business liability that stems from the fact that some obligations, such as wages and taxes, are not paid immediately after the obligations are created.
What is activity-based costing (ABC)?
A bottom-up approach to costing that identifies the activities required to provide a particular service, estimates the cost of those activities, and then aggregates the costs.
What is adverse selection?
The problem faced by insurance companies because individuals who are more likely to have claims are also more likely to purchase insurance.
What is an aging schedule?
A table that expresses a businesses accounts receivable by how long each account has been outstanding.
What is an allocation rate?
The numerical value used to allocated overhead costs; for example, $10 of facilities costs per square foot of occupied space.
What is the American Institute Of Certified Public Accountants (AICPA)?
The professional association of public (financial) accountants.
What is an amortized (installment) Loan?
A loan that is repaid in equal periodic amounts that include both principle and interest payments.
What is an annual report?
A report issued annually by an organization to its stakeholders that contains descriptive information and financial statements for the prior year
What is an annuity?
A series of payments of a fixed amount for a specified number of periods.
What is an annuity due?
An annuity with payments occurring at the beginning of each cash period.
What is an asset?
An asset is an item that either possesses or creates economic value for an organization.
What are asset management ratios?
Asset management ratios are financial statement analysis ratios that measure how effectively firm is managing its assets.
What is the automated clearing house (ACH)?
The automatic clean house is an electronic communication network for transmitting data from one financial institution to another.
What is an average collection period (ACP):
An average collection Is the average length of time it takes a business to collect its receivables; also called days sales outstanding (DSO) or days in patient accounts receivable.
What is a balance sheet?
A balance sheet is a financial statement that lists a business’s assets, liabilities, and equity (fund capital).
What is benchmarking?
Benchmarking is the comparison if performance metrics, such as financial ratios, of one business against those of similar businesses and industry averages; also called comparative analysis.
What is a beta coefficient?
A beta coefficient is a measure of the risk of one investment relative to the risk of a collection (portfolio) of investments.
What is a bond?
A bond is a long-term debt issued by business or government unit and generally sold in $1000 or $5000 increments to a large number of investors.
What is book value?
Book value is the value of a businesses, assets, liabilities, and equity as reported on the balance sheet; in other words, the value in accordance with generally accepted accounting principles (GAAP ).
What is break even analysis?
Break even analysis is a type of analysis that estimates the amount of some variable - such as volume, cost, or variable cost rate - that is needed to break even.
What is a budget?
A budget is a detailed plan, in dollar terms, of how a business and its subunits will acquire and utilize resources during a specified period of time.
What is Budgeting?
Budgeting is it process of preparing and using a budget, which is a detailed plan (in dollar terms) that specifies how resources will be obtained and used during some future period.
What is a build up method?
A build up method is a method for estimating the cost of equity for a small business that starts with a base rate and then adds premiums to account for size, liquidity, and unique risk characteristics.
What is bundled (global) payment?
A bundle payment is the fee-for-service payment of a single amount for the complete set of services required to treat a single episode.
What is business risk?
Business risk is the risk inherent in the operations of a business, assuming it uses zero-debt financing.
What is Call Provision?
A call provision is a provision in a bond indenture (contract) that gives the issuing company the right to redeem (call) the bonds prior to maturity.
What is call risk premium (CRP)?
Call risk premium is the premium that debt investors add to the base rate to compensate for bearing call risk.
What is Capital?
Capital is the funds raised by a business that will be invested in assets, such as land, buildings, and equipment that support the organizational mission.
What is the Capital Asset Pricing Model (CAPM)?
The capital asset pricing model is an equilibrium model that specifies the relationship between a stock’s value and its market risk, as measured by beta
What is Capital Budgeting?
Capital Budgeting is the process of analyzing and choosing new long term assets such as land, buildings, and equipment.
What are Capital Budgeting Decisions?
Capital Budgeting Decisions are the process of selecting a businesses capital (long-term asset) investments; the list of investments chosen constitutes a business’s capital budget.
What is Capital Gain (loss)?
The profit (loss) from the sale of certain investments at more (less) than their purchase price.
What is Capital Gains Yield?
The percentage capital gain (loss) over some period, defined as the price appreciation (loss), divided by the beginning-of-period price.
What is Capital Rationing?
Capital rationing is the situation that occurs when a business has more attractive capital investment opportunities than it has capital to invest.
What is Capital Structure?
Capital structure is the structure of a business’s financing mix as shown on the balance sheet, often expressed as the percentage of debt financing; for example, 35 percent debt.
What is Capitation?
Capitation is a reimbursement methodology that is based on the number of covered lives (or enrollees) as opposed to the amount of services provided.
What is Cash Accounting?
Cash accounting is the recording of economic events when cash exchange takes place.
What is a Cash Budget?
A cash budget is a schedule that lists a business’s expected cash inflows, outflows, and net cash flows for some future period.
What is a Chargemaster?
A chargemaster is a list of all items and services provided by a health services organization containing their gross (list) prices.
What is a Chart of Accounts?
A chart of accounts is a document that assigns a unique numerical identifier to every account of an organization.
What is a Classified Stock?
A classified stock is the term used to distinguish between stock classes when a business uses more than on type of common stock.
What is a Coefficient of Variation?
A coefficient of variation is a statistical measure of an investments stand-alone risk calculated by diving the sandarac deviation of returns by the expected return. The result is the amount of stand-along risk per unit of return.
What is Common Size Analysis?
Common size analysis is a technique to analyze a business’s financial statements that expresses income statement items and balance sheet accounts as percentages rather than in dollars.
What is Comparative Analysis?
Comparative analysis is the comparison of key financial and operational measures of one business with those of comparable businesses or sector averages; also called benchmarking.
What is a Compensating Balance?
A compensating balance is a minimum checking account balance that a business must maintain to compensate the bank for other services or loans.
What is Compounding?
Compounding is the process of finding the future value of a lump sum, an annuity, or a series of unequal cash flows.
What is a Contribution Margin?
A contribution margin is the difference between per unit revenue and per unit cost (variable cost rate); in other words, the dollar amount that each unit of volume contributes to covering fixed costs, and once fixed costs are covered, to profit.
What is Conventional Budgeting?
Conventional budgeting is an approach to budgeting that uses the previous budget as the starting point for creating the new budget.
What is a Corporate Bond?
A corporate bond is debt issued (sold) by for-profit businesses, as opposed to government or tax exempt (municipal) bonds.
What is the Corporate Cost Of Capital (CCC)?
The weighted average of a business’s capital (financing) costs; also, the discount rate that reflects the overall (average) risk of the entire business.
What is a Corporation?
A Corporation is a legal business entity that is separate and distinct from its owner (or community) and managers.
What is a Correlation?
A correlation is the movement relationship between two variables.
What is the Correlation Coefficient?
A standardized measure of correlation that ranges from -1 (variables move perfectly opposite of one another) to +1 (variables mover in perfect synchronization); denoted by r.
What is Cost?
A resource use associated with providing or supporting a specific service.
What is Cost allocation?
Cost allocation is the process by which overhead costs are assigned (allocated) to individual departments within an organization.
What is a Cost Center?
A cost center is a business that does not generate revenues, hence only its costs can be measured
What is a Cost Driver?
A cost driver is the basis on which a cost pool is allocated; for example, facilities costs or marketing costs.
What is Cost-Based Reimbursement?
Cost-based reimbursement is a fee-for-service reimbursement method based on the costs incurred in providing services.
What is a Costly Trade Credit?
A costly trade credit is the credit taken by a company from a vendor in excess of the free trade credit.
What is a Cost-To-Charge Ratio(CCR)?
A cost-to-charge ratio is a ratio used to estimate the overhead costs of individual services; defined as the ration of indirect (overhead) costs to charges (or alternatively, to serevice revenues).
What is a Coupon (Interest) Rate?
A coupon (interest) rate is the stated annual rate of interest on a bond, which is equal to the coupon payment divided by the par value.
What is a Coupon Payment?
A coupon payment is the dollar amount of annual interest on a bond.
What is a Credit Policy?
A credit policy is generically, a business’s rules and regulations regarding granting credit and collecting from buyers the take credit; for healthcare providers, the business’s policy regarding self-pay and indigent patients.
What are credit terms?
The statement that extends credit to a buyer.
What is Cross-Subsidization (Price Shifting)?
Cross-Subsidization is a pricing approach in which some payers are charged more than full costs to make up for other payers that are paying less than full costs
What is a Current Asset?
A Current Asset is an asset that is expected to be converted into cash within on accounting period (often a year).
What is Current Procedural Terminology (CPT) Codes?
Current Procedural Terminology Codes are codes that are applied to medical, surgical, and diagnostic procedures.
What is a Dashboard?
A format for presenting a business’s key performance indicators that resembles the dashboard of an automobile.
What is a Debenture?
A debenture is an unsecured bond, meaning one that has no assets pledged as security.
What is Debt Capacity?
Debt Capacity is The amount of debt considered optimal for the business (the target capital structure).
What Are Debt Management Ratios?
A group of ratios that measure the extent of a business’s financial leverage (capital structure)
What is a Debt Ratio?
A debt utilization ratio that measures the proportion of debt (versus equity) financing; typically defined as total debt (liabilities) divided by total assets.
What is Default?
Default is when a borrower fails to make a promised debt payment; technical default occurs when the borrower fails to meet one of the restrictions in the loan agreement but is still making the required payments.
What is Default Risk Premium (DRP)?
Default Risk Premium is the premium that creditors demand (add to the base interest rate) for bearing the default risk. The greater the default risk, the higher the default risk premium.
What is Depreciation?
Depreciation is a non cash charge against earnings on the income statement that reflects the “wear and tear” on a business’s fixed assets (property and equipment).
What is a Depreciation Shield?
A Depreciation Shield is the dollar amount of taxes that will not have to be paid because to the business’s depreciation expense.
What is Depreciation Cost?
Depreciation Cost is a cost that is tied exclusively to a subunit of an organization, such as the salaries of a department’s employees. When a subunit is eliminated, its direct costs disappear.
What is a Direct Method?
A direct method is a cost allocation method in which all overhead costs are allocated directly from the overhead departments to the patient services departments with no recognition that overhead services are provided to other support departments.
What is Discounting?
Discounting is the process of finding the current (present) value of a lump sum, an annuity, or a series of unequal cash flows.
What is Diversifiable Risk?
Diversifiable risk is the portion of the risk of an investment that can be eliminated by holding the investment as part of a diversified portfolio.
What is a Dividend Reinvestment Plan (DRIP)?
A dividend reinvestment plan is a plan under which dividends paid to a stockholder are automatically reinvested in the company’s common stock.
What is a Dividend Yield?
A dividend yield is the annual dividend divided by the stock price.
What is Divisional Cost Of Capital?
Divisional Cost of Capital is the discount rate (hurdle rate or opportunity cost rate) that reflects the unique risk of a division within a corporation.
What is a Double Entry System?
A Double entry system is the system used to make accounting journal entries; called double entry because each transaction has to be entered in at least two different accounts.
What is Du Pont Analysis?
Du Pont Analysis is a financial statement analysis tool that decomposes return on equity into three components: profit margin, total asset turnover, and equity multiplier.
What is Economic Breakeven?
Economic Breakeven is the volume required to produce revenues sufficient to cover all accounting costs and to provide a specified profit level.
What is an Effective Annual Rate (EAR)?
An effective annual rate is the interest rate that, under annual compounding, produces the same future value as was produced by more frequent compounding.
What is an Efficient Markets Hypothesis?
The theory that stocks are always in equilibrium and it is impossible for investors to consistently earn excess returns (beat the market).
What is Equity?
Equity is assets minus liabilities; in other words, the “book value” of the ownership position of a business.
What is Expected Rate of Return?
The expected rate of return is the return expected, in a statistical sense, on an investment when the purchase is made.
What is an Expense Budget?
An expense budget is a budget that focuses on the costs of providing goods or services.
What are expenses?
Expenses are the costs of doing business ; the dollar value of resources used to provide goods or services.
What is Fee-For-Service?
Fee-for-service is a reimbursement methodology that provides payment each time a service is provided.
What is Financial Accounting?
Financial accounting is the field of accounting that focuses on the measurement and communication of the economic events and status of an entire organization.
What is the Financial Accounting Standards Board (FASB)?
A private organization who’s mission is to establish and improve the standards of financial accounting and reporting for private businesses.
What is a Financial Asset?
A financial asset is a security, such as a stock or bond, that represents a claim on a business’s cash flows. Financial assets are purchased with the expectation of receiving future payments.
What is Financial Leverage?
Financial Leverage is the use of fixed cost financing; typically debt financing for healthcare providers.
What is Financial Management?
Financial Management the field of finance that provides the theory, concepts, and tools used by healthcare managers to make financial decisions.
What is a Financial Plan?
A financial plan is the portion of the operating plan the focuses on the finance function.
What is Financial Ratio Analysis?
Financial ratio analysis is the process of creating and analyzing ratios from financial statement data to asses the business’s financial condition.
What is Financial Risk?
Financial risk in an investment context. the risk that the return on an investment will be less than expected. The greater the chance of earning a return far below that expected, the greater the risk. In a capital structure context, it is the risk added to a business (More precisely, to he business’s owners) when debt financing is used. The greater the proportion of debt financing, the greater the financial risk.
What is Financial Statement Analysis?
Financial Statement Analysis is the process of using data contained in financial statements to make judgements about a businesses financial condition.
What are Financial Statements?
Statements prepared by accountants that convey the financial status of an organization. The four primary statements are the income statement, balance sheet, statement of changes in equity, and statement of cash flows.
What is a Fiscal Year?
A fiscal year is the year covered by an organization’s financial statements; it usually, but not necessarily, coincides with the calendar year.
What are Fixed Assets?
Fixed assets are a business’s long-tdermassets, such as land, buildings, and equipment; usually labeled net property and equipment on the balance sheet.
What is Fixed Cost?
Fixed cost is a cost that is not related to the volume of services delivered; for example, facilities costs. Total fixed costs fo not change if volume remains within the relevant range.
What is a Flexible Budget?
A flexible budget is a budget based on the static budget assumptions but adjusted to reflect realized volume.
What is the Float?
The float is the difference between the balance shown on a business’s (or individual’s) checkbook and the balance shown on the bank’s books.
