IV. Managing Finances Flashcards
Income statement or revenue/expense spreadsheet
Budget statement
Shows revenue generated and expenses incurred over a period of time
(month, quarter, year)
Income statement
Formula of Net income
Net income = revenue generated — expenses incurred
Shows the financial situation of the organization at a specific point in
time
Balance sheet
This sheet contains current assets (cash, patient receivables, inventory),
current liabilities (accounts payable, accrued salaries), property and
equipment (land, building, equipment, and instruments), and long-term
obligations (bonds payable, loans).
Balance sheet
Equation of assets
assets = liabilities + net worth
Show the inflow and outflow of cash for a specific period
Cash-flow statements
These statements show the net cash flow from operations, net flow from
investments, and net cash flow from financial activities
Cash-flow statements
Miscellaneous data needed by managers
Test volumes per laboratory
section,
supply costs,
labor costs,
cost per billable test,
workload,
rejection
rates,
contamination rates,
and productivity
Usually done annually as a plan for spending for the next year
Budgets
Incorporates workload data, new programs, test costs, previous year
revenues, previous year costs, capital equipment costs, operating expenses,
labor costs, and equipment maintenance costs
Budgets
Most organizations use data from the previous year, then estimate
increased costs for the coming year and add this figure to the budget.
Budgets
Zero-based budgeting involves starting the budget process from a zero
figure and justifying and researching every cost that will be incurred
before arriving at the final budget.
Budgets
The federal government pays healthcare organizations for providing
care to beneficiaries using a method called
Prospective Payment
System (PPS).
Healthcare organizations are paid a lump sum for services according to
the ___ for outpatient services
Ambulatory Payment Classification (APC)
Healthcare organizations are paid a lump sum for services according to
the ___ for inpatient services
Diagnosis-Related Group (DRG)
is a Medicare
coding system for reimbursement at the procedural level
Current Procedural Terminology (CPT)
The government established a database and derived average costs for
many illnesses based on the
International Classification of Disease
(ICD-9).
For outpatient services, the healthcare provider is paid a _____ to
provide specific services per HMO enrollee.
set fee
This method is based on the
number of enrollees at a specific payment amount per enrollee.
capitated reimbursement
are what it costs to produce test results. This includes
direct and indirect costs
Operating costs
are directly associated with producing test results. These
include supplies and labor
Direct costs
indirectly contribute to producing laboratory tests.
Indirect costs
These
include electricity, water, paper towels, soap, bleach, computer software,
and the labor that supports these services, as well as supervisory,
managerial and administrative labor.
Indirect costs
Give examples of indirect costs
electricity,
water,
paper towels,
soap,
bleach,
computer software,
labor that supports these services
supervisory,
managerial
and administrative labor.
remain the same from month to month no matter how many
tests are produced
Fixed costs
change with the amount of work performed.
Variable costs
are related to purchasing equipment or instruments that have
a life span of more than 1 year and cost more than a set dollar amount.
Capital costs
This figure is determined by the organization and usually ranges from
$1000 to $5000
Capital costs
Keeping cost as low as possible without compromising the quality
of care delivered to patients
Cost Management
Employees become very valuable sources for suggestions to increase
efficiency and effectiveness of work patterns
Cost Management
entails gathering data on wages, collection and handling
fees, reagent cost, control and reference materials cost, disposables cost,
instrument maintenance, depreciation, miscellaneous costs, and indirect costs.
Cost per billable test
Cost for testing calculation
Cost for testing = instrument cost + administration costs + supplies + labor
Revenue per test calculation
Revenue per test = total revenue ÷ total number of tests
Formula for profit
Profit = revenue per test — cost per test
Calculations done in Cost per Billable Test
Cost for testing
Revenue per test
Profit
where revenues equal expenses
Breakeven analysis
Breakeven analysis calculation
Breakeven (BE) test volume = annual fixed costs ÷ (test price — variable costs per test)
BE minimum price per test
BE minimum price per test = [annual fixed costs + (test volume X variable costs per test)] ÷ test volume
BE minimum revenue
BE minimum revenue = annual fixed costs ÷ [(test price — variable costs per test) ÷ test price]
Systems that study costs associated with performing tests
Cost Accounting
Focuses on internal processes
Cost Accounting
Focuses on ways of first reducing costs, then maintaining quality
Cost Containment
Give ways of Cost Containment
Centralized purchasing
Centralization of jobs
Decreases unnecessary testing
Focuses on ways of first reducing costs, then maintaining quality
