Test 1 (Chapters 1-4) Flashcards
What is healthcare finance?
It is the accounting and financial management of healthcare in all sectors of the industry
What are the 4 critical roles of businesses?
obtain financing, use funds to buy capital, create goods and services from the capital, sell goods/services for revenue
What are the 4 Cs of the role of finances in Healthcare?
Costs, cash, capital, and control
What is a certificate of need?
Process by which capital equipment and other supplies are evaluated to contain costs and obtain teh best price for equipment.
What is the primary legal issue surrounding healthcare today?
Malpractice suits!
What is the primary concern that healthcare managers face today?
Finances! This includes reimbursement, Medicare/Medicaid stuff, and bad debt
What are the three types of businesses?
Proprietorship, partnership, and corporation
What is a major disadvantage of a proprietorship and partnership?
Unlimited personal liability
What is the major disadvantage to corporations?
Double taxation and expensive setup costs.
What is the primary goal for for-profit hospitals?
Shareholder wealth maximization
Primary goal of not-for-profit hospitals?
Please shareholders in providing quality care to the community
What sort of financial goals to not-for-profits have?
staying financially viable while providing charity care, creating quality service, investing in new technology, and making care as inexpensive as possible.
What is the agency problem?
This is when corporations hire agents and give them full decision-making authority in their behalf.
What is Form 990?
It is the tax form that not-for-profit organizations file to the IRS on governing/charity activities
What are managed care plans?
They streamline healthcare services and regular insurance functions all into one entity by networking specific physicians and hospitals to be a part of the network.
What are the two main types of managed care plans?
HMOs and PPOs
What are the risks and incentives to a cost-based reimbursement system?
Provider is guaranteed fully reimbursement, but the payments are periodic.
What are the risks and incentives to a charge-based reimbursement system?
They are paid whatever they assign the cost to be in the chargemaster, but costs are negotiated down and discounted.
Risks and incentives of per diem payment?
Providers are reimbursed for each day the patient is at the facility, though the payment may not cover all the costs of care.
Bundled payment system?
Each service is paid and covered, but it may be difficult to separate payments as it covers all services under one umbrella.
What are the two main sets of codes used to bill for medical procedures?
ICD and CPT
What is the main goal of financial accounting?
To measure and communicate the economic events and status of a business or organization?
Accounting identity
The business for which a set of accounting statements apply.
Going concern
The assumption that the business will last indefinitely
Revenue recognition
The concept that revenues msut be recognized in the accounting period when they are realizable and earned
Cost matching
The principle that the organizations expenses must be matched with the revenues to which they are related
What is cash accounting?
Revenue is counted when it is received or expended, not when the service is provided. Typically smaller clinics do this.
What is accrual accounting?
Revenue and expenses are realized when the service is rendered, rather than when the cash is received. This is what GAAP requires.
What is a current asset?
Any asset that can be liquidated into cash within one accounting period.
What is the equation for net working capital?
Total current assets - Total current liabilities
