Test 1 (Chapters 1-4)

Question 1

What is healthcare finance?

Answer 1

It is the accounting and financial management of healthcare in all sectors of the industry

Question 2

What are the 4 critical roles of businesses?

Answer 2

obtain financing, use funds to buy capital, create goods and services from the capital, sell goods/services for revenue

Question 3

What are the 4 Cs of the role of finances in Healthcare?

Answer 3

Costs, cash, capital, and control

Question 4

What is a certificate of need?

Answer 4

Process by which capital equipment and other supplies are evaluated to contain costs and obtain teh best price for equipment.

Question 5

What is the primary legal issue surrounding healthcare today?

Answer 5

Malpractice suits!

Question 6

What is the primary concern that healthcare managers face today?

Answer 6

Finances! This includes reimbursement, Medicare/Medicaid stuff, and bad debt

Question 7

What are the three types of businesses?

Answer 7

Proprietorship, partnership, and corporation

Question 8

What is a major disadvantage of a proprietorship and partnership?

Answer 8

Unlimited personal liability

Question 9

What is the major disadvantage to corporations?

Answer 9

Double taxation and expensive setup costs.

Question 10

What is the primary goal for for-profit hospitals?

Answer 10

Shareholder wealth maximization

Question 11

Primary goal of not-for-profit hospitals?

Answer 11

Please shareholders in providing quality care to the community

Question 12

What sort of financial goals to not-for-profits have?

Answer 12

staying financially viable while providing charity care, creating quality service, investing in new technology, and making care as inexpensive as possible.

Question 13

What is the agency problem?

Answer 13

This is when corporations hire agents and give them full decision-making authority in their behalf.

Question 14

What is Form 990?

Answer 14

It is the tax form that not-for-profit organizations file to the IRS on governing/charity activities

Question 15

What are managed care plans?

Answer 15

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.

Question 16

What are the two main types of managed care plans?

Answer 16

HMOs and PPOs

Question 17

What are the risks and incentives to a cost-based reimbursement system?

Answer 17

Provider is guaranteed fully reimbursement, but the payments are periodic.

Question 18

What are the risks and incentives to a charge-based reimbursement system?

Answer 18

They are paid whatever they assign the cost to be in the chargemaster, but costs are negotiated down and discounted.

Question 19

Risks and incentives of per diem payment?

Answer 19

Providers are reimbursed for each day the patient is at the facility, though the payment may not cover all the costs of care.

Question 20

Bundled payment system?

Answer 20

Each service is paid and covered, but it may be difficult to separate payments as it covers all services under one umbrella.

Question 21

What are the two main sets of codes used to bill for medical procedures?

Answer 21

ICD and CPT

Question 22

What is the main goal of financial accounting?

Answer 22

To measure and communicate the economic events and status of a business or organization?

Question 23

Accounting identity

Answer 23

The business for which a set of accounting statements apply.

Question 24

Going concern

Answer 24

The assumption that the business will last indefinitely

Question 25

Revenue recognition

Answer 25

The concept that revenues msut be recognized in the accounting period when they are realizable and earned

Question 26

Cost matching

Answer 26

The principle that the organizations expenses must be matched with the revenues to which they are related

Question 27

What is cash accounting?

Answer 27

Revenue is counted when it is received or expended, not when the service is provided. Typically smaller clinics do this.

Question 28

What is accrual accounting?

Answer 28

Revenue and expenses are realized when the service is rendered, rather than when the cash is received. This is what GAAP requires.

Question 29

What is a current asset?

Answer 29

Any asset that can be liquidated into cash within one accounting period.

Question 30

What is the equation for net working capital?

Answer 30

Total current assets - Total current liabilities