Questions and Answers of Financial Management For Public Health

Performance measures. Name two financial measures that are used to judge the performance of investment centers and not used to measure the financial performance of profit centers.
Performance measures. What are major disadvantages of using traditional performance measures?
Variance analysis. What does the term variance analysis mean when applied to financial performance of health care organizations?
Budget variances. What are the most common types of budget variances found in health care organizations?
Cost variances. What occurrences can account for cost variances?
ROI for an investment center. An outpatient clinic invests $3,300,000. The desired ROI is 12 percent. In the first year, revenues are $1,750,000 and expenses are $1,270,000. Does the clinic meet its
ROI for an investment center. A new cardiac catheterization lab was constructed at Have a Heart Hospital. The investment in this lab was $950,000 in equipment costs and$50,000 in renovation costs. A
Detailed variance analysis. The following are the planned and actual revenues for Cutting Edge Surgery Center. Because it is one of four surgery centers in the community, the administrator is
Detailed variance analysis. The administrator of Break-a-Leg Hospital is aware of the need to keep costs down because he has just negotiated a new capitated arrangement with a large insurance
Detailed variance analysis. A dermatology clinic expects to contract with an HMO for an estimated 100,000 enrollees. The HMO expects one in four of its enrolled members to use the dermatology
Detailed variance analysis. The controller of the Conrad Aiken Surgical Center was reviewing monthly financial reports and noted some differences. The center had fallen 8 short of its plan to perform
Detailed variance analysis. The student clinic at Schumpeter University is run as a profit center. The dean of student services was reviewing the expenses on last month’s financial report for the
Thor County Hospital is the only medical facility serving an area with a population of 8,400. In 20X1, the Radiology Department purchased a used CAT scanner from a larger hospital for $50,000. The
Definitions. Define the key terms listed above.
Cost-to-charge ratio. What is the basic concept of the cost-to-charge ratio method of estimating costs? Give an example.
Cost-to-charge ratio. What are the four major concerns with using the cost-to-charge ratio method?
Step-down method. How did the step-down method of cost allocation acquire its name?
Cost allocation and cost drivers. What is the relationship between the concept of the cost allocation basis, used in the step-down method, and the concept of the cost driver, used in activity-based
Fully allocated costs. What is the difference between a cost object’s direct cost and its fully allocated cost? Give an example.
Step-down method. Identify and discuss four points that must be considered when using the step-down method of cost allocation.
ABC and step-down methods. What are the advantages and disadvantages of ABC relative to the step-down method of cost allocation?
Activity-based costing. Referring to Exhibit 12.10, suppose that instead of 2,000, 5,000, and 3,000 visits for an initial, regular, and intensive visit, respectively, the number of visits was 3,000,
Activity-based costing. Referring to Exhibit 12.10, suppose that instead of 2,000, 5,000, and 3,000 visits for an initial, regular, and intensive visit, respectively, the number of visits was 2,500,
Cost allocation. Use the information in Exhibit 12.11 to answer these questions.a. Louis Clark, the new administrator for the surgical clinic, was trying to figure out how to allocate his indirect
Cost allocation. Use the information in Exhibit 12.12 to answer these questions.a. Dick Clark, the new administrator for the surgical clinic, was trying to figure out how to allocate his indirect
Traditional and activity-based costing. Use the information in Exhibit 12.13 to answer these questions.a. What is the per unit cost of an initial, regular, and intensive visit using the conventional
Traditional and activity-based costing. Use the information in Exhibit 12.14 to answer these questions.a. What is the per unit cost of an initial, regular, and intensive visit using the conventional
Definitions. Define the key terms listed above.
Stakeholders and objectives. Exhibit 13.1 illustrates the stakeholders and objectives of the U.S. health care payment system. What are the biggest changes over the last five years?
Value-based payment. What were the major events and trends that caused CMS to institute a value-based payment structure for Medicare?
Hospital Readmissions Reduction Program. What is the rationale behind Medicare’s refusal to pay for certain readmissions? What is the risk?
ACOs. In what ways do ACOs resemble insurers?
Copayments and deductibles. What is the purpose of copayments and deductibles?
Steerage. Name the uses of steerage.
Diagnosis related groups. What are DRGs? Why was the DRG system developed?
Ambulatory payment classifications. What are APCs? Why was the APC system developed?
Health plans. How do insurers determine their premiums?
Health plan premium. If a health plan covers 150,000 lives, expects 25 myocardial infarctions(MIs) to occur each year within the covered lives, expects a length of stay of 4.5 days for each MI, and
Health plan premium. Given the same scenario as in question 11, what if the health plan’s stockholders demand a 9 percent profit margin? What would the premium be in that case?
Health plan premium. In question 12, what if the employer or patient refuses to pay the new premium? What could the health plan offer to pay the hospital for an inpatient day?(Hint: Try lowering the
Health plan premium. In question 13, what if the hospital refuses to take the new rate, an employer refuses to pay the new premium, and that employer decides to take its employees (10,000) to another
Capitation systems. Who bears the financial risk in a capitated payment system?
Capitation systems. Why might a provider be willing to accept a global capitation payment?
Cost-based payment. What are four factors to consider when developing charges in a charge-based system? (Hint: see Appendix J.)
Cost-based payment. What charge method uses primarily the market price to establish a charge? (Hint: see Appendix J.)
Cost-based payment. What charge method relies on the case mix, volume, and financial requirements of the institution? (Hint: see Appendix J.)
Cost-based payment. What is the difference between determining charges on an average-cost basis and determining charges on a weighted-cost basis? (Hint: see Appendix J.)
Cost-based payment. What are the steps in determining weighted-average costs?
Cost-based payment. Describe the two margin-based approaches to developing charges.
How would you define the terms cash, short-term securities, accounts receivable, inventories, and prepaid expenses?
What are some of the differences in sources of capital between not-for-profit organizations and for-profit organizations?
What is the formula for calculating interest on short-term loans?
What is the main objective of managing cash flows? What are the reasons an organization should have cash on hand?
Why do healthcare organizations use present value of money and future value of money for their investments?
Why do organizations need to perform a financial analysis? Explain each of the three steps involved.
What is the definition of accounts receivable? What are some primary reasons patients are sometimes not billed in a timely manner?
How does accounts receivable differ from the revenue cycle?
What happens when an organization extends credit to patients?
What are the steps in managing accounts receivable? Explain each step.
What are the methods used to collect accounts receivable?
How can an organization improve its revenue cycle management?
What are the advantages and disadvantages of the two methods used to convert accounts receivable to cash?
What are the key provisions of the four laws that govern accounts receivable?
What is the best way to evaluate revenue cycle management performance?
What is the definition of inventory management?
Why is proper inventory management important?
How would you explain the four methods used to value inventory?
How can an organization reduce the value of inventory and the number of items in inventory?
What does an economic order quantity (EOQ or Qe) tell management?
What does the total cost formula tell management?
What is the best way to evaluate inventory management performance?
What is the definition of planning? Of strategic planning? Of operational planning?What are examples of each?
What are the planning horizons for strategic planning and operational planning?
How would you explain the various management approaches to planning?
How would you describe each step, in order, in the strategic planning process?
How would you describe each step, in order, in the operational planning process?
How do you imagine organizations that do not engage in meaningful strategic planning would look?
Who is responsible for evaluating the progress of the strategic plan and the operational plan?
What is the definition of budgeting?
What are the ways to classify budgeting?
How would you explain the various management approaches to budgeting?
What are the steps in the budgeting process, and how would you describe each step, in sequence?
Who is responsible for evaluating budget performance?
Why are capital costs such an important aspect of a healthcare organization’s costs?
What two categories are capital expenditure budgets divided into? Provide real-world examples of both of these categories.
How would you explain the five steps involved in the capital budgeting stage of the corporate planning process?
What are the three methods of financial analysis for capital expenditures? What are the formulas for each? Which of these three is the least sophisticated? Why?
What policies led to an increase in debt financing? What result did the two policies have on healthcare organizations?
What factors do rating agencies look at when issuing bond ratings?
Why would an organization choose to lease equipment over purchasing it? Provide an example of when an organization would be better off purchasing equipment than leasing.
How would you summarize the history of healthcare reform?
What are the key provisions of the Affordable Care Act of 2010?
What are the key provisions of the Medicare Access and CHIP Reauthorization Act of 2015?
What are the key provisions of the Massachusetts health plan?
Why did the California health plan fail to gain legislative support?
What are the two major free-market initiatives and what is the impact of each on quality, cost, and access?
Why is there a need for entitlement reform? What might entitlement reform look like in the future?
Why might healthcare reform not work?
What are the major healthcare reform ideas proposed by President Trump and HHS Secretary Price?
Definitions. Define the following terms:a. Ambulatory Payment Classifications (APCs).b. Capitation.c. Care Mapping.d. Compliance.e. Cost-shifting.f. Defensive Medicine.g. Diagnosis Related Groups

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