Questions and Answers of Financial Management For Public Health

Bonds. What party acts on the behalf of bondholders to insure that the issuing facility not only is complying with the covenants of the bond, but also is making timely principal and interest payments
Investment Bankers. Why would an investment banker syndicate a bond issue with other investment bankers?
Bonds. Compare private placement bond issues with public placement bond issues.
Credit Ratings. Identify two ways that a health care provider can strengthen its credit rating.What are some of the ramifications of these options?
Credit Ratings. What can cause a health care provider’s credit rating to be downgraded?
Market Rates. What impact do required market rate changes have on bonds of longer maturities?
Leasing. What are the two types of leasing arrangements and their primary differences?
Leasing. Why might an organization enter into a leasing arrangement?
Bond Valuation. If a $1,000 zero coupon bond with a 20-year maturity has a market price of $311.80, what is its rate of return?
Bond Valuation. If a $1,000 zero coupon bond with a 15-year maturity has a market price of $481.80, what is its rate of return?
Bond Valuation. A tax-exempt bond was recently issued at an annual 8 percent coupon rate and matures 20 years from today.The par value of the bond is $1,000.a.If required market rates are 8 percent,
Bond Valuation. A tax-exempt bond was recently issued at an annual 7 percent coupon rate and matures 30 years from today.The par value of the bond is $5,000.a.If required market rates are 7 percent,
Bond Valuation. Assuming that the bond in Problem 19 matures in five years, what would be the market prices under the various required market interest rate changes?
Bond Valuation. Assuming that the bond in Problem 20 matures in ten years, what would be the market prices under the various required market interest rate changes?
Bond Valuation. Charles City Hospital plans on issuing a tax-exempt bond at annual coupon rate of 6 percent with a maturity of 30 years.The par value of the bond is $1,000.a.If required market rates
Bond Valuation. Assuming that the bond in problem 23 matures in ten years, what would be the market prices under the various required interest rate changes?
Bond Valuation. A $5,000 par value bond with an annual 8 percent coupon rate will mature in six years.Coupon payments are made semiannually.What is its market price if the required market rate is 6
Bond Valuation. A $1,000 par value bond with annual 7 percent coupon rate will mature in eight years.Coupon payments are made semi-annually.What is the market price if the required market rate is 4
Bond Valuation. Currently, Boston Common Community Hospital’s taxexempt bond is selling for $847.48 per bond and has a remaining maturity of 15 years.If the par value is $1,000 and the coupon rate
Bond Valuation. Haven Hospital’s tax-exempt bond is currently selling for$659.32 and has a remaining maturity of 12 years. If the par value is $1,000 and the coupon rate is 5 percent, what is the
Loan Amortization. Dinglewood Hospital needs to borrow $1,000,000 to purchase an MRI.The interest rate for the loan is 6 percent.Principal and interest payments are equal debt service payments, made
Loan Amortization. Petersville Hospital needs to borrow $40 million dollars to finance its new facility.The interest rate is 11 percent for the loan.Principal and interest payments are equal debt
Purchase versus Lease. Mercy Medical Mega Center, a taxpaying entity, has made the decision to purchase a new laser surgical device.The device costs$400,000 and will be depreciated on a straight-line
Purchase versus Lease. New Health Hospital Systems either wants to borrow money to purchase a hospital or else enter into a lease agreement with the City of Chesterville.The purchase price of the
Purchase versus Lease. Carolina Ancillary Services for Hospitals (CASH), a taxpaying entity, is considering the purchase of a CT scanner.The cost of the scanner is $1 million.The scanner would be
Purchase versus Lease. Tidewater Hospital, a taxpaying entity, is considering leasing its ambulance fleet.The fleet of ambulances costs$125,000 and will be depreciated over a ten year life to a
Definitions: Define the following terms:a. Avoidable Fixed Cost.b. Breakeven Analysis.c. Breakeven Point.d. Capitation.e. Common Costs.f. Contribution Margin.g. Contribution Margin Per Unit.h.
Breakeven Formulas. What are the formulas for:a. The basic breakeven equationb. The basic breakeven equation expanded to include indirect costs and desired profit?
Understanding Fixed and Variable Cost. Briefly describe what happens to each of the following as volume increases:a. Total Fixed Costb. Total Variable Costc. Fixed Cost per Unitd. Variable Cost per
Step Fixed Cost and the Relevant Range. Explain the relationship between step-fixed costs and the relevant range.
Product Margin. Based on the product margin, when is it in the best interests of an organization to continue or drop a service?
Make-or-buy Decision and related analyses.a. What is a make-or-buy decision?b. What other analyses are relevant to the types of decisions discussed in this chapter?
Breakeven equation. Fill in the blank. The following table contains selected data concerning several outpatient clinics in the new Ambulatory Care Center at Hope University Hospital. Fill in the
Breakeven equation. Fill in the blank. Instead of the information in problem 7, assume Ambulatory Care Center’s data looked like this: [A] Price per Visit [B] [C] [D] [E] [F] Variable Number
Expand/Reduce Decision. Laurie Vaden is a nurse practitioner with her own practice. She has developed contracts with several large employers to perform routine physicals, fitness for duty exams, and
Expand/Reduce Decision. Janet Gilbert is director of labs. She has some extra capacity and has contracted with some small neighboring hospitals to run some of their lab tests. She has recently had a
Calculating Breakeven. Ms Jasmine Gonzales, administrative director of Physicians Associates, a group practice, has been asked if the group should begin offering mammography screenings. The following
Calculating Breakeven. Southern Regional Hospital is considering offering a new specialty service which will be provided out of its urgent care center. A pediatric cardiologist from the region’s
Calculating Breakeven and Graphing. San Juan Health Department’s dental clinic projects the following costs and rates for the year 20XX.a. Using this information, determine the breakeven point in
Calculating Breakeven and Graphing. The North Kingstown Cancer infusion therapy division expects tremendous growth over the next year and is projecting the following cost and rate structure for the
Determining breakeven price in a reduce/expand decision. QuickCare is a health care franchise that functions as a primary family health clinic, seeing unscheduled patients 24 hours a day. Several
Expand/Reduce. The administrator of ABC Hospital, Mr Stevens, has just received the latest financial report and the news is not good. The hospital has been losing money for over a year, and if things
Add/Drop Decision The Ancome County Health Department is considering using 300 square feet of excess office space to provide a clinic for Healthchek visits.These visits are reimbursed at $67.30 under
Add/Drop Decision The Midtown Women’s Center offers bone densitometry scans in the office as a convenience to its patients. The clinic volume is expanding and Sam Loch, the Center’s
Breakeven. Sure Care Health Maintenance Organization is seeking a managed care contract with a local manufacturing plant. Sure Care estimates that the cost of providing care for the 300 employees
Breakeven. Zack Millman Clinic is seeking to provide sports-related health care services to high schools in the area. Zack Millman estimates that the cost to provide care would be $1,000 plus $12 per
Contribution Margin, Product Margin and Breakeven. Dixon Pharmaceuticals, a drug manufacturing company, produces prescription medication for the treatment of respiratory infections. The company’s
Contribution Margin, Product Margin and Breakeven. Capital Community Hospital is opening a new Radiation Oncology division within its Cancer Center. This service will add revenues while eliminating
Determining Charges for Private Pay Residents. Shady Rest Nursing Home has 100 private pay residents. The administrator is concerned about balancing the ratio of its private pay to non-private pay
Determining Charges for Private Pay Residents. Shady Rest Nursing Home has 220 private pay residents. The administrator is concerned about balancing the ratio of its private pay to non-private pay
Add/Drop with Net Present Value Analysis (Builds on material in Chapters 6 and 7). Franklin County Hospital, a non-profit hospital, bought and installed a new computer system last year for $65,000.
Complex Make/Buy. Dr Mike Roe is the Medical Director of the labs at Parkside Hospital, the acute care provider for the Sunstone HMO. The lab is looking to reduce its costs to remain competitive in
Income statement and add/drop. Lakespring Retirement Village is home to senior citizens who are fairly independent, but need assistance with basic health care and occasional meals. Jill Thompson, a
Definitions. Define the following terms:a. Authoritarian Approach.b. Capital Budget.c. Cash Budget.d. Controlling Activities.e. Expense Budget.f. Fixed Labor Budget.g. Fixed Supplies Budget.h.
What is the purpose of the budget? Why are requests for budget revisions necessary? When should a formal request for a budget revision be submitted?
What are the major components of the planning/control cycle?
Discuss the role of strategic planning in the budgeting process. How does it differ from short-term planning?
What are the advantages and disadvantages of the participatory approach to budgeting?
What are the four major budgets of a health care organization? Briefly discuss each.
Using Exhibits 10–6 through 10–8 as examples, construct line-item, program, and performance budgets for a service or program in a health care organization.
Using the data provided in Exhibit 10–16, explain the difference in predicting this year’s visits for non-capitated and capitated patients.
The Statistics Budget: Forecasting Visits. Instead of its current forecast, Walk-In Clinic estimates that it will not obtain a major HMO contract, and its enrollment July—December will only go up
The Statistics Budget: Forecasting Visits. Instead of its current forecast, Walk-In Clinic estimates that it will not obtain a major HMO contract, and its enrollment July–December will only go up 6
The Statistics Budget: RVU Weighted Visits. What are RVU weighted visits? Why is it necessary to weight visits by their intensity level?
The Statistics Budget: Changing Intensity. How would the statistics budget change if Walk-In Clinic used the following distribution instead of the distribution of visits by intensity shown in Exhibit
The Statistics Budget: Changing Intensity. How would the statistics budget change if Walk-In Clinic used the following distribution instead of the distribution of visits by intensity shown in Exhibit
The Revenue Budget: Types of Payors. What is the difference between charge-based, cost-based, flat fee, and capitated payors?
The Revenue Budget: Calculating Gross Revenues. Calculate Walk-In Clinic’s January, February, and March gross revenues if it lowers its fee to$64.50 from $74.50 per RVU (assuming that cost-based
The Revenue Budget: Calculating Gross Revenues. Calculate Walk-In Clinic’s January, February, and March gross revenues if it lowers its fee to$70.00 from $74.50 per RVU (assuming that cost-based
The Revenue Budget: Gross and Net Charges. What is the difference between gross charges and net charges?
The Revenue Budget: Calculating Net Revenues. Calculate Walk-In Clinic’s January, February, and March net revenues if it lowers its fee to $64.50 from $74.50 per RVU. (See Exhibits 10–19 and
The Revenue Budget: Calculating Net Revenues. Calculate Walk-In Clinic’s January, February, and March net revenues if it lowers its fee to $70.00 from $74.50 per RVU. (See Exhibits 10–19 and
The Labor Budget: Fixed and Variable Labor. What is the difference between a fixed and a variable labor budget?
The Labor Budget: Calculating the Fixed Labor Budget. Instead of the raises stated in Exhibit 10–24, assume that all benefits are 13 percent and all raises are 7 percent and calculate the fixed
The Labor Budget: Calculating the Fixed Labor Budget. Instead of the raises stated in Exhibit 10–24, assume that all benefits are 20 percent and all raises are 5 percent and calculate the fixed
The Labor Budget: Variable Labor. In the variable labor budget, why is it necessary to determine how many RVUs can be handled by full-time employees?
The Variable Labor Budget: Direct and Indirect Time. In the variable labor budget, what is the main difference between direct and indirect “minutes per RVU” per LPN?
The Labor Budget (each part builds on the previous part).a. Calculating the Effects of Changes in Indirect Time on RVU Capacity per LPN. How many RVUs per day could an LPN serve if the indirect time
The labor budget. [Each part builds on the previous part.]a. Calculating the Effects of Changes in Indirect Time on RVU Capacity per LPN. How many RVUs per day could an LPN serve if the indirect time
Calculating the Variable Supply Budget. Calculate the variable supplies budget, assuming Walk-in Clinic changes its requirements so that ending inventory is 25 percent of next month’s COGS. No
Calculating the Variable Supply Budget. Calculate the variable supplies budget, assuming Walk-in Clinic changes its requirements so that ending inventory is 15 percent of next month’s COGS. No
Definitions. Define the following terms:a. Accountability.b. Administrative Cost Centers.c. Administrative Profit Centers.d. Authority.e. Budget Variance.f. Capitated Profit Centers.g. Clinical Cost
Advantages of decentralization. List and discuss the advantages associated with decentralization.
Disadvantages of decentralization. List and discuss the disadvantages of decentralization.
Types of responsibility centers. Describe the four types of responsibility centers, including the characteristics of each.
Responsibility centers.a. What is the most common type of responsibility center?b. What is the most basic type of responsibility center?
Identifying responsibility centers. Identify each responsibility center below as either a service center, cost center (clinical or administrative), profit center(capitated or administrative), or
The relationship among accountability, responsibility, and authority.What is the relationship of accountability, responsibility, and authority with respect to a responsibility center?
Transfer prices. What are transfer prices? Discuss their major disadvantages.
Performance measures. What is the most commonly used financial performance measure?
Performance measures. Name two financial measures used to judge the performance of investment centers that are 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 used in health care organizations?
Cost variances. What can account for cost variances?
ROI for an investment center. An outpatient clinic invests $2,300,000. The desired ROI is 12 percent. In the first year, revenues are $750,000 and expenses are $370,000. Does the clinic meet its ROI
ROI for an investment center. A new cardiac catheterization lab was constructed at Havea Heart Hospital. The investment for the lab was $450,000 in equipment costs and $50,000 in renovation costs. A
Detailed variance analysis. The following are planned and actual revenues for Cutting Edge Surgery Center. Since they are one of four surgery centers in the community, the administrator is very
Detailed variance analysis. The administrator of Break-a-Leg Hospital is very aware of the need to keep his cost down, since he 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 80,000 enrollees. The HMO expects 1 in 4 of its enrolled members to use the dermatology services per

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