Questions and Answers of Financial Management For Public Health

Definitions. Define the following terms:a. Activity-based Costing.b. Allocation Base.c. Cost Driver.d. Cost Object.e. Cost-to-charge Ratio (CCR).f. Direct Costs.g. Fully Allocated Cost.h. Indirect
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. Discuss the four major concerns of using the costto-charge ratio method.
Step-down Method. Discuss how the step-down method of cost allocation derives its name.
Cost Allocation and Cost Drivers. What is the relationship between the concepts cost allocation basis as used in the step-down method and cost driver as used in ABC?
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. In 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, 5,000 and
Activity-based Costing. In 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, 6,000 and
Cost Allocation. Use the information in Exhibit 12–11 to answer these questions.a. David Paul, 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. David Paul, 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
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
Define the “Key terms” found in this Chapter.a. Allowable Costs.b. APCs.c. Capitation.d. Case Rate.e. Charge-based.f. CMMS.g. Community Rating.h. Contact Capitation.i. Conversion Factor.j.
What were the major events and trends that defined the “Early,” “Middle,”and “Later” periods of the US health care system? In each period describe:a. The major events and trends.b. The
What was the driving force behind the development of Blue Cross/Blue Shield?
Name the units of service on which cost-based payers may pay providers.
What drove the development of Medicare? Who is covered under Medicare?
What drove the development of Medicaid? Who is covered under Medicaid?
Who pays for the Medicare and Medicaid programs?
How do copayments and deductibles reduce risk?
Why do providers desire “steerage”?
What do providers fear most under a case rate model?
What are some methods insurers use to limit their risk under per diem arrangements?
Who bears the risk under a flat rate system? Why?
What factors determine what a flat rate payment to a provider should be?
Why was the DRG system developed?
What are APCs? Why were they developed?
Why do HMOs use prevention and case management?
How do HMOs determine their premiums?
If an HMO covered 150,000 lives, expected 25 myocardial infarctions (MI) to occur each year within the covered lives, would expect a length of stay of 4.5 days for each MI, and had to pay an average
Given the same scenario as in question 18, what if the HMO’s shareholders demanded a 9 percent profit margin? What would the premium be in this case?
In question 19, what if the employer/patient refused to pay the new premium?What would the HMO offer to pay the hospital for an inpatient day?
What if, in question 20, the hospital refused to take the new rate, the employer refused to pay the new premium, and the employer decided to take its employees (10,000) to another HMO. Also, suppose
Who bears the financial risk in a capitated payment system?
Name and describe four different types of capitation.
Why would a provider be willing to accept a global capitation payment?
What are four factors to consider when developing charges in a charge-based system?
What charge method primarily uses the market price to establish a charge?
What charge method relies on the case mix, volume, and financial requirements of the institution?
What is the difference between determining charges on an average-cost basis and a weighted-cost basis?
What are the steps in determining weighted-average costs?
Describe the two margin-based approaches to developing charges.
Why is financial management important to the organization?
What is the distinction between the purpose of healthcare management and the purpose of healthcare financial management?
How would you prioritize the major objectives of healthcare financial management?
What are the major ethical theories, and how do they apply to the role of a healthcare manager?
Why should financial managers be concerned with quality initiatives in the healthcare organization?
How would you predict that financial management and the management functions will be important as healthcare changes in the future?
How would you explain the meaning of corporate status in relation to healthcare organizations? What are the advantages corporate status provides?
What is the role of the governing body? How does the governing body use organized committees to monitor the performance of the CEO?
What are the responsibilities of the CFO? What are the characteristics and traits of a successful CFO?
Although both the corporate compliance officer (CCO) and the chief information officer (CIO) report to the CEO, what are the primary aspects of their individual roles that distinguish these positions?
How would you compare the roles of the internal auditor and the independent auditor? What must the independent auditor include in the audit report?
How would you describe organizational models that attempt to integrate patient care, including the differences among them?
How would you explain the three steps in financial analysis at the organizational level?
What is the purpose of creating a balance sheet? List the three general classifications of the balance sheet and possible categories under these classifications.
What is the purpose of the statement of operations? List the main classifications and the possible categories under the classifications.
What types of organizations use the statement of changes in net assets, and why?
What is the statement of cash flows? The statement is divided into three segments;list each category.
What are the four classifications of ratios on which the financial statement analysis focuses?
What are the operating indicators used to analyze the financial performance of an organization?
What must an annual report include to be considered a good report?
How would you explain the rationale for granting organizations tax-exempt status?
What are the benefits and the burdens of tax-exempt status for hospitals?
What are the steps necessary to qualify for tax-exempt status?
What are the bases of legislative, judicial, and IRS challenges to tax-exempt status?
Is the Affordable Care Act of 2010 being viewed as friend or foe to tax-exempt hospitals? Why?
Under the ACA, if more people are covered by insurance and fewer people need charity care, how will nonprofit hospitals justify their tax-exempt status?
Discuss the differences between second-party payment and third-party payment.What led to the creation of the third-party payment system?
Which groups were considered the first managed care organizations? How does one distinguish a managed care organization (MCO), a preferred provider organization(PPO), and a health maintenance
Why did employers prefer managed care organizations? How have MCOs changed over the years?
What are some of the differences between open-panel HMOs and closed-panel HMOs?
What are the benefits to the employer of a defined-contribution plan?
How would you describe the two models of consumer-driven plans: spending account models and tiered models?
What are the different forms of payment to providers?
Why do organizations choose to shift costs to other payers?
How would you describe the history of Medicare, emphasizing the increasing cost of the program?
What was the purpose of offering Medicare Advantage to Medicare beneficiaries?
Why was the year 2011 important in terms of Medicare viability?
What are the major provisions of HIPAA?
What are the major provisions of the Affordable Care Act, and which provisions might be kept under the Trump administration?
What are the differences between fraud and abuse?
What are the major provisions of MACRA?
In many states, Medicaid expenditures are the largest line item in the state budget.Why have Medicaid expenditures increased, and what can states do to contain Medicaid costs?
What are the advantages of Medicaid expansion to patients, potential patients, providers, states, and the federal government?
The federal government is financing most of the cost of the Medicaid expansion.What is the government’s rationale?
Ultimately, states will be responsible for 10 percent of the cost of expansion in their states. How will the states handle this cost?
Some states argue for block grants from the federal government to the states in lieu of federal money for expansion. What are the advantages and disadvantages of this argument?
Why is it important for the healthcare manager to be able to classify costs in a variety of ways?
What is the point of allocating costs? After allocation, how is the resulting information used?
Cost information can be assembled in a variety of ways for a variety of reasons. What are three ways that cost information is assembled, and what is the reason for the assembly?
How might differential cost analysis be used in the following nonroutine decisions:expanding an existing service, decreasing an existing service, starting a new service, and closing an existing
How was the ACA expected to change how providers look at costs?
What are the similarities and differences between breakeven points per period and breakeven points per unit of service?
Is there a relationship between cost and price for any given product or service in healthcare? Should there be?
Many observers would concede that healthcare prices are currently irrational. How did prices get that way?
The public and those that represent the public (legislatures, insurance companies, consumer groups) have concluded that healthcare prices are outrageous. What can the healthcare industry do to
Healthcare prices are not, and perhaps should not be, set like prices in other industries. How are healthcare prices set as compared with how automobile prices are set?

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