Questions and Answers of Health Care Finance

Understand the difference between productive time and nonproductive time.LO.1
Have you ever had to compute depreciation expense? If so, please describe the circumstances.LO.1
Do you or your supervisor have to deal with depreciation expense? If so, please describe.LO.1
Have you ever had to count physical inventory? If so, please describe the process.LO.1
Do you or your supervisor have to deal with inventory? If so, please describe.LO.1
Be able to identify the five methods of computing book depreciation.LO.1
Understand how to compute the net book value of a fixed asset.LO.1
Understand the interrelationship between depreciation expense and the reserve for depreciation.LO.1
Be able to calculate inventory turnover.LO.1
Understand the difference between LIFO and FIFO inventory methods.LO.1
Understand the interrelationship between inventory and cost of goods sold.LO.1
Do you believe your organization could use these analysis tools more often than is now happening? What do you believe the benefits would be?LO.1
How do you think you would use break-even analysis?LO.1
If so, how was it used (or presented)?LO.1
Have you encountered break-even analysis in your work?LO.1
Do you believe that contribution margins can help you manage in your present work?In the future? How?LO.1
Have you seen reports in your workplace that set out the contribution margin?LO.1
Be able to compute the profitvolume(PV) ratio.LO.1
Be able to compute the costvolume-profit (CVP) ratio.LO.1
Understand the computation of a contribution margin.LO.1
Be able to analyze mixed costs by two methods.LO.1
Understand the distinction between fixed, variable, and semivariable costs.LO.1
If so, do you believe the responsibility centers operate properly? Would you make changes? Why?LO.1
If not, do you think they should? Why?LO.1
Does your organization use responsibility centers?LO.1
What is the difference?LO.1
In your own workplace, can you give a good example of a direct cost? An indirect cost?LO.1
Distinguish between product and period costs.LO.1
Understand the composition and purpose of responsibility centers.LO.1
Understand why the difference is important to management.LO.1
Distinguish between direct and indirect costs.LO.1
What grouping of expenses do you believe your organization uses (traditional cost centers, diagnoses/procedures, care settings, other)?LO.1
If so, why?LO.1
Do you believe that grouping expenses by diagnoses and procedures (based on type of services provided) is better to use for control and planning than grouping expenses by care setting (based on
Have you had to manage from a cost center type of report? If so, how was it categorized?LO.1
Have you worked with cost centers in your duties? If so, how have you been exposed to them?LO.1
Payment after expense is incurred. In most healthcare organizations, expenses are paid at a later time and not at the point when the expense is incurred. If this is the case, the expense is recorded
Payment when expense is incurred. If an expense is paid for at the point where it is incurred, it does not enter the accounts payable account. In large organizations, it is relatively rare to see
Recognize why cost reports have influenced expense formats.LO.1
Follow how expenses are grouped in different ways for planning and control.LO.1
Understand how disbursements for services represent an expense stream(an outflow).LO.1
Understand the distinction between expense and cost.LO.1
From your perspective, would there be a better grouping possible? If so, why do you think it is not used?LO.1
What grouping of revenue do you believe your organization uses (revenue centers, care settings, service lines, other)?LO.1
Do you believe that this proportion (payer mix) will change in the future? Why?LO.1
What do you believe the proportion of revenues from different sources is for your organization?LO.1
Why do you think this is so?LO.1
Does your organization receive revenue mainly in the form of payment after service is delivered or payment before service is delivered?LO.1
See how to group revenue for planning and control.LO.1
Understand the differences in sources of healthcare revenue.LO.1
Recognize contractual allowances and discounts and their impact on revenue.LO.1
Understand how receiving revenue for services is a revenue stream.LO.1
Do you think the balance sheet report you receive gives you useful information? How do you think it could be improved?LO.1
If you receive a copy of the balance sheet, is one distributed to you once a month, once a year, or on some other more irregular basis? What are you supposed to do with it upon receipt?LO.1
If so, is the balance sheet you receive for your department only or for the entire organization?Do you know why this reporting method (departmental versus entire organization)was chosen by
Do you ever work with balance sheets in your current position?LO.1
See how assets, liabilities, and net worth fit together.LO.1
Understand net worth terminology.LO.1
Recognize typical liabilities.LO.1
Recognize typical assets.LO.1
If so, do these reports give you useful information? How do you think they could be improved?LO.1
Do you work with daily or weekly operating reports? With quarterly reports and statistics?LO.1
If so, is it similar to one of the three formats illustrated in this chapter? If not, how is it different?LO.1
Do you know about the chart of accounts in your organization as it pertains to information you receive?LO.1
If so, did you receive the information in a formal seminar or in an informal manner, one-on-one with another individual? Do you think this was the best way? Why?LO.1
Have you ever been informed of the information flow in your unit or division?LO.1
Follow the annual management cycle.LO.1
Recognize the basic system elements.LO.1
Follow an information flow.LO.1
Understand that four segments make a financial management system work.LO.1
If you receive reports in the course of your work, do you believe that they are prepared for outside (third party) use or for internal (management) use? What leads you to believe this?LO.1
Have you ever seen your company’s organization chart? If so, how decentralized is it?LO.1
Of the organization types described in this chapter, what type is the one you work for?LO.1
Do you perform all four elements? If not, why not?LO.1
What element of financial management do you perform most often in your job?LO.1
Understand the composition and purpose of an organization chart.LO.1
Identify the types of organizations.LO.1
Understand the differences between the two types of accounting.LO.1
Identify the four elements of financial management.LO.1
Discuss the three viewpoints of managers in organizations.LO.1
The Metropolis Health System (MHS) has a system-wide training course for nurse aides. The course requires a packet of materials that MHS calls the training pack. Due to turnover and because the
Have you ever had to compute depreciation expense? If so, please describe the circumstances.
Do you or your supervisor have to deal with depreciation expense? If so, please describe.
Have you ever had to count physical inventory? If so, please describe the process.
Do you or your supervisor have to deal with inventory? If so, please describe.
Do you believe that this proportion (payer mix) will change in the future? Why?
What do you believe the proportion of revenues from different sources is for your organization?
Why do you think this is so?
Does your organization receive revenue mainly in the form of payment after service is delivered or payment before service is delivered?
The data in TABLE 15-8 represent a cost accountant’s effort to define the variable cost for DRG 216 (Cardiac Valve Procedures with Cardiac Catheter). Evaluate this method.
TABLE 15-7 presents some summary cost data for MS-DRG 233 at your hospital compared to a national profile.Your hospital costs are almost $7,000 per case higher than U.S. averages and the largest
Dr. Jones is scheduled to meet with you this afternoon. She has been an active admitter, but you would like to see her practice increase. After reviewing Dr. Jones’ s financial report, shown in
An HMO has asked your hospital to provide all of its obstetric services. It has offered to pay your hospital $2,000 for a normal vaginal delivery, without complications (DRG 775). You have looked at
Describe the concept of relative value units.
Explain the two systems necessary to accurately cost healthcare encounters of care.
Describe the three main phases of the costing process.
Describe how cost information relates to the three key activities of management: planning, budgeting, and control.
Describe the existing needs for cost information in healthcare firms.
Your hospital was denied a contract with an HMO last year. Legal counsel believes that there was a breach of contract and wishes to bring suit against the HMO for damages. The chief executive officer
An interdepartmental service structure and its direct costs are depicted in TABLE 14-13. Compute the total costs, direct and allocated, for each of the three revenue centers using the direct and

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