Health Care Finance and Budgeting Final

If an office building was purchased for $2,500,000 and has a useful life of 28 years, how much depreciation should be accumulated at the end of 21 years (assume straight line depreciation)

$1,875,000

If the budget revenue amount for patient visits is $109,00 and the actual revenue is $120,000, the budget variance is:

$11,00

A hospital treated a Medicare patient for pneumonia and expected to be paid $4,500. If the total charge for the admission was $15,000, what is the contractual allowance for that case?

$11,000

In the above situation, suppose one of the payers is willing to include carve-out to pay for the device implanted during the joint replacement. If the average charge for the device is $10,000 and the payer is offering terms of $1,500 per day plus 50% of the charge for devices, what is the expected payment for the typical joint replacement claim (assume that all patients require a device)

$12,500

A hospital treated a Medicare patient for pneumonia and expected to be paid $4,500. If the total charge for the admission was $15,500, what is the contribution to patient accounts receivables for that case?

$15,500

Dr. Brutus' practice is preparing to open a second office location. The bank loan for new equipment and furnishings amounts to $20,000 at 12% per year. Dr. Brutus will make monthly payments. How much interest expense will be due for the first month's payment on the loan?

$200

What is the expected contractual allowance per case for the following contract if the average charge per case is $30,000 and the average length of stay is 4 days; per diem rate of $4,000 for the first day and $1,500 for all subsequent days?

$21,500

A hospital has $10,000,000 in donations, which it invested in a 6% coupon bond with a maturity of 10 years from the date of purchase. What is the semiannual interest payment that the hospital will receive?

$300,000

You will receive a $100,000 inheritance in 20 years. Your investments earn 6% per year. compounded annually. To the nearest hundred dollars, what is the present value of your inheritance?

$31,180

A certificate of deposit with a principal of $5,000 that earns 4% annual interest has a maturity of 3 months. What is the interest at maturity on this account?

$50

If a computer system was purchased for $20,00 and has a useful life of 10 years, what is the net value of the computer system after 7 years (assume straight line depreciation)

$6,000

The volume variance component (VVS) may be calculated as:

(Actual volume-budget volume) times budget unit price

If $1,00 is the present value of $1,250 to be received at the end of 2 years, what is the required annual interest rate to achieve the desired future value of the fund (round to the nearest percent)?

12%

City Urgent Care requires coverage in their triage area from 10:00AM to 10:00PM. There must be two nurses on duty at all times, each nurse works an 8 hour shift. How many FTEs are required to meet that need

2.5

If the number of patients visiting the ED in a typical shift is 10 with a standard deviation of 2, what is the probability that more than 14 patients will visit during a particular shift? (Assume that the distribution of patients visiting the ED is approx. normal).

2.5%

You decided to buy a new copier for your clinic instead of outsourcing your copying needs. If the copier costs $32,000 and generates $8,000 in savings. What is the payback period?

4 years

If a hospital purchases a new office building that will generate $500,000 in case flow for 2.5 million, what is the payback period?

5 years

Which investment will result in a higher return?

6% compound interest paid quarterly

If a facility's average length of stay for joint replacement patient is 5 days and the average charge per patient is $25,000, which of the following contractual arrangements is most favorable?

65% of charges

A physician is saving for a down payment for a new office building by investing $10,000 for the next 5 years at an annual rate of return of 5.5%. If the purchase requires a $15,000 down payment, how long must the sum stay invested to meet or exceed the $15,000 target?

7 year

Which of the contract arrangements offers the facility the most incentive to use monitor the amount of resources required to treat each patient?

A case rate of $10,000

Revenue variances may be due to:

A change in payer fee schedule

In the context of Medicare payment policy, what is the donut hole?

A gap in coverage where the beneficiary must prescription drugs

Which of the following organizations does not release accounting standards?

AHA

Which of the following are considered short term liabilities?

Accrued payroll

Which types of budget variances should be investigated further?

All variances

A payback period is the length of time required for the cash coming in from an investment to equal the:

Amount of cash originally spent when the investment was acquired

To perform a vertical analysis on a balance sheet, each figure should be divided by:

Assets

If Fair PPO offers to contract for inpatient services with your hospital via per diem rate of $500, what key pieces of data are required to determine if that amount is adequate to cover the cost of a typical patient?

Average cost and length of stay per discharge

The average annual net income divided by original investment amount equals:

Average rate of return

Where would short-term debt appear in a facility's financial statement?

Balance sheet

Which of the following financial statements represents the basic accounting equation?

Balance sheet

To maintain tax-exempt status, the not-for-profit hospitals must:

Be organized for the benefit of a private interest, attempt to influence legislation, Participate in election campaign activities

Not government sponsored healthcare plan

Blue Cross

Which type of lease requires the lessee to take on more ownership responsibility?

Capital lease

The "Stand alone principle" is used in performing a:

Cash flow anaylsis

Which health plan can providers negotiate with?

Commercial Payers

Which of the following investment vehicles is most risky?

Common Stock

Which of the following is not a critical part of commercial contract management?

Common size analysis

Which of the following is not a method for evaluating the feasibility of a capital purchase?

Common size analysis

The first step in any budget variance analysis is to:

Compare budget to actual results

A budget is a tool that may be used to:

Compare departmental actual performance to annual goals

Which of the following is not a key driver of payment?

Cost to deliver service

Which of the following costs may be traced directly to producing a laboratory test?

Cost to submit claim for service

Sunk costs:

Costs incurred even if the project does not go forward

Which of the following is an example of a short term debt instrument?

Credit line

Pre-paid expenses are an example of:

Current assets

Net working capital is:

Current assets minus current liabilties

Which is the newest of Medicare "Parts"

D

Which of the following is an asset management ratio?

Days in Patients Accounts Receivable

Which type of ratio measures the likelihood that an entity will default on a loan?

Debt performance ratios

Which of the following is a method used to determine if a budget variance should be investigated?

Decision theory

If a hospital's Medicare case mix shifts from 1.256 to 1.124, what impact will that shift have on the Medicare inpatient revenue projection for that hospital (assume volume does not change)?

Decrease

As the annual cash flow for an investment increases, the payback period:

Decreases

Which of the following is not the basis of an adjustment used on the cash flow statement to reconcile operating income to net cash flow?

Depreciation

What are the tax implications of lease versus buy in a for-profit entity?

Depreciation on a purchase reduces tax liability

Which of the following overhead allocation methods only allocates overhead direct service departments?

Direct Method

Which of the following are not key characteristics of costs?

Efficiency

Which of the following must be taken into consideration when formulating a revenue budget?

Expected volume of services, payer mix, market shares

If the budget expense amount for salary and benefits is $500,000 and the actual is $540,000, the budget variance is:

Favorable

If actual revenue is higher than the budget amount, the variance may be described as:

Favorable variance

What is the rate that banks use to loan reserve funds to each other?

Federal funds rate

The preparation and release of financial statements may be characterized as what type of task?

Financial accounting

Which of the following relationships is true?

Fixed Asset Turnover >= Total Asset Turnover

A higher value is considered favorable for which of the following financial ratios?

Fixed asset turnover

A(N) budget varied based on the volume of services experienced by the department

Flexible

If the net present value of the purchase of a new clinic building was $2,000,000, which of the following decisions should be made

Go forward with the purchase

Offers the least amount of flexibility to the enrollee in choosing their healthcare provider

HMO

Which of the following is false?

HMO plans create incentives for patients to seek hospital care, since volume means more profit.

What is the largest single expense category at a hospital?

Human resources

Which of the following attributes is a weakness of the payback period as a project evaluation tool?

Ignores the time value of money

Which of the following financial statements tracks revenue and expenses over the prior fiscal year?

Income statement

If a facility's cash increased in value and all other items statements remained the same, what impact would that have on quick ratio?

Increase

If a facility's net patient service revenue decreased in value and all other items on the financial statements remained constant, what impact would that have on the days in accounts receivable?

Increase

Which of the following health plan designs allows for the most patient flexibility?

Indemnity plan

Which of the following health plan designs are likely to charge the highest premium?

Indemnity plan

Payment per visit may be segmented into which two components?

Intensity and input price per unit

Which of these is not a source of capital funding?

Inventory

The numerator in the payback period is the :

Investment amount

Which of the following impacts work force needs?

Labor pool, environment, variation in volume

According to CDC estimates, what portion of children in the near-poor population is not covered by any health plan?

Less than 10%

The basic accounting equation is:

Liabilities + Equity= Assets

Which type of ratio assess the ability of an entity to pay their short term obligations?

Liquidity ratios

Suppose two facilities (A &B) experienced the same volume of admission and has similar payer mix, but Facility B's case mix was 0.5 higher than Facility A's case mix. Would the budgeted inpatient revenue for Facility A be:

Lower than Facility B

The Medicare program pays for inpatient hospital services based on:

MS-DRGS

The monitoring of budgets and internal cost control may be characterized as what type of task?

Managerial accouting

Current assets have which of the following attributes?

May be converted to cash in less than twelve months, must only be cash and cash equivalents, does not include patient accounts receivable

Which of the following agencies assigns credit ratings to health care organizations?

Moody's

Short term debt:

Must be repaid within 1 year

For-profit hospitals

Must pay taxes on their net income

Not-for-profit

NOT what most acute care hospitals are

What is synonym for equity?

Net assets

Which of the following investment statistics considers the time value of money?

Net present value

If the decision to go forward with a project is based entirely on the projected net present value, then the project should be accepted if:

Net present value is positive

If the budget revenue amount for patient visits is $109,000 and the actual revenue is $120,000, and the threshold for investigating a budget variance is 15% or above or below budget, should this budget variance be investigated?

No

A facilities long term assets decreased in value and all other items on the financial statements remained constant, what impact would that have on the current ratio?

No impact

If a facility's operating expenses increased in value and all other items on the financial statements remained constant, what impact would that have on the days cash on hand?

No impact

Units of service may be measured in:

Number of procedures

Significant budget variances should be identified by:

Objective criteria

Which of the following budget type is focused on generating revenue via the primary purpose of the business?

Operating budget

Which of the following is not considered to be a part of an entity's financial statements?

Operating budget

Which of following is a true statement?

Operating income = operating revenue - operating expenses

Total asset turnover both have which quantity in the numerator?

Operating revenue

Which of the following are statutory adjustments found in Medicare Part A payments?

Outlier payment, transfer payment, disproportionate share

Medicare pays for inpatient services under which of the following?

Part A

All Medicare beneficiaries are required to pay a premium for which of the Medicare parts?

Part B

If Dr. Brutus did not want to borrow the funds for the new office location, what alternatives are available to him as for-profit entity?

Partnership, sell a portion of the practices to an investor, sell assets.

NOT the result of The Affordable Care Act of 2010

Patients are only liable for healthcare expenses up to $100,000

Relative value units (RVUs) are an example of a measure of:

Payer mix

Accurate description of the trend in the US healthcare expenditures

Per capital health expenditures are projected to increase through 2018.

A budget variance due to a personnel position that was left unfilled for 3 months in an example of a:

Permanent variance

Which of the following services are not covered under Medicare part A?

Physician office

Which is the amount paid by a health plan enrollee to receive coverage?

Premium

In a prospective payment system, payment for services is determined:

Prior to services rendered

Which type of ratio measures the overall financial performance of an entity?

Profitability

An outlier term is sometimes included in a commercial contract to:

Protect the provider from absorbing the cost of caring for a very sick patient

A healthcare plan enrollee pays their co payment to which participant in the healthcare business model

Provider

Capital budgets focus on:

Purchasing items that depreciate, increasing the fixed assets, major structural improvements

Which of the following is a liquidity ratio?

Quick Ratio

To perform a vertical analysis on an income statement, each figure should be divided by:

Revenue

Operating budgets focus on:

Revenue and expenses

Bond issues must be approved by what government body?

SEC

Which method of capital funding is available to only for-profit entities?

Sale of stock

The denominator in a profitability ratio is a measure of:

Size of business

Community benefit provided by a not-for-profit hospital

Smoking cessation workshops, diabetes screening at a local grocery store, free well-child checkups

Strategic budget goals are not based on:

Staffing level

Which of the following financial statements tracks the changes in cash position of the entity over the prior fiscal year?

Statement of cash flows

Depreciation and amortization may be found on which component(s) of the financial statements?

Statement of cash flows and income statement

A cash flow analysis does not include which type of cost?

Sunk costs

A positive attribute is a net present value as a criterion for embarking on a project is:

Takes the time value of money into consideration

When deciding to lease of buy new equipment, what is typically the most critical fact to consider?

Tax status of the entity

A budget variance that is expected to resolve before the end of the year is a:

Temporary variance

Health Insurance deductible

The amount of cost a patient must pay during the benefit plan year prior to the health insurance company paying for care.

The denominator in the Days Patient Accounts Receivable represents?

The average patient service revenue per day

When using decision theory, the decision to investigate a budget variance is based on:

The cost to investigate and the cost to not investigate

The internal rate of return is:

The discounting rate that results in a net present value of zero

Balance Billing is:

The practice of billing the patient for any amount not paid by insurance

Analyzing the trend in source of funds for healthcare exptenditures

The proportion of public funds spent on healthcare is decreasing over time

The primary difference between cash and accrual accounting is:

The timing of recording revenue and expenses

Difference between for-profit and not-for-profit

The way the patient care is distributed

Which of the following is true for not-for-profit hospitals?

They are exempt from federal taxes

Which of the following methods may be used to identify significant budget variances?

Threshold, statistical process control, decision theory.

The majority of healthcare insurance coverage for US individuals under 65 is obtained:

Through an employer

Which of the following is a debt performance ratio?

Times interest earned

Which of the following is a profitability ratio?

Total Margin

If an insurance company does not have a contractual agreement with a provider, then they are obligated to pay what amount on behalf of their beneficiary?

Total charge

A budget formulated based on projected increases of decreases over the prior period is called:

Traditional budget

ROI or the return on investment depends on all of these except:

Type of organization investing

Individuals that have healthcare coverage by that coverage is not sufficient to pay for their required health care are called:

Underinsured

The best definition of the future value of an investment is:

Value of the investment at maturity

The difference between a budgeted and actual amount is called?

Variance

Which of the following is not an objective criterion for determining the significance of a budget variance?

Variances that are unexpected

If a health system acquired a hospital during fiscal year 2010, what method would be most appropriate in comparing fiscal year 2010 to 2011?

Vertical Analysis

The three most common budget variance causes are:

Volume, unit price and intensity

Which of the following categories may be the source of budget variance?

Volume, unit price, intensity of service