HSML 6209 Exam #2
24%
% of workers who performed some work at home on an average day in 2019 pre-Covid, according to the Bureau of Labor Statistics
Not-for profit
(1) Organizations that have a special designation because they provide goods or services that result in needed community benefit; in turn, such organizations are not required to pay most taxes; (2) The designation of an organization as one that is not generally required to pay taxes and may not distribute its profits; defined under IRS rule 501(c)(3) as operating for religious, charitable, educational, or scientific reasons
Overtime pay
1.5x hours worked more than 40 per week; important because holidays impact this (still have to work over 40 hours to get paid this)
Production identifier (PI)
A conditional, variable portion of a UDI that identifies one or more of the following when included on the label of a device: lot or batch number within which a device was manufactured, serial number of a specific device, expiration date of a specific device, date a specific device was manufactured, distinct ID code required for a human cell, tissue, or cellular and tissue-based product regulated as a device
Bonds
A form of long-term financing whereby the issuer receives cash and in return issues a note; the issuer agrees to make principal and/or interest payments on specific dates to the holders of the note
Means tested program
A government-sponsored program in which beneficiaries become eligible through specific means testing; Medicaid is the largest and best known example
Device identifier (DI)
A mandatory, fixed portion of a UDI that identifies the labeler and the specific version or model of a device
Expense
A measure of the resources used to generate revenue and/or provide a service; often used synonymously with costs
Inventory
A nonproductive asset; does not grow or product income; the more time an item spends here, the more likely it will become stolen, expired, or lost; appears as a CA on the B/S representing the unused portion on hand for a given accounting period (value is based on the cost paid for the items); appears as an expense item on Statement of Ops expressed as supplies, food, and drugs, representing the portion used for a given accounting period
Relative value units (RVUs)
A standard for measuring the value of a medical service provided by physicians relative to other medical services provided by physicians that has three components: the physician work component (reflecting physician time and intensity), the overhead component (reflecting all categories of practice expenses, exclusive of malpractice insurance costs), and the malpractice expense component (reflecting the cost of obtaining malpractice insurance)
Allocation base (cost driver)
A statistic used to allocate costs from a cost center based on cause-and-effect relationship; for example, a common allocation base to allocate the costs of maintaining medical records is number of visits
Unique device identifier (UDI)
A unique numeric or alphanumeric code that generally consists of a device identifier and production identifier; must be provided by device labeler as both easily readable plain-text and machine-readable form that uses automatic identification and data capture (AIDC) technology
Invoice
A way to generate operating expenses; used whenever an organization purchases goods and services; covers these areas of expenses- 1) Supply expenses (meds, PPE, med surg), 2) General and administrative expenses (marketing, malpractice ins, business ins, continuing ed, conferences, admin supplies- fax), 3) PPE/Facilities expense (utilities, environmental services, outsourced); comes out of the supply chain process
Worker classification
Affects how you pay your federal income tax, social security and Medicare taxes, and how you file your tax return; affects your eligibility for social security and Medicare benefits, employer provided benefits, and your tax responsibilities
IRS Form 990
All not-for-profit firms with annual revenues greater than $25,000 and who are exempt from federal income tax are required to file this form on an annual basis; the form contains a variety of financial information, including balance sheet and income statement data; the form also contains information on compensation for the highest paid executives; value on this is quantified through a community benefit reporting software
Personnel expenses
Always the first expense listed on the Statement of Operations since they are in order of greatest to least expensive; make up about 60% of total expenses for a hospital/health system
Skilled nursing facility (SNF)
An institution that meets specified regulatory certification requirements and is engaged primarily in providing inpatient skilled nursing care and rehabilitative services
Device labeler
Any person who causes a label to be applied to a device, or who causes the label of a device to be modified, with the intent that the device will be commercially distributed without any subsequent replacement or modification of the label; in most instances, it is the device manufacturer, but it may be a specification developer, a single-use device reprocessor, a convenience kit assembler, a repackager, or a relabeler
Automatic identification and data capture (AIDC)
Any technology that conveys the UDI or the device identifier of a device in a form that can be entered into an electronic patient record or other computer system via an automated process
Cost object
Anything for which a cost is found (a test, a visit, a patient day)
Employer-Indepedent Contractor Relationship
Business may be required to provide Form 1099-MISC, Miscellaneous Income, to report what it has paid to contractor; Contractor is responsible for paying their own income tax and self-employment tax (Self-Employment Contributions Act- SECA), and may need to make estimated tax payments during the year to cover tax liabilities; Contractor may deduct business expenses on Schedule C of their income tax return
Outsourced work
Companies that provide services for something there are no in-house experts for; they send an invoice to A/P to get paid; e.g. marketing company for PR campaign, rev cycle, environmental services, security
Temporary agencies
Companies that provide staffing services; send invoice to A/P to get paid; pays the benefits for the people they hire and then offer to health systems; travels are longer-term and higher-paid versions of these
Sunk costs
Costs based on relation to time- cost does not go away (depreciation expense of equipment, leased space)
Avoidable costs
Costs based on relation to time- if you change your operations, the cost can go away (closing the lab changes staff, supplies, etc.)
Indirect costs
Costs that are not traced to a cost object/given department but must eventually be allocated across cost objects; ex. building depreciation, utilities, shared costs with other depts (i.e. housekeeping, marketing, legal, HR), employee benefits; must have an allocation methodology that managers are aware of
Direct costs
Costs that are traced to a cost object/specific department; ex. lab staff salaries, lab medical and office supplies, lab contracts, equipment
Controllable costs
Costs that can be influenced by a designated responsibility center or departmental manager within a defined control period (staffing, supplies)
Variable costs
Costs that change proportionately according to changes in volume; ex. every time you draw a CBC, it costs $2 in supplies
Semi-fixed (step-fixed) costs
Costs that change, but not proportionately according to changes in volume; ex. salary expense of lab staff to volume of CBCs- 1 tech ($25k) for 1,000 tests, at 1,000, add another tech ($50k), at 2,000, add another tech ($75,000); over short term, salaries are fixed though (can't hire/fire that quickly)
Fixed costs
Costs that do not change according to changes in volume; ex. lease fee on lab machine is $2,000 per month, regardless of volume
Semivariable costs
Costs that include elements of both fixed and variable costs
Non-controllable costs
Costs that management is not responsible for; employee benefits, rent/utilities
Global Unique Device Identification Database
Device labelers are required to submit information here; administered by the FDA, includes a standard set of basic identifying elements for each device with a UDI and contains only the device identifier, which serves as the key to obtain device information in the database
Discontinuities
Disruptions to the inventory process, such as the introduction of a new version of a product or a missed delivery; affects the amount of supplies on hand
Employee
Distinguished by these factors: 1) Behavioral control: receives extensive instructions on how work is to be done; business provides you with training about required procedures and methods, 2) Relationship of the parties: receive benefits, such as insurance, pension, or paid leave
Independent contractor
Distinguished by these factors: 1) Behavioral control: receives less extensive instructions about what should be done, but not how it should be done (time and place is less important than how the work is done); 2) Financial control: have significant investment in your work; not reimbursed for some or all business expenses; can realize a profit or incur a loss
Exempt employees
Employees that are not protected under the Fair Labor Standards Act for minimum wage and overtime premium pay; generally receive a full week's pay for a week in which they perform work, regardless of the # of days or hours worked; all must be paid at least $455/week on a salary or fee basis
Nonexempt employees
Employees which must generally be paid for overtime- at time and one half their regular rate of pay- for each hour, or fraction thereof, in excess of 40 hours in a workweek, and minimum wage laws apply; such employees may be docked for missed hours or days, or suspended without pay for variations in the quality or quantity of work performed
Employer-Employee Relationship
Employers must do the following for their employees: 1) Must withhold income tax and their portion of SS and Medicare taxes; 2) Must pay SS, Medicare, and unemployment (FUTA) taxes on their wages; 3) Must provide a Form W-2, Wage and Tax Statement, showing the amount of taxes withheld; Employees may deduct unreimbursed employee business expenses on Schedule A of their income tax return, only if deductions are itemized and total more than 2% of ADI
Federal poverty line
For 2020, it is $32,000 for one person and $66,000 for four people
Paid current
For exempt employees, means if you are working in a job that gets paid monthly, you get paid the last day of the month for work performed that month
Paid in arrears
For non-exempt. employees, means they must track their time that the manager then approves, is transmitted to payroll and benefits applied; usually done weekly or bi-weekly and takes about 1 week to process through system
Operating expenses
Four ways to generate: 1) Payroll and benefits, 2) Invoices, 3) Signed contracts, 4) Accounting treatment
Charity care
Free care provided to those who cannot pay for service; also called indigent care; each organization must have rules to differentiate it from bad debt; some healthcare institutions may received appropriations from the government to help offset the costs; Medicaid unreimbursed costs can also count
Materials
In most healthcare orgs, these make up the largest nonlabor cost in the operating budget; includes supplies and pharmaceuticals; proper management can have a significant effect on operating costs and the net income of the org; items are classified as either patient care or administration
1961
In this year, the Dept of Labor issued interpretive rules saying: "If the employer knows or has reason to believe that the work is being performed, he must count the time as hours worked, and pay for it, even if they did not ask for or want the work, Burden is on ER to ensure that work is not performed that they do not wish to be performed"
Categories of exempt workers
Include executive employees, administrative employees, learned professional employees, creative professional employees, computer employees, highly compensated employees, and outside sales employees
Administration materials
Include housekeeping supplies, office supplies, other non-direct patient care supplies
Patient care materials
Include medical supplies, surgical supplies, drugs, linens, food; the right kind of supplies can be determined by the materials manager with the help of a user committee; amount can be more difficult to project due to time, uncertainties, and discontinuities
Financial benefits for NFPs
Includes 1) Tax exemption from federal income tax, state and local income tax, and property tax; 2) Gets lower postage rate; 3) Gets access to tax-exempt bond markets where they pay a lower interest rate (lower interest expense each year); 4) Sales tax exemption on purchased goods; 5) Exempt from paying into Federal Unemployment Tax Act
Types of community benefit
Includes charity care, bad debt, Medicaid unreimbursed costs, Medicare unreimbursed patient balances, patient support groups (diabetes, cancer, etc.), patient education classes (healthy eating, exercise, etc.), free screenings and health fairs, education for health professions (e.g. CPR class for all first responders in community), subsidized services that are provided to patients, research, and contributions to community groups (sustainable housing community group for patients who need permanent housing)
Pre-tax benefits- Employer
Includes health/dental insurance premiums (required for "large employers with >50 employees), Health Savings Account (HSA), Flex Spending, and Retirement- 401K or profit sharing (completely optional)
Pre-tax benefits- Employee
Includes health/dental insurance premiums , Health Savings Account (HSA), Flex Spending, and Retirement- 401K or profit sharing (max roughly $20,000, updated yearly by IRS)
Benefits of UDI System
Includes: 1) Allows more accurate reporting, reviewing, and analyzing of adverse event reports, 2) Reduces medical errors, 3) Enhancing analysis of devices on the market by providing a standard and clear way to document device use in EHRs, 4) Provides a standardized identifier to more effectively manage medical device recalls, 5) Provides a foundation for a global, secure distribution chain, and 6) Leads to the development of a medical device ID system that is recognized around the world
Other benefits- Employee
Includes: Short-Term Disability- generally covers from 6 weeks-6 months after disabling event; Long-Term Disability- generally covers % salary from 6 months- age 65; Garnishments- court ordered withholding for debts not paid, e.g. taxes; Charitable Contribution
Taxes- Employee
Includes: Social Security- 6.2%, up to IRS limit (changes each year); MC Part A fund- 1.45%, no limit; Federal Income- based on salary level and Fed W-4 form compared to IRS withholding tables; State Income- in 41 states and D.C., based on salary level and Fed W-4 form, and state withholding tables; Local income- can be flat % of based on state info
Taxes- Employer
Large employer must submit both ER and EE portions by IRS by Wednesday following pay day; includes: Social Security- 6.2%, up to IRS limit (changes each year); MC Part A fund- 1.45%, no limit; FUTA- 6% of $7,000 (can be reduced if paying SUTA), and SUTA/SUI- varies, % rate calculated annually based on company's unemployment data
Living wage laws
Laws created to pay state minimum wage above the federal rate; implies that workers in that state cannot live off of the federal rate
Charges
Legally must be the same for patients with or without insurance; are not related to cost of care provided because they can be set to anything
Property tax
Listed as PPE on B/S; tax paid to state and county for buildings and equipment, which is not paid by NFPs
Financial Assistance Policy
Must include a plain language summary, along with the detailed policy (6 pages of text, 4 pages of application); has to be written and made available to patients; based on FPL- up to 250% will get a 100% discount and 275-400% will have a sliding scale of 65-90% discount
Other benefits- Employer
Must submit to vendor based on contract; includes: Short-Term Disability (STD)- optional to offer; Long-Term Disability (LTD)- optional to offer; Charitable Contribution- optional to offer, ex. United Way deductions
Charitable organization
No legal definition; healthcare has to be qualified under this area of the not-for-profit IRS definition
Morristown Hospital v. Town of Morristown
Outcome was that anything that falls under a joint-venture must pay property taxes; this case sets a precedent for towns being able to sue their hospitals - 35 other NFPs challenges by towns/cities occurred because the case had to do with NJ state law
34%
Percentage of net income that is taxed by the federal income tax, which is not paid by NFPs
6%
Percentage of profits that is taxed by state and local income tax, which is not paid by NFPs
501(c)(3)
Provision of the Internal Revenue Code that relates to charitable purpose; provides that not-for-profit hospitals qualify for tax exemption
Accounting treatment- Employee
Recorded as deductions from employee paycheck
Accounting treatment- Employer
Recorded as fringe benefit expense on Statement of Operations; holds both employer and employee amounts as liability on B/S until they submit payments to vendor
Time element
Refers to the fact that for most supplies, a lag time exists between ordering and receiving the supplies
Costs of inventory
Reflected in the following issues: 1) How much of an item to order each time, 2) When to order the item, and 3) The cost of the item
Community benefit
Related to nonprofit hospitals; used to describe the scope of services and support that a hospital provides in return for its tax-exempt status; services include charity care and setting lower prices, or offering services that, from a financial perspective, might not be viable for for-profit firms
Paycard
Reloadable debit card used for paying employees; employer contracts with credit card servicing company that loads the amount of wages onto the card for each pay period; sent electronically to paycard processor; governed by state and federal laws- guidelines for processing company on fees charged; fees must be disclosed to employees before they sign up for this payment method
Community benefit standard
Requires 1) Representative Board of Trustees, 2) Medical staff open to all qualified physicians if they have proper licensure and want to work for you, 3) Operate an ER and do not deny care (later eliminated for rural areas), 4) Provide services to those who ordinarily would not have access, 5) Excess revenues must be reinvested into facilities
Unique Device Identification System final rule
Requires device labelers (typically, the manufacturer) to: 1) Include a UDI on device labels and packages, except where the rule provides for an exception or alternative, 2) Submit device information to the Global Unique Device Identification Database
Schedule H
Started in 2009; form that must be filed with IRS 990 forms by all not-for-profits hospitals starting in 2010; primary purpose of this form is to collect information regarding the provision of charity care by not-for-profit hospitals; not related to AHA
Set Up New Employee
Step #1 of the payroll process; employees are coded to correct dept and acct via chart of accounts; enter salary (weekly or hourly rate, overtime or shift differentials, exempt or not); Form W-4 for tax withholdings; HR form for benefit selection/deductions
Time & Attendance System
Step #2 of the payroll process; time tracked and approved by manager
Time Passes to Payroll Subledger
Step #3 of the payroll process
Salary Calculated
Step #4 of the payroll process; based on hourly rate, OT, differentials; calculate taxes and benefits to get total expenses
Paychecks Prepared & Sent as Paper or Direct Deposit, or Paycard
Step #5 of the payroll process
Expenses from Payroll Subledger Pass to GL
Step #6 of the payroll process; salary-based on charts of accounts; benefits depends on if they are treated as direct (traced directly to department) or indirect (allocated by %- based on dept's % of salaries)
Submit Withheld Taxes and Benefits Deductions to Appropriate Entity
Step #7 of payroll process
Community Health Needs Assessment
Survey hospital community needs to participate in every 3 years and must contain: 1) Description of community served, 2) Description of assessment methodology, 3) Description of data and gathering methods, 4) Prioritized description of needs identified, and 5) Description of existing resources to help meet needs; must be published on hospital website and submitted with Form 990 every year; have to answer question on Form 990 on how they have serviced the needs and what progress is being made
Materials management
The management and control of inventory, services, and equipment from acquisition to disposition; primary objective is to minimize the total cost associated with materials while ensuring that the proper materials, meaning both in quality and quantity, are readily available for patient care and administration
Inventory management
The management and control of items that have an expected useful life of fewer than 12 months
Traceability
The most basic classification of cost; two major categories of cost classifed in this manner are direct costs and indirect costs
Cost allocation
The process of assigning pooled indirect costs to specific cost objects using an allocation base that represents a major function of a business
Cost structure
The relative proportion of each type of cost present in a firm
Cost
The resources used to produce a good or service
2010
The year of a rule change under the Affordable Care Act, where Congress added 4 new requirements for NFP hospitals (501r); caused by charity care dropping down with ACA, which would cause an issue for all NFP because their community benefits spending would go down; changes include the publishing of the CHNA, a written Financial Assistance Policy, and keeping charges the same for patients with or without insurance
1956
The year that the IRS interpreted "charitable organization" to mean tax-exempt health care orgs had to provide care to those unable to pay
2017
The year that the IRS revoked NFP of a hospital for not disclosing their CHNA on their website; hospital had to pay fines and have to pay all the taxes they were originally exempt from, can't access bond market, and can't receive 501(c)(3) charitable donations
2015
The year that the town of Morristown took Morristown Hospital to court to have their NFP status revoked due to not having to pay property taxes; the hospital lost and settlement was reached- hospital agreed to pay $15 million back in property taxes to the town of Morristown and pay a property tax on 24% of property being used going forward from 2016-2025
1938
The year the Fair Labor Standards Act was passed
2012-2013
The years that the FDA supported an 18 month demonstration project with Mercy related to the adoption of UDI in the clinical setting
1969
This year, following Medicaid being passed, the IRS thought the need for charitable care would decrease significantly, so they introduced "community benefit standard"
Fair Labor Standards Act
Was passed in 1938 under the U.S. Dept of Labor, and remains relatively unchanged today; affects employees in private and public sectors; caused by transition from agricultural to manufacturing society, rural to urban workers; established federal minimum wage and overtime pay; discusses record keeping- says workers have to track the hours they have worked; addressed youth employment standards for ages 13-17
Payroll department
Work under the Controller; responsible for processing payroll for the organization's employees