HFMA's CSAF 2021, Certified Specialist Accounting and Finance

If a lessee is building up equity in equipment being leased, the lease is:

**A. A capital lease. B. An operating lease. C. A noncancelable lease. D. A cancelable monthly lease agreement.

Tax benefits may be realized.

**A. Advantage B. Disadvantage

The project may be financed 100%.

**A. Advantage B. Disadvantage

A federally funded and administered program of health insurance

**A. Medicare B. Medicaid

For all persons 65 years of age or older; Individuals with certain disabilities

**A. Medicare B. Medicaid

Incentive and bonus payments

**Yes No

Land

**Yes No

Leased property and equipment

**Yes No

Medicaid and disproportionate share hospital (DSH) data

**Yes No

Misrepresenting the diagnosis to justify payment. This commonly refers to upcoding or assigning a higher payment than the procedure or diagnosis warrants.

**Yes No

Non-qualified deferred compensation

**Yes No

Medicare provides health insurance benefits to:

65 or older, renal (kidney) failure, certain disabilities

Unasserted claim

A malpractice claim may arise in the future (both reported and unreported)

Which component is not a considered assumption in the budgeting process?

A. Admissions or patient visits B. Average length of stay C. Average labor costs per FTE **D. Physician prescriptions

Which type of payment method is intended to cover all inpatient services utilized for each procedure (e.g., joint replacement) while the beneficiary is in the hospital?

A. Fee-for-service B. Per diem rate **C. Case rate D. Capitation

Which budget type is prepared under various assumptions that would include the range of volumes that could reasonably be expected?

A. Flexible budget B. Fixed budget C. Cash budget NOT - D. Operating budget

The components incorporated in a cash budget:

Ability of the organization to manage overall revenue cycle, projection of costs, variability in activities that impact both revenues and expenses, regularly recurring or periodic expenses, timing of capital purchases

Income does not include:

Capital gains, assets drawn down as withdrawals from a bank, sale of property house or car, refunds gifts loans lump-sum inheritances, one-time insurance payments, or compensation for injury

Second function of CMS:

Conditions under CMS programs, performance standards in administration, and results to achieve

Realizable amounts determined by:

Contractual agreement, legislation (worker's comp), provider policy updates

Less disruption from fewer incidents.

Cost **Benefit

Sarbanes-Oxley makes it so that CEOs and CFOs are responsible for:

Disclosure controls, ensuring specified information (controls) is made known to them, regular evaluations of controls with quarterly certifications

Three Internal control objectives:

Effectiveness and efficiency of operations, Reliability of financial reporting (external and internal), compliance with applicable laws and regulations

Cash is reported separately from cash equivalents if (or):

Externally restricted (current operations), externally designated (acquisition of noncurrent assets), Segregated for liquidation of long-term debts, or donor-imposed restrictions

Audit Plan includes

Goals, personnel conducting audit, individuals to interview, documents to review, attorney-client privilege

Operating budget's statistical factors include

Historical statistics, Historical relationship of department volume, anticipated effects of new programs, clinical practice patters, covered lives in global payment risk programs, changes in regulatory environment, technical developments, process improvements, marketing efforts, demographic trends

Charity Care

Inability to pay

Two types of equity financing

Internal and External

3 healthcare enterprises

Investor-owned, not-for-profit, governmental

Medicaid began

January of 1967,

Medicaid is administered by

Jointly the federal and state governments.

Asserted claim

Legal actions against provider seeking financial remedy

Break-even point

Level of sales volume of a product producing the exact amount of contribution margin needed to cover fixed costs.

Components of auditor's attestation report:

Objective, Date, Evaluation

First objective of risk management

Prevent or avoid the loss

Three Principal Types of expense variances

Price, Volume, and Efficiency

Capital gains.

True **False

3 classes of net assets

Unrestricted, temporarily restricted, permanently restricted

Bad Debt

Unwillingness to pay

Capital Leases

Yes **No

Donations of noncash assets that are not long-lived assets are recognized as revenue

in the period received.

What is prospective rate setting?

**A. A method used to set payment rates in advance of the delivery of healthcare services B. An interim payment determination from a third party C. Promises to give with payments due in future periods D. The disclosure of information about significant concentrations of credit risk from third parties

What is internal control?

**A. A process designed to provide reasonable assurance regarding the achievement of specified objectives B. A commission that provides a flexible and adaptable set of tools for assessing, monitoring, and strengthening an organization's comprehensive system C. A published work by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) D. A recognition of the business environment changes which have occurred since 1992

Which of the following statements about trust funds is NOT true?

**A. A trust fund is not included in the financial statements of a healthcare organization. B. A portion of the fund equal to the amount of assets expected to be liquidated to pay malpractice claims classified as current liabilities is classified as a current asset. C. In general, estimated losses from asserted and un-asserted claims are accrued and reported. D. Estimated losses are not based on payments to the trust fund.

How does CMS define the term transactions?

**A. Activities involving the transfer of healthcare information for specific purposes B. National standards to protect the security and privacy of an individual's health information C. A set of codes used to encode data elements such as tables of terms and medical concepts D. A standard unique health identifier for each individual, employer, health plan, and healthcare provider

When a hospital's actual patient census is greater than budgeted, the management views this as favorable. Generally, the effect on the actual expenses being less than the budgeted amounts is:

**A. Also favorable B. Unfavorable C. Mostly favorable D. A positive volume variance

What is an Internal Revenue Service Form 990?

**A. An annual information return required to be filed with the IRS by most organizations exempt from income tax under Internal Revenue Code section 501(a) B. An Act which added arbitrage restrictions whenever tax-exempt bond proceeds are invested and produce a yield higher than the interest rate on the bonds. C. Income from any regularly carried-on trade or business, the conduct of which is not substantially related to the exercise or performance of the organization's tax-exempt purpose or function. D. A regulation requiring that no part of the net earnings of the charitable organization shall inure to the benefit of any private shareholder or individual.

Defined as unwillingness to pay.

**A. Bad Debt B. Charity Care

A lease is classified if meets any one of four criteria.

**A. Capital Lease B. Operating Lease

All of the benefits and risks of ownership have been effectively transferred to the lessee, except the lessee doesn't get title to the asset or any value at the end of the lease.

**A. Capital Lease B. Operating Lease

The lessor recovers the full price of the equipment, plus an interest factor, during the lease period.

**A. Capital Lease B. Operating Lease

Involve existing conditions in which there is uncertainty as to possible gain or loss, which will ultimately be resolved when one or more future events occur or fail to occur.

**A. Contingencies B. Commitments

The break-even point is the level of sales volume of a product producing the exact amount of _____________.

**A. Contribution margin needed to cover fixed costs B. Incremental cost needed to cover fixed costs C. Contribution margin needed to cover incremental costs D. Contribution margin needed to cover all costs

Opportunities passed by because they were identified as too risky.

**A. Cost B. Benefit

The cost of administering risk management programs.

**A. Cost B. Benefit

The value lost from those incidents that could not be prevented.

**A. Cost B. Benefit

What is the primary purpose of measuring productivity?

**A. For management to determine if resources are being used efficiently. B. For management to implement a separate labor productivity monitoring process. C. For management to identify areas where corrective action may be appropriate. D. For management to incorporate strategic and operating plans for an organization

For internal reporting purposes, revenue and receivables can be stated either as ____________as long as they are consistently applied.

**A. Gross or Net B. Gross C. Net D. Inpatient or Outpatient

What is the purpose of the Audit Guide?

**A. Identifies various methods for quantifying and valuing uncompensated care, such as gross charges, actual costs, and units of service B. Disqualifies charity care for recognition as receivables or revenue in the financial statements C. Identifies a single method for quantifying and valuing uncompensated care, such as gross charges, actual costs, and units of service D. To declare that charity care represents healthcare services that are provided but are never expected to result in cash flows

What is the function of tail coverage?

**A. It generally covers claims incurred before, but reported after, cancellation of a program of claims-made coverage B. It covers claims that arise during the policy term, regardless of when they are reported to the insurance company C. It classifies malpractice self-insurance trust assets in unrestricted net assets as "assets whose use is limited" D. It mandates that all asserted and unasserted claims that have not been settled as of year-end must be accrued and reported as a liability in the financial statements

What are covenants?

**A. Legal obligations on the borrower that are intended to protect the lender against default by the borrower. B. The date when the issuer may elect to redeem bonds that are not yet mature C. The process of implementing a healthcare bond transaction D. An occurrence when an organization fails to meet one of the terms in its financing agreement

Includes four parts A, B, C, and D

**A. Medicare B. Medicaid

With the Prospective Payment System, hospital reimbursement for inpatients, with the exception of critical access hospitals, is determined prospectively.

**A. Medicare B. Medicaid

Should report their total income or loss from operations on a statement that, at a minimum, also presents the total changes in unrestricted net assets.

**A. Not-for-profit organizations B. Governmental organizations C. Expenses D. Healthcare organizations

All incidents occurring within the insured period would be covered regardless of when they were identified or reported.

**A. Occurrence basis B. Claims-made basis

More expensive, particularly in the early years of coverage.

**A. Occurrence basis B. Claims-made basis

Which type of insurance generally requires providers to retain a certain level of risk?

**A. Occurrence-based insurance B. Claims-made insurance C. Self-insurance D. Captive insurance

Which control budget places the responsibility for meeting budget targets on departmental or service managers?

**A. Operating budget B. Capital budget C. Cash budget D. Control budget

Accounting for current liabilities of healthcare organizations is similar to that of __________.

**A. Other business enterprises B. Deferred compensation arrangements C. Governmental healthcare entities D. Compensated absences

Gross charges for services rendered to patients are reduced by contractual adjustments to reflect the revenue expected from various health plans.

**A. Patient Service Revenues B. Premium Revenues

Not all revenue reported is expected to be collected and therefore health care organizations report bad debts for care provided to patients on an accrual basis

**A. Patient Service Revenues B. Premium Revenues

Revenue is reported on the accrual basis matching the period in which the care is provided to the patient.

**A. Patient Service Revenues B. Premium Revenues

In order to discount cash flow, you need to know:

**A. Payment flow and interest rate B. The actual value of the assets C. Several investment opportunities available on a common basis D. The current dollar value of comparable assets

The objective of this phase is to determine allowable costs by department.

**A. Phase I B. Phase II C. Phase III D. Phase IV

Arrived at by a group or association of organizations with similar characteristics (for example, a published relative value scale).

**A. Predetermined B. Negotiated C. Customized standards

Regarding anti-dumping, which option is necessary for a hospital to do if an emergency medical condition exists?

**A. Provide further medical examination and treatment to stabilize the patient B. Transfer the individual to another medical facility if such a transfer is appropriate C. Discourage patients from refusing care because they are concerned about cost D. Terminate its provider agreement with Medicare

The healthcare industry relies on _________________ to quantify creditworthiness.

**A. Rating agencies B. Medical staff characteristics C. The skill and ability of a hospital's management team D. Historical financial trends

The hospital staffing for a regular acute unit is an example of

**A. Semi-fixed or stepped variable cost B. Variable cost C. Fixed cost D. A fixed cost pattern

Less tentative

**A. Short-Term B. Long-Term

What does the usual coinsurance clause state?

**A. That if the insured fails to carry insurance equal to some specified percentage of the property value at the time of the loss, the insurer is responsible only for that portion of the loss to the total B. That the payment of losses becomes the contractual and legal obligation of the insurer, who then holds the risk C. The defined specifications for cost, type of insurance, and experience rate D. That if a claims-made policy is canceled, the company must choose to retain the risk of loss internally

Which of the following statements is NOT true about employers' obligations to provide post-employment benefits in accordance with FASB Statement No. 112, Employers' Accounting for Post-Employment Benefits?

**A. The obligation is based upon the parameters of GASB 45 B. Employees' rights to the benefits accumulate over time. C. Payment of the benefits is probable. D. The amount of the benefits can be reasonably estimated.

Healthcare providers should develop different modeling tools depending on ____________.

**A. The reimbursement method proposed in the contract. B. Whether it will result in additional business. C. Cost estimates for each scheduled rate D. What the cost structure would be

What occurs within retrospective rate setting?

**A. Third parties usually determine an interim payment rate and, during the rate period, pay the healthcare organization for services rendered using that rate B. Third parties usually determine an interim payment rate only C. Third parties make payment to the healthcare organization for services rendered using a fixed rate established by the government. D. Third parties make final settlements in accordance with federal or state regulations or contractual agreements.

What is the purpose of the Sarbanes-Oxley Act?

**A. To establish new or enhanced standards for corporate accountability and penalties for corporate wrongdoing B. To support the significant loss of public trust in corporate accounting and reporting practices C. To enhance penalties and sentencing guidelines for certain white-collar crimes D. To issue rules requiring attorneys in certain roles to report violations of securities laws

What is one primary purpose of a cash budget?

**A. To identify cash requirements and cash sources for a certain period of time. B. To evaluate investment alternatives. C. To coordinate the financial needs of subsidiaries and divisions. D. To determine the available cash balance at the end of the previous month.

What is the first objective of risk management?

**A. To prevent or avoid the loss B. To minimize the cost of financing the risk C. To allow directly access the reinsurance market D. To establish regulatory requirements that must be met to operate an insurance company

What is the purpose of the IRS Form 990?

**A. To provide information to the IRS and the public regarding the tax-exempt organization's programs B. To require recognition of post-employment costs on an accrual basis C. To report a more detailed break-down of an individual's compensation D. To require numerous disclosures regarding the compensation arrangements for officers, directors, trustees, and key employees

What is the purpose of long-term debt?

**A. To satisfy capital needs. B. To permit healthcare organizations to borrow funds for capital projects. C. To represent a liability that must be paid to the U.S. Treasury. D. To disclose information about contractual limits.

The activity must be a trade or business.

**A. UBI condition B. UBI excluded activity

The trade or business must be carried on regularly.

**A. UBI condition B. UBI excluded activity

The trade or business must not be substantially related to the exempt purpose of the organization.

**A. UBI condition B. UBI excluded activity

Which type of cost behavior varies more or less in direct proportion to volume?

**A. Variable cost B. Fixed cost C. Semi-variable cost D. Semi-fixed cost

When should the equity method should be used?

**A. When investment in voting stock gives an investor the ability to exercise significant influence over operating and financial policies of an investee B. When assessing the ability of an investor to exercise significant influence in a given investment C. When healthcare organizations make the financial statement disclosures required by FASB ASC 323-10 D. When consolidated financial statements are required or permitted

Allow a non-profit organization to enter into a joint venture deal with minimal up-front capital investments due to the tax benefits that flow to the for-profit groups.

**Benefit Risk

Allow an entity to remain competitive in its marketplace when it cannot do so by itself.

**Benefit Risk

Allow entities to spread the risks associated with a deal.

**Benefit Risk

Allow the parties to combine their financial resources and may give them access to additional sources of capital.

**Benefit Risk

Attract physician and for-profit groups as investors.

**Benefit Risk

Covers a period of one year or less

**Short-Term Long-Term

Useful to planning daily operations

**Short-Term Long-Term

Net receipts from self-employment.

**True False

Regular payments from Social Security.

**True False

Unemployment compensation.

**True False

Veterans' payments.

**True False

Workers' compensation.

**True False

Accounts payable

**Yes No

Accrued salaries and payroll Taxes

**Yes No

All partial payments by charity care patients

**Yes No

Balance Sheet

**Yes No

Base salary

**Yes No

Buildings and improvements

**Yes No

Conduct inspections of accounting firms.

**Yes No

Construction in progress

**Yes No

Cost-to-charge ratio

**Yes No

Current portion of long-term debt

**Yes No

Deferred revenue

**Yes No

Expense reimbursement

**Yes No

Externally designated for expenditure in the acquisition or construction of noncurrent assets

**Yes No

Externally restricted as to withdrawal or use for other than current operations

**Yes No

Falsifying certificates of medical necessity, plans of treatment, and medical records to justify payment

**Yes No

Filing claims for services that were not rendered

**Yes No

Health or social clubs dues or fees

**Yes No

Misrepresenting the time, location, frequency, duration, or provider of services

**Yes No

No part of the entity's net earnings, either directly or indirectly, inures to any private shareholder or individual.

**Yes No

No substantial part of the entity's activities consists of carrying on propaganda or otherwise attempting to influence legislation.

**Yes No

Notes

**Yes No

Notes of the Financial Statement

**Yes No

Notes payable to banks

**Yes No

Other state and local indigent care programs data

**Yes No

Public assistance.

**Yes No

Refunds to and deposits from patients and others

**Yes No

Register public accounting firms.

**Yes No

Regularly recurring or periodic expenses, such as utilities and taxes

**Yes No

Required by a donor-imposed restriction that limits their use to long-term purposes

**Yes No

Set the PCAOB budget and manage board and staff operations.

**Yes No

Soliciting, offering, or receiving a kickback

**Yes No

State Children's Health Insurance Program (SCHIP) data

**Yes No

Statement of Cash Flows

**Yes No

Statement of Changes in Net Assets

**Yes No

Statement of Operations

**Yes No

Tax indemnification and gross up payments

**Yes No

The entity does not participate in, or intervene in, any political campaign on behalf of any candidate for public office.

**Yes No

The healthcare organization's projection of costs

**Yes No

Timing of capital purchases

**Yes No

To design disclosure controls and procedures to ensure that specified information is made known to them.

**Yes No

To establish and maintain disclosure controls and procedures.

**Yes No

To undertake regular evaluations of disclosure controls and procedures in connection with quarterly certifications and other reporting obligations.

**Yes No

Total initial charity charges

**Yes No

Unbundling or "exploding" charges, that is, the practice of billing as separate items the services that are actually performed as a group of services, such as lab tests

**Yes No

Variability in activities that impact both revenues and expenses

**Yes No

Conduct investigations and disciplinary proceedings, and impose appropriate sanctions.

**Yes no

Use the discount method to determine how much money must be put in the bank today to have $1,000 in three years. The interest rate is 8% and the discount factor is 0.794.

A. $735 **B. $794 C. $857 D. $926

A major cost to health care organizations is high-tech equipment. Fixed Asset management ratios can help managers understand how much bang for their buck they are getting from their expensive assets. The Fixed asset turnover ratio specifically measures how efficiently assets are converted into revenue. Compute the Fixed Asset ratio using applicable information from the following: Total Patient Service Revenue $250 million, Operating Revenue $75 million, high-tech equipment cost $25 million, Accumulated depreciation $10 million. The Fixed Asset Turn Over Ratio is

A. 10 B. 3 **C. 5 D. 17

Which one of the following is not true of COSO framework for Internal Control?

A. 5 components are unchanged in the 2013 release of COSO report **B. 12 components exist to support the components of internal control C. 17 codified principles exist to support the components of internal control D. Management is ultimately responsible for its system of controls

Which option is NOT a transaction and/or financial arrangement type that may promote an excess benefit transaction?

A. A non - fair market value transaction in which an insider receives payment that cannot be supported by independent appraisal B. A transaction in which an insider receives compensation from the tax-exempt organization in an amount deemed in excess of fair value or otherwise is unreasonable C. A revenue-sharing transaction in which an insider receives payment based on the tax-exempt organization's income and violates the private inurement prohibition **D. An intermediate tax sanction imposed on two specific classes of disqualified persons

The cost of extending the lease for the entire useful life of the equipment may be more than the actual purchase price.

A. Advantage **B. Disadvantage

Third parties will recognize a full lease payment as an allowable cost only if the lease is identified as a "true" (operating) lease.

A. Advantage **B. Disadvantage

Activity-based costing is

A. Another term for the proportional allocation method **B. A method of determining product costs using cost drivers or activity measures that cause indirect costs to be incurred C. Less expensive to determine due to the necessary data collection D. Generally considered a less accurate costing method

An indication of how long an organization can support operations with no inflows of cash is referred to as

A. Average Payment Period **B. Days Cash on Hand C. Days in Accounts Receivable (net) D. Current ratio

Defined as inability to pay.

A. Bad Debt **B. Charity Care

Represents healthcare services that are provided but are never expected to result in cash flows.

A. Bad Debt **B. Charity Care

Rewards will be shared if the joint venture becomes very profitable.

A. Benefit **B. Risk

Equipment and lease renewal options are determined by the fair market value of the equipment.

A. Capital Lease **B. Operating Lease

The hospital does not have any ownership right during or after the leasing period.

A. Capital Lease **B. Operating Lease

The hospital is liable for the leasing cost for the term of the lease.

A. Capital Lease **B. Operating Lease

Which one of the following options is a managed care product that is easy to evaluate?

A. Capitation B. Fee schedule C. Case rate **D. Fee-for-service

Estimated time period that the investment will provide positive returns.

A. Cash Outflow B. Cash Inflow **C. Economic Life D. Opportunity Cost of Funds

The benefits that would be received from the next best alternative use of the investment funds. Typically this is expressed in terms of an interest rate, either the cost of borrowing funds or your internal cost of capital, and it becomes the discount rate used for present value calculations.

A. Cash Outflow B. Cash Inflow C. Economic Life **D. Opportunity Cost of Funds

Incremental net revenues associated with the capital investment decision, including any cost savings, and the impact of cost-based reimbursement and/or taxation. Cost-based providers will share in any capital investment that reduces cost. For tax-based providers, any dollar of profit will be reduced by the tax.

A. Cash Outflow B. Cash Inflow C. Economic Life NOT - D. Opportunity Cost of Funds

The amount of cash required to plan and implement an investment proposal.

A. Cash Outflow B. Cash Inflow C. Economic Life NOT - D. Opportunity Cost of Funds

What option is NOT a method used to prepare a cash budget?

A. Cash receipts and disbursements method B. Adjusted net income method C. Working capital differential method **D. Control flow of cash funds method

Can be agreements to provide future services that reasonably can be expected to occur, although the exact level of service may not be known.

A. Contingencies **B. Commitments

Which option is NOT used to determine realizable amounts?

A. Contractual agreement with others (such as Blue Cross plans, Medicare, Medicaid, or HMOs) B. Legislation or regulation such as workers' compensation or no-fault insurance C. Provider policy or practice (such as courtesy discounts to medical staff members and employees or other administrative adjustments) **D. Subsequent to discharge or completion of service

More efficient and productive use of resources.

A. Cost **B. Benefit

Which option is NOT an action in which the SSA provides for?

A. Criminal penalties, applicable to persons convicted of committing specified fraudulent acts B. Civil monetary penalties, applicable to persons determined by the Secretary of HHS NOT - C. Provider and practitioner exclusion from programs D. Misrepresenting the diagnosis to justify payment

Which type of deficiency occurs when a properly designed control does not operate as designed?

A. Deficiency in internal control B. Deficiency in design **C. Deficiency in operation D. Significant deficiency

Overhead is a common term for

A. Direct costs B. Variable Costs C. Fixed Costs **D. Indirect Costs

Which one of the following in NOT a method used to quantify the value of assets?

A. Discounted cash flow method B. Replacement cost method C. Debt restructuring method NOT - D. Market comparison method

Who uses ratio analysis in its purest form for evaluating debt offerings or applications for borrowing money?

A. Employee unions B. Rate regulators **C. Creditors D. Board members

Which option is NOT a function of the Centers for Medicare and Medicaid Services (CMS)?

A. Establishment and promulgation of clear policy on eligibility for CMS programs, coverage and reimbursement of healthcare services, standards for providers and program administration B. Administration of comprehensive agreements with contractors and states that stipulate the conditions under which CMS programs are carried out, the performance standards that must be met in their administration, and the programmatic results that are to be achieved C. Monitoring the performance of contractors and states in administering CMS programs consistent with program and performance standards, as well as the direct monitoring of healthcare providers to make sure that programmatic goals are achieved **D. Regulation of federal and state legislation related to life and safety issues, business compliance, and licensure requirements. Regulatory Environment and Corporate Compliance

What is the requirement of the Omnibus Budget Reconciliation Act of 1989?

A. For hospitals to maintain records on transferred patients for five years B. For hospitals to provide for an appropriate medical screening examination to any individual who comes to the hospital and requests a medical examination or treatment. C. To take advantage of the potential cost savings associated with health maintenance organizations NOT - D. For hospital personnel to discourage patients from refusing care because they are concerned about cost

Which of the following types of debt depend on the revenue stream generated by the issuer to provide for repayment?

A. General obligation bonds **B. Revenue bonds C. Tax-exempt bonds D. Taxable debt bonds

Which option is NOT considered a covered entity to which HIPAA applies to?

A. Health plans B. Healthcare clearinghouses C. Healthcare providers transmitting any health information electronically **D. Healthcare patients

Which of the following statements is NOT accurate?

A. Healthcare organizations may receive and hold assets owned by others under agency relationships. **B. Agency funds are not included in unrestricted net assets. C. If the provider has concentrations of credit risk related to financial instruments, additional disclosure may be required. D. Investments in obligations that are not guaranteed by the government make for potential exposure to credit risk.

Which option is NOT a FASB ASC 320-10-25-1 defined category for provider investments?

A. Held-to-maturity securities B. Trading securities NOT - C. Available-for-sale securities D. Investor-owned entities

Which statistical factor is typically used by healthcare organizations in their operating budgets?

A. Historical statistics B. Technological developments C. Labor contracts and union activities NOT - D. Cash flow budgets

Which option is NOT true concerning Medicare's Prospective Payment System?

A. Hospital reimbursement for inpatients, with the exception of critical access hospitals, is primarily determined prospectively B. Hospitals assume the responsibility for treating the diagnosis with the most cost-effective use of hospital resources. NOT - C. All Medicare patients are placed into a diagnosis related group (DRG) based on their primary clinical diagnosis D. It is an accumulation of funds in the Part B trust fund occurs through premiums paid by enrollees as well as federal government subsidies.

If the reporting entity controls a separate not-for profit entity through a form other than a majority ownership or voting interest, has an economic interest in that other entity, and does not present consolidated financial statements, what should NOT be disclosed in the financial statements?

A. Identification of the other entity and the nature of its relationship with the reporting entity that results in control B. Summarized financial data of the other entity, including total assets, liabilities, net assets, revenue, and expenses; and resources that are held for the benefit of the reporting entity or that are under its control C. The disclosures set forth in FASB ASC 850-10-50 paragraphs 1-6 **D. Control through a majority voting interest in the board of another entity by means other than ownership or sole corporate membership

Which statement is NOT true regarding equity financing?

A. Internal equity financing is usually the least expensive source of capital funds B. External equity financing is traditionally accomplished through the sale of stock C. One advantage is that increasing the equity in a company enhances its ability to raise more capital via debt **D. Equity financing is very common in the healthcare industry

Which option is NOT an operating characteristic category for healthcare organizations?

A. Investor-owned healthcare entities B. Not-for-profit business-oriented entities C. Governmental healthcare entities **D. AICPA's healthcare entities

What do advance refundings NOT do?

A. It enables providers to restructure their long-term liabilities B. It takes advantage of reduced interest rates NOT - C. It terminates restrictive bond covenants D. It serves as a financing source for government operations

Which of the following statements is NOT true about operational auditing?

A. It is a technique to ensure that management objectives and organizational policies are effectively carried out. B. Opportunities for improvement are commonly identified as a result of these reviews **C. Operational auditing takes considerable special instruction and training since it is not logical. D. The auditor focuses on the operational aspects of running an efficient and profitable business and ensures that assets are safeguarded.

All of the following are true of a bond transaction working group, except:

A. It is formed at the time the borrower decides to begin the process of issuing debt. B. The borrower's management typically works with the organization's financial advisor or investment banker to develop a preliminary structure for the debt. C. Preliminary discussions with bond counsel may be held to determine any tax consequences. **D. Generally the issuer, the borrower, and the underwriter are only represented by legal counsel at the end of the process.

Which of the following is not one of the current trends moving away from the fee for service delivery payment system:

A. MIPS B. Comprehensive Care for Joint Replacement (CJR) C. Accountable Care Organizations (ACO) **D. Resource Based Relative Value System (RBRVS)

Administered jointly by the federal and state governments

A. Medicare **B. Medicaid

Provides health insurance mainly for the indigent

A. Medicare **B. Medicaid

States receive funding from the federal government based on the state's per capita income

A. Medicare **B. Medicaid

Should report their total income or loss from operations on a statement of revenues and expenses. In many instances the statement also includes the change in net position.

A. Not-for-profit organizations B. Governmental organizations C. Expenses NOT - D. Healthcare organizations

Should report the results of their operations in a statement of operations.

A. Not-for-profit organizations NOT - B. Governmental organizations C. Expenses D. Healthcare organizations

Which option is NOT a component of an auditor's attestation report?

A. Objective B. Date C. Evaluation **D. Deficiency

Claims would be covered in the period they were identified and reported

A. Occurrence basis **B. Claims-made basis

If canceled, the company must choose to insure the exposure for incidents incurred but not reported (IBNR) by purchasing a tail coverage policy

A. Occurrence basis **B. Claims-made basis

Organizations should have a clear plan as to why they are in business and how they can stay in business in the future. What is such a plan called?

A. Organizational chart B. Mission **C. Strategic plan D. Future plan

At a minimum, a compliance plan should include all of the following, except:

A. Oversight of personnel NOT - B. Mechanisms for monitoring compliance, including independent evaluations. C. Disciplinary measures for employees violating procedures. D. Full support of middle managers in the organization.

An agreement between a health plan and the provider exists to provide patient care to patients at a predetermined amount.

A. Patient Service Revenues **B. Premium Revenues

Which option is NOT a general category of provider excess loss insurance?

A. Per-Person B. Aggregate C. Carve-Out **D. Quality Indicators

The objective is to determine the total allowable cost of direct patient care departments, commonly referred to as "revenue-producing" departments.

A. Phase I **B. Phase II C. Phase III D. Phase IV

The output of this phase is the provider's cost reimbursable from Medicare.

A. Phase I B. Phase II **C. Phase III D. Phase IV

This phase of the reimbursement process is determining the net settlement due to or from the provider.

A. Phase I B. Phase II C. Phase III **D. Phase IV

Based on the historical data of the specific institution for which the budget is intended

A. Predetermined **B. Negotiated C. Customized standards

Based on detailed time or activity studies within a specific department of a specific institution.

A. Predetermined B. Negotiated **C. Customized standards

Which of the following is NOT a type of expense variance?

A. Price Variance B. Volume Variance C. Efficiency Variance **D. Stepped Variable

Which ratio generally deal with the income statement, revenues and expenses, and how those relate to the organization's financial health?

A. Profitability Ratios B. Liquidity Ratios C. Activity Ratios NOT - D. Capital Structure Ratios

Which ratio measures the relationship between revenue and assets to determine the financial efficiency of an organization's operations?

A. Profitability ratios NOT - B. Liquidity ratios C. Activity ratios D. Capital structure ratios

Managed care arrangements generally result in providers:

A. Receiving, on average, a higher level of reimbursement. **B. Assuming greater financial risk for the level of services provided. C. Relaxing their management for the level of services provided. D. Being fairly and adequately reimbursed for the level of services provided.

Which option is NOT a primary input for asset allocation models that construct the asset allocation alternatives?

A. Returns B. Risks C. Correlation **D. Diversification

Which option is NOT a long-term debt (bond)?

A. Revenue B. General obligation C. Participating **D. Private Placement

Covers a period beyond a year

A. Short-Term **B. Long-Term

Tentative and contain fewer details

A. Short-Term **B. Long-Term

Useful in formulating overall financial policies

A. Short-Term **B. Long-Term

The wage variance is determined by:

A. The "difference in the actual and budgeted paid hours" times the "budgeted wage rate." B. The "budgeted units of service" times the "budgeted labor hours per unit of service" times the "actual average wage rate per hour." C. The variance in the "labor hours per unit of service" times the "actual units of service" times the "budgeted average wage rate." **D. The "difference in the budgeted and actual average wage per hour" times the "actual paid hours."

Contribution margin is

A. The difference between marginal revenue and the break-even point. **B. The difference between marginal revenue and marginal cost. C. Where marginal revenue equals marginal cost. D. The point where fixed cost produces a profit.

Which option is false concerning return on investment?

A. The formula to calculate the return is income plus realized gains minus realized losses. **B. The formula to calculate the return is losses plus realized gains minus realized income. C. The expected return from an investment is correlated to the risk profile. D. While it is difficult to quantify risk, it is easy to calculate the return of an investment

Under HIPAA and federal regulations, what is the difference between "fraud" and "abuse"?

A. There is no difference. B. Abuse requires a knowing and intentional act, while fraud only requires engaging in a practice that directly leads to unnecessary costs to the Medicare and other federal programs. NOT -C. Fraud requires a knowing and intentional act, while abuse only requires engaging in a practice that directly leads to unnecessary costs to the Medicare and other federal programs. D. Fraud requires a knowing and intentional act, while abuse only requires engaging in a practice that directly or indirectly leads to unnecessary costs to the Medicare and other federal programs.

What is the purpose of operational auditing?

A. To ensure that management objectives and organizational policies are effectively carried out NOT - B. To review the established system of internal controls, an appraisal of operations and operating procedures C. To focus on the operational aspects of running an efficient and profitable business D. To perform specific internal controls procedures like surprise cash counts and review of patient revenue charges

What is the purpose of an investment policy?

A. To establish a framework to make investment decisions and evaluate results B. To form a cushion to protect creditors if the operating environment were to deteriorate NOT - C. To maximize returns while ensuring that there is cash on hand for day-to-day operations D. To define how the organization intends to match the maturity of the investments with the projected need for the proceeds

What is the second objective of risk management?

A. To minimize the cost of financing the risk B. To allow direct access the reinsurance market NOT - C. To establish regulatory requirements that must be met to operate an insurance company D. To minimize the establishment of a segregated cash account, or trust, from which claims are paid

Which option is NOT a reason why a hospital would want to undertake a debt restructuring by either retiring or reacquiring existing debt?

A. To take advantage of lower interest rates B. To change collateral restrictions C. To allow acquisition of other assets **D. To better fit debt service requirements to current government regulations

Any trade or business carried on by a 501(c)(3) organization, or by a governmental college or university, primarily for the convenience of its members, students, patients, officers, or employees.

A. UBI condition **B. UBI excluded activity

Any trade or business in which substantially all the work in carrying on the business is performed for the organization without compensation.

A. UBI condition **B. UBI excluded activity

Any trade or business that consists of selling merchandise, substantially all of which has been received by the organization as gifts or contributions.

A. UBI condition **B. UBI excluded activity

Which option is NOT a broad class of net assets or net position?

A. Unrestricted B. Temporarily Restricted C. Permanently Restricted **D. Donor Restricted

When is revenue typically recorded on a financial statement?

A. When coverage is provided to an enrollee or the service is provided to a patient or resident B. When enterprises receive the promise of contributions, grants, or tax support NOT - C. Only when required by the AICPA Audit and Accounting Guide, Audits of Not-For-Profit Organizations D. Only when required by the ASU No. 2014-09

A budgeting process develops assumptions for the following:

Admissions, ALOS, Expense per visit, Inflation on expense, FTE per visit, Productivity on FTE per visit, Labor cost per FTE, Net Rev per visit

Third parties will recognize a full lease payment as an allowable cost only if the lease is identified as a "true" (operating) lease.

Advantage **Disadvantage

Financial Statements consist of:

Balance Sheet, Statement of Operations, Statement of Changes in Net Assets, Statement of Cash Flows, Notes of the Financial Statement

If the deal loses money, all parties involved lose money

Benefit **Risk

Medicare/Medicaid fraud and abuse may be alleged.

Benefit **Risk

Tax-exempt status may be endangered through inurement or private benefit problems.

Benefit **Risk

What could have strengthened the tie with a physician, may have the opposite effect.

Benefit **Risk

Users of ratio analysis

Board of Directors, Management, Health Systems Agencies, Creditors, Employee Unions, Rate Regulators

Every capital investment proposal requires 4 quantifiable factors

Cash Outflow, Cash Inflow, Economic Life, Opportunity Cost of funds

Methods of a Cash budget:

Cash receipts and disbursements Method, Adjusted Net Income Method, Working Capital Differential Method

Major agencies with regulatory authority:

Centers for Medicare and Medicaid Services (CMS), Provider Reimbursement Review Board (PRRB), Federal Trade Commission (FTC), Internal Revenue Service (IRS), Quality Improvement Organization (QIO), Joint Commission, Office of the Inspector General (OIG), United States Department of Justice (DOJ), U.S. Public Health Service

Healthcare organizations use commercial banking services for:

Controlled Disbursement Account, Depository Account, Concentration Account and Zero Balance Account, Sweep Account

Reduced cost of risk.

Cost **Benefit

Third Medicare Cost Reimbursement Phase

Cost Apportionment

Second Medicare Cost Reimbursement Phase

Cost Finding

Disadvantages of leasing

Cost of extending the lease may be more than the actual purchase price, Interest costs are higher than debt, third parties will recognize a full lease payment as allowable only if a true operating lease, the leasing company frequently passes the cost of property tax to the lessors

Social Security Act provides for:

Criminal penalties for fraud, civil monetary penalties by Secretary of HHS for fraud, and excluding providers who abused or neglected patients.

First Medicare Cost Reimbursement Phase

Determining Allowable Costs

Fourth Medicare Cost Reimbursement Phase

Determining Settlement

Contribution Margin

Difference between marginal revenue and marginal cost.

Three significant Investment valuation methods

Discounted cash flow method, Replacement cost method, Market comparison

First functions of CMS:

Eligibility policy, reimbursement, provider and program administration

Sarbanes-Oxley established:

Enhanced standards for accountability and penalties for wrongdoing.

An investment policy

Establishes a framework to make investment decisions and evaluate results

Four IRS tax-exempt status conditions:

Existence of a governing board, Separate boards for multi-entity systems, full-time emergency room, open admission of medical staff to physicians in area

The 4 Primary payment methods used in managed care

Fee-for-Service, Per Diem Rate, Case Rate, Capitation

Common Medicare fraud:

Filing claims for un-rendered services, Misrepresenting the diagnosis, kickbacks, unbundling charges, falsifying certificates, misrepresenting the time, location, or frequency of service

A Compliance Plan contains 8 points:

Full support of organization & compliance officer, written procedures, comprehensive training and education program, hotline, due diligence with employment of sanction individuals, rules and standards, oversight of personnel, mechanisms for monitoring compliance, disciplinary measure for employees

HIPAA applies to:

Health plans, healthcare clearinghouses, providers transmitting any health information electronically

3 categories of securities

Held-to-maturity, trading, available-for-sale

Primary purposes of a cash budget:

Identify cash requirements and sources for a certain period of time, control the flow of cash funds

Overhead

Indirect Costs

Accounts for Plant, Property, Equipment

Land, Land improvements, buildings and improvements, leasehold improvements, equipment (Fixed and movable), Leased property and equipment, accumulated depreciation and amortization, and construction in progress

Reporting and disclosure requirements of nongovernmental healthcare organizations:

Majority of a for-profit voting stock (consolidated statements), sole corporate member of a not-for-profit entity (consolidated statements), entity controls another entity through a majority voting interest (consolidated statements), 50% or less common voting stock (Equity Method FASB ASC 323-10)

In most cases the federal government matches state contributions and, thus, shares in financing these healthcare services

Medicare **Medicaid

Activity-based costing (ABC)

Method of determining product costs using cost drivers or activity measures, which cause indirect costs to be incurred.

Second objective of risk management

Minimize the cost of financing the risk

Third function of CMS:

Monitoring performance of contractors

Which option is NOT an IRS condition that should exist for a healthcare provider to meet the community benefits standard required for tax-exempt status?

NOT - A. Existence of a governing board of trustees or directors composed of a majority of civic and community leaders B. Establishment of separate boards for multi-entity healthcare systems C. Existences of a full-time emergency room open to all patients regardless of their ability to pay, unless having an emergency room would be unnecessary and a duplication of services D. Existence of a governing board of trustees or directors composed of a majority of recurring patients and government officials.

Which budget type is prepared under the assumption of a single activity or volume level?

NOT - A. Flexible budget B. Operating budget C. Fixed budget D. Cash budget

Should be reported on the face of financial statements using either a natural classification or a functional presentation.

NOT - A. Not-for-profit organizations B. Governmental organizations C. Expenses D. Healthcare organizations

Which option is NOT a control budget?

NOT - A. Operating B. Capital C. Cash D. Variances

Regarding the reporting and disclosure requirements of nongovernmental healthcare organizations, which of the following options do NOT require consolidation?

NOT - A. The entity owns a majority of a for-profit entity's voting stock. B. The entity is the sole corporate member of a not-for-profit entity. C. The reporting entity owns 50 percent or less of the common voting stock of an investee and can exercise significant influence over operating and financial policies. D. The entity controls another through a majority voting interest in the board and an economic interest exists.

Which use of ratio analysis will help an organization decide how much of a debt burden it can feasibly assume?

NOT- A. Assess short-and long-range financial plans B. Assessing debt capacity C. Monitoring debt covenant compliance D. Pricing of services

Exemption requirements for nongovernmental not-for-profit healthcare:

No inures to private shareholder, no influencing legislation, no political campaign

Examples of current liabilities:

Notes payable to banks, current portions of long-term debt, accounts payable, advances from and accounts payable to third-party payers for reimbursement settlements, refunds, deferred revenue, accrued salaries, current portion of malpractice costs

If canceled, the company must choose to retain the risk of loss internally.

Occurrence Basis **Claims-made Basis

Three common Capital Evaluation techniques

Payback, Net Present Value Method, Return on Investment

Three main types of Cost standards.

Predetermined (Synthetic), Negotiated (Historical), and Customized (Engineered)

The categories of ratios used

Profitability Ratios, Liquidity Ratios, Activity Ratios, Capital Structure Ratios

When issuing a rating on a specific organization, a rating agency will commonly consider the following

Provisions or structure of the financing, competitive environment and market position, medical staff characteristics, management capability, financial

3 Benefits of risk management

Reduced cost of risk, less disruption, more productive use of resources

PCAOB does:

Register public accounting firms, establish audit standards, inspect accounting firms, disciplinary proceedings and appropriate sanctions, PCAOB budget.

Two common types of long-term debt

Revenue bonds and General Obligation Bonds

Undertake debt restructuring by either retiring or reacquiring existing debt for 4 reasons

Take advantage of lower interest rates, change collateral restrictions, allow acquisition of other assets, better fit debt service requriements

Any assets drawn down as withdrawals from a bank.

True **False

One-time insurance payments.

True **False

Tax Refunds

True **False

3 Costs of risk management

Value lost from incidents, opportunities passed as too risky, cost of administering risk management

Four Types of Individual Cost behaviors

Variable, Fixed Cost Pattern, Semi-Variable Cost Pattern, Semi-Fixed or Stepped Variable

The four budget variances used to explain by cause are

Volume, rate (charged), price (of a supply), and efficiency (cost per procedure).

HHS defines income:

Wages, Self-Employment, Social Security, Unemployment compensation, Worker's compensation, Veteran's payments, public assistance, alimony and child support

3 Exclusions to unrelated trade or business:

Without compensation; for convenience of members students, patients, officers, or employees; selling merchandise.

A machine costs us $15,000. We will have a net income of $6,000 in year 1, $6,000 in year 2, $2,500 in year 3, and $2,500 in year 4. The salvage value of the equipment is $2,000. Assuming we can borrow money at 15%, and the discount factors are 0.870 for year 1, 0.756 for year 2, 0.658 for year 3, and 0.572 for year 4, should we buy the equipment?

Yes **No

A machine costs us $15,000. We will have a net income of $6,000 in year 1, $6,000 in year 2, $2,500 in year 3, and $2,500 in year 4. The salvage value of the equipment is $2,000. Assuming we can borrow money at 15%, and the discount factors are 0.870 for year 1, 0.756 for year 2, 0.658 for year 3, and 0.572 for year 4, should we buy the equipment?

Yes **No

Charitable Donations

Yes **No

Conduct inspections of health plans.

Yes **No

Controlled disbursement accounts

Yes **No

De minimis fringe benefits

Yes **No

Determining allowable costs

Yes **No

Enforce compliance with the IRS.

Yes **No

Equity Transfers

Yes **No

External Cash Management

Yes **No

Farm animals

Yes **No

Filing claims for services that were rendered

Yes **No

Mortgages

Yes **No

Outpatient transitional corridor payment

Yes **No

Personal automobiles

Yes **No

Refusing to receive solicitations or kickbacks.

Yes **No

Reporting Entities

Yes **No

Reporting accurate data concerning the time, location, frequency, duration, or provider of services.

Yes **No

Required additional disclosure if the provider has concentrations of credit risk related to financial instruments

Yes **No

The entity must not primarily provide services for charity cases.

Yes **No

To assert to and report on the effectiveness of the company's internal controls and procedures for financial reporting on an annual basis.

Yes **No

Transitional pass-through

Yes **No

Occurrence basis of malpractice claims

all incidents occurring within the period are covered, reported or not

Revenue usually is recorded when:

an enrollee or the service is provided to a patient or resident.

Retrospective rates setting determines

an interim rate and then a final settlement is made after the rate year.

The equity method should be used when investment in voting stock gives

an investor the ability to exercise significant influence over operating and financial policies of an investee. (method)

Current liabilities

are satisfied within a year of the balance sheet date

The returns, risks, and correlation are the primary inputs for

asset allocation models

Reportable compensation includes:

base salary, incentive & bonus payments, severance, non-qualified deferred compensation, tax indemnification and gross up payments, expense reimbursement, fringe benefits, club dues and fees

Medicare was established

by the Social Security Act of 1965, enacted on July 1, 1966

Tail coverage

covers malpractice claims incurred before but reported after end of claims-made coverage.

Prospective rate setting is used to set payment rates in advance of

delivery of healthcare services, determine amount third parties will pay during the rate year.

Budget types include

fixed and flexible

The primary purpose of measuring productivity is

for management to determine if resources are being used efficiently

IRS form 990 - Return of Organization Exempt from Income Tax

form for income tax under IRS section 501(a) and for non-exempt charitable trusts

In a capital lease, all of the benefits and risks of owner except title or ending (salvage value)

get transferred to the lessee. The lessor recovers full price and interest during the lease.

A Strategic Plan allows organizations to

have a clear plan as to why they are in business and how they can stay in business in the future.

Omnibus Budget Reconciliation Act of 1989, requires

hospitals to maintain records on transferred patients for five years and maintain a list of physicians who are on call after the initial examination to provide treatment necessary to stabilize an individual

Claims-made basis of malpractice claims

incidents are covered in period identified and reported

Operational auditing is one technique available to

management to ensure objectives and organizational policies are effectively carried out.

Different types of asset allocation risks are as follows:

maturity (liquidity) risk, interest rate risk, credit risk, political (legal) risk, market (price) risk

AICPA's Audit of Providers of Health Care Guide identifies

methods for quantifying and valuing uncompensated care.

Most healthcare organizations are dependent

on financing long-term debt

The main types of control budgets include

operating, capital, and cash.

The general categories of provider excess loss insurance are

per-person, aggregate, and carve-out.

Form 990 purpose

provide to IRS and public the tax-exempt organization's programs

Donations of Cash used to acquire long-lived assets are reported as

temporary restricted support in the period received.

Healthcare bond issues place legal obligations on

the borrower intended to protect the lender against default by the borrower.

Donor-restricted contributions may be reported as unrestricted support if

the organization reports consistently from period to period and discloses its accounting policy

Donations of long-lived assets are reported as revenue in

the period received at fair value. (long-lived)

Healthcare providers should develop different modeling tools depending on

the reimbursement method proposed in the contract

For Medicaid, states receive funding from the federal government based on

the state's per capita income.

Donations received with no restrictions attached are reported as unrestricted support in

the statement of activities.

Advance refunding enables providers:

to restructure their long-term liabilities, reduce interest rates, or terminate restrictive bond covenants

3 conditions of Unrelated trade or business:

trade or business, carried on regularly, not substantially related to the exempt purpose of the organization

An operating lease is

when the hospital is liable for the leasing cost; renewal options are determined by the fair market value

Advantages of leasing

working capital is conserved, budgetary control, tax benefits may be realized, project may be financed 100%, lessee has greater flexibility in replacing equipment

In order to use the discounted cash flow method

you need to know the payment flow or payment pattern and the interest rate