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