Laboratory Management - Financial Management
Control of expenses
_____ is an essential management function necessary to ensure solvency.
Reimbursement Programs
plans that pay a set amount for specific services regardless of the charge.
Financial Accounting
"bottom-line financial position" of the organization often referred as the scorekeeping function focuses on cash flow and financial position of the firm and records in 3 basic statements which is "balance sheet" - is the most common
Cost Accounting
"managerial accounting" provide manager with information to operate business emphasis on analyzing and providing operational information and most prominent document generated by this branch is "budget"
Objectives of Financial Management
1. Maintaining enough supply of funds for the organization; 2. Ensuring shareholders of the organization to get good returns on their investment; 3. Optimum and efficient utilization of funds; 4. Creating real and safe investment opportunities to invest in.
3 Primary aspects
1. Recording revenue received and owed. 2. Tracking expenditures and paying bills. 3. Analyzing financial information so that management and interested parties can plan and control the operations of the business.
Assets = Equities (Liabilities + Retained earnings)
A = E (L + RE) stands for?
Assets = Equities (Liabilities + Stockholder Equity)
A = E (L + SE) stands for?
Assets = Equities
A = E stands for?
Weighted-value basis (3)
After the test has been assigned a relative weight, the total number of weighted units produced by the laboratory is determined. This is done by multiplying the volume of tests performed by their assigned value and then totaling these values,
percentage of revenue
Calculating the _______ for each budget line item is a relatively straightforward method and most widely used.
Sources of funds
Decrease in working capital
Application of fund
Dividend and Tax payment
Patient day
Each day a patient stays in the hospital overnight is defined as ______
Weighted-value basis (2)
Each test performed is assigned a relative weight based on the cost of performing that test in relationship to other procedures.
Investing the capital
Every organization or firm needs to invest money in order to raise more capital and gain regular returns.
size, purpose, nature of business
Factors such as _____, ______, and_______ activities performed determine the type of accounting program necessary.
Sources of funds
Funds from operation
Cost centers
Housekeeping Dietary Engineering Business Office
Retained earnings
In a not-for-profit business, money or assets remaining after liabilities is called as ______
Stockholder equity
In a privately owned business operated for a profit, the assets left over all obligations are labeled as ________ on the balance sheet
Sources of funds
Issue of shares and debentures for cash
Sources of funds
Long term loans
Cash accounting basis
Most routine expenses and low-cost items used in the laboratory such as salaries, reagents, pipettes, and small instruments under P5000 such as microscopes and centrifuges are placed
Formation of capital structure
Once the amount of capital the firm requires has been estimated, a capital structure needs to be formed.
Application of fund
Purchase of fixed assets
Profit centers
Radiology Pharmacy Physical Therapy Nursing Laboratory
Application of fund
Redemption of shares and debentures
Application of fund
Repayment of long-term loans
Sources of funds
Sale of Asset
True
T or F: This department takes decisions about how the organization should raise finance, whether they should sell new shares, or how the profit should be distributed.
True
T or F: With the advent of TEFRA and DRGs, hospitals were reimbursed for Medicaid and Medicare patients by the case or illness rather than on an open-ended fee-for-service basis
True
T or F: income must exceed expenses or the enterprise fails.
overhead
The expenses of the cost centers were the major component of what is called "_______" and were allocated to all areas of the institution.
Financial manager
The financial management department of any firm is handled by a _______.
Calculating the capital required
The financial manager has to calculate the amount of funds an organization requires.
Weighted-value basis (1)
The financial requirements of the laboratory are established by determining the historical direct and indirect costs expended. To this number is added the profit contribution required by the hospital or laboratory management to arrive at the total desired revenue.
Weighted-value basis (4)
The revenue needs of the laboratory (step 1) are then divided by the total number of units produced (step 4) to arrive at a cost-per-weighted-unit factor.
Allocation of profits
This could involve keeping a part of the net profit for contingency, innovation, or expansion purposes, while another part of the profit can be used to provide dividends to the shareholders
Revenue budget
This information can be used to calculate two ratios: tests per patient days for hospital-based laboratories and revenue per test. test volume and income
Accrual accounting basis
To accurately determine where costs and revenues are being generated and to predict expenditures and income (in other words, to budget) activities that incur expense must be charged to revenue items.
Laboratory Management Index Program
What does LMIP stands for?
Master Charge Description File Listing
What does MCDFL stands for?
Tax Equity and Fiscal Responsibility Act of 1982
What does TEFRA stands for?
Workload unit
What does WLU stands for?
American Hospital Association
What does AHA stands for?
Current Procedural Terminology
What does CPT stands for?
Diagnosis Related Groups of 1983
What does DRG stands for?
Health Maintenance Organization
What does HMO stands for?
Defining, controlling
______ and _______ costs can be approached and analyzed from two directions: by examining the influence of variations in testing volume (production) or by looking at the expenses involved in performing an individual procedure (billable procedure).
Recording, monitoring
_______ and _____ a laboratory's income is a crucial managerial task.
Providing financial information
________ is the primary task of the accounting process.
Profit
a department that generates billable services
Tax Equity and Fiscal Responsibility Act of 1982
a federal program that sets caps on the amount of revenue paid for HC expenditures
Diagnosis Related Groups of 1983
a federal reimbursement system in which hospitals are paid based on the nature of the case, or illness, and not on the number of individual services provided to the patient.
Prospective Payment System
a program that pays a set amount per case or patient, regardless of the amount of care received.
Current Procedural Terminology
aka "The Physician's CPT"
Surcharge
aka "cost-plus" most common procedure for establishing a charge and method most retail businesses use. method is referred to as a "markup"
Statement of Financial Position
aka balance sheet best-known document issued by a company private and public organization frequently publish these in newspapers or mail them to their members
Semi-variable costs
aka marginal costs costs that rise in steps based on more gradual changes in workload For example, when the laboratory hires an additional secretary or phlebotomist, labor expenses take a proportional jump: that is, salary costs go up a whole step increment, the salary of a full-time employee, rather than increasing gradually.
Direct costs
aka test-specific costs a particular procedure which the laboratory can generate revenue. occur in direct proportion to the number of procedures performed
Accounting Codes
an arbitrarily assigned number, developed by the accounting department to simplify record-keeping.
Cost
an area that provides services that benefit the entire institution but cannot be directly assigned an individual chargeable item.
Statement of Income and Retained Earnings
are of interest mainly to investors concerned with where the company gets its cash and how it makes a profit
Current Procedural Terminology
built around a schedule of services and procedures listed in a book published by the American Medical Association: The Physician's' Current Procedural Terminology, or CPT. they were developed according to disease-related criteria and not payment or service procedures
Cash accounting basis
bills are paid as they are presented and revenue is counted when it is actually received, with no effort to assign costs and revenues to the effort and time frame in which they were generated.
Remaining value
either stockholder equity or retained earnings, depending on the type of corporate structure
Indirect costs
expenditures that remain after direct costs have been identified and assigned. an expense shared by many components of the institution may generally fixed or in some cases semi-variable
Fixed costs
expenses that do not fluctuate when volume of work changes on a daily basis. predictable and usually supportive in nature Laboratory administration, instrument leases, maintenance contracts, computer services, equipment costs, and facilities
Financial control
has to control and analyze the firm's finances in the short-term and long-term. This can be done using financial tools such as financial forecasting, ratio analysis, risk management, and profit and cost control.
Total costs
illustrates how these costs interact to arrive at the total cost of operating a laboratory.
Financial management
includes applying management principles to the financial assets of an organization, while also playing an important part in fiscal management
Application of fund
increase in working capital
Sole proprietorship
individual owner is?
Financial decision-making
involves investment and financing with regards to the organization,
Financial management
is one of the most important aspects in business. In order to start up or even run a successful business, you will need excellent knowledge
Master Charge Description File Listing
is the technical name for the lists of services and their corresponding prices provided by a laboratory or hospital aka "price list" and is the charge sheet consulted to answer a question from a patient about the cost of a laboratory procedure.
Hourly Rates
is used to set charges for the use of specialized areas such as surgical suites and labor and delivery rooms Equipment such as: respirators, heart monitors
Prospective Payment System
it is formally called for TEFRA, DRGs, HMOs
Equities
liabilities and remaining value
Accrual accounting basis
method that attempts to measure net income for a particular period by matching expenses against revenues.
Weighted-value basis
more theoretical than practical use because of its complicated and difficult formulation. recommended by AHA for use by ancillary services such as laboratories and radiology departments. based on financial goals of the laboratory, not on the individual cost of delivering a specific service.
Competition and rate controls
most laboratories have a sliding scale based on: volume, method of payment, competition from other laboratories, and certainty or timeliness of payment.
Financial control
one of the key activities in financial management, main role is to assess whether an organization is meeting the objectives or not
For-Profit
privately owned and profits from the enterprise are distributed to the owners, they are called _______ companies subject to all taxes.
Financial Planning
process of calculating the amount of capital that is required by an organization and then determining its allocation.
Indirect costs
refer to costs that can be allocated directly to a specific area
Financial management
refers to the strategic planning, organizing, directing, and controlling of financial undertakings in an organization
Assets
resources that the firm uses to conduct its business consumed; they expire in day-to-day operation of the enterprise
Variable costs
respond directly to any changes in workload. "As the volume of work increases, expenses rise in a direct and linear relationship." considered to be the most man agreeable and adjustable on a short-term basis
Effective management of money
responsible for effectively managing the firm's money. Required for: payment of salaries and bills, maintaining stock, meeting liabilities, and the purchase of any materials or equipment
Liabilities
same for all enterprises and consist of bills owed or other obligations
Historical method
simply raises their prices annually by a certain percentage based on the rate of inflation and income needs.
Non-Profit or Not-for-Profit
sponsored by government, charity, religious, or educational organizations to serve a social cause have special tax-exempt status
Statement of Flow of Funds
statement that reflects the relative position of funds of the company over a two-period horizon enables analysis of sources and uses of funds for a particular period of time
Unit costs
total of direct and indirect expenses
Captive Revenue Tests
tests in which the patients have no choice of location. This usually means procedures requested through the hospital for inpatients, outpatients, and emergency room patients
Cash accounting basis
this method is the simplest, it does not provide any information to the manager about the operations of the company or allow for projects that may extend over a long period of time.
Discretionary Tests
which the client may select the location where patients may be referred by physicians, outpatient dept., insurance companies, or industrial outreach programs
Partnership or corporation
with hundreds or even thousands of shareholders
