· Question 1
The majority of hospitals in the United States are classified as private for-profit hospitals.
· True
· False
· Question 2
Charity Care is defined as care for services when it is expected that the patients will not pay.
· True
· False
· Question 3
The capitation method of payment is one of the many strategies used by managed care companies to control costs.
· True
· False
· Question 4
In 2004, there was nationwide litigation against several large not-for-profit health systems. Please explain the following: the reason for the legal action; the reason why the law targeted not-for-profit hospitals; the government response (federal, state and local level) to this occurrence.
·
Question 5
Please explain the organization purpose and also identify why each point is important to the management of health care organizations.
· Question 6
The prepaid group practice was the forerunner of the BlueCross/ Blue Shield plans that are in existence today.
· True
· False.
· Question 7
Please list and discuss the characteristics of the three methods of payment. Please also list at least one strength and weakness of each of the chosen methods.
· Question 8
In the Statement of Cash Flows, cash flows from investing activates contain information regarding the purchases and sale of PPE (Property, Plant, and Equipment).
· True
· False
· Question 9
In cost allocations, the direct method recognizes the interdependencies between the various support departments (e.g., relationship human resources, housekeeping, and administration).
· True
· False
· Question 10
As you move down the asset section of the balance sheet, assets become more liquid.
· True
· False
· Question 11
Please list and define the three measures of charity care. Which level is most likely to be performed by hospitals?
· Question 12
Cost that occur with relative certainty, and occur regardless of the level of volume over a relevant range are known as adjusted costs.
· True
· FalseHealthcare Financial Management
Lecture Packet 3
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1
Outline
Types of Costs
Cost Analysis
Cost Allocation
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Types of Costs
Types of Costs
Costs:
Costs are a ‘resource use’ associated with providing or supporting a specific service.
There are several different types of costs: fixed costs, variable costs, direct costs, and indirect costs.
Costs do not necessarily reflect the actual cash outflows.
This occurs because of the use of accrual accounting. We will revisit later.
_______________________________________________________________
Costs can be classified two ways:
Their relationship to the volume (amount of services provided).
E.g. Fixed/ variable costs
Their relationship to the unit (department) being analyzed
E.g. Direct/ indirect costs
We will revisit this topic later.
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Types of Costs
Costs Behavior:
Health services managers are extremely interested in how costs are affected by changes in the organization activity (volume).
The relationship between costs and volume is known as cost behavior, or underlying cost structure.
_______________________________________________________________
The primary reason analyzing an organizations underlying cost structure is to provide healthcare managers with a tool for forecasting costs (and ultimately profits) at different volume levels.
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Types of Costs
Fixed Costs:
Costs that are known with relative certainty.
These costs occur regardless of the level of volume within the relevant range.
e.g. The clinic has a labor force of well trained permanent employees that would be increased or decreased only under certain circumstances.
As long as volume falls within a relevant range, labor costs at the clinic are fixed for the coming year regardless of the number of patient visits.
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.
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Types of Costs
Variable Costs:
Costs that are directly related to the volume of services supplied.
e.g. the costs of the clinical supplies (e.g. rubber gloves , tongue depressors , hypodermics) would be classified as variable costs.
While some costs are fixed regardless of volume (within a relevant range), variable costs are driven by volume.
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Variable Cost per Test Fixed Costs per Year
Clinic Supplies $28.18 Labor $1,000,000
Other fixed costs $3,967463
Cost Analysis
‘Volume Fixed Costs Total Variable Costs ‘Total Costs ‘Average (Total) Cost Per Tests
0 $4,967,463 $0 $4,967,463 $ 0
1 $4,967,463 $28 $4,967,491 $4,967,491.18
50 $4,967,463 $1,409 $4,968,872 $99,377.44
100 $4,967,463 $2,818 $4,970,281 $49,702.81
500 $4,967,463 $14,090 $4,981,553 $9,963.11
1,000 $4,967,463 $28,180 $4,995,643 $4,995.64
5,000 $4,967,463 $140,900 $5,108,363 $1,021.67
10,000 $4,967,463 $281,800 $5,249,263 $524.93
15,000 $4,967,463 $422,700 $5,390,163 $359.34
20,000 $4,967,463 $563,600 $5,531,063 $276.55
70,000 Healthcare Financial Management
Lecture Packet 1
2022
1
Please review with notes page visible.
Respectfully,
GEG
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Outline
The Objective of Healthcare Management.
The Objective of Healthcare Financial Management.
What is Healthcare Financial Management?
Traditional Responsibilities of Financial Managers.
Major Responsibilities of Healthcare Financial Management.
The Four C’s of Financial Management.
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The purpose of this lecture is to provide an overview of the Healthcare Financial Management discipline. This will be accomplished by focusing on the objectives of healthcare management and healthcare financial management. We will also discuss the responsibilities of healthcare financial managers. We will then conclude this presentation by focusing on the Four C’s (cost, cash, capital and control) of financial management.
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The Objective of Healthcare Management.
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The Objective of Healthcare Management
The overall objective of healthcare management is to accomplish the organizational purpose.
Organizational Purpose: (formal definition) “To provide the community with the services it needs at clinically acceptable levels of quality at a publicly responsive level of amenity, and at the least possible cost (Berman, Kukla, and Weeks 1994).
__________________________________________________________________
Provide services at a high level of quality, serve as many people as you can, and keep costs as low as possible). (broad view)
Organization Purpose also depends on the line of business. (specific view)
Who are we, what do we do?
Why is the organizational purpose important?
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The Objective of Healthcare Financial Management?
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The Objective of Healthcare Management
The objective of healthcare financial management is provide both accounting and finance information that assists healthcare managers in accomplishing the organization’s purpose.
_______________________________________________________________
Two Broad Areas of Accounting:
Financial Accounting: Provide information for external users.
This type of information is heavily regulated by the Financial Accounting Standards Board (FASB)
e.g. preparation of income statement.
Managerial Accounting: Provide information for internal use.
These types of statements are not regulated
e.g. budgets, cost allocations.
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The Objective of Healthcare Management
Accounting Versus Financial Management:
Accounting: focuses on the financial measurement of events that reflect the resources, operations, and financing of an organization.
–vs.–
Financial Management: focuses on the theories, concepts, and tools necessary to help managers make better financial decisions.
What are you going to do with the informationHealthcare Financial Management
Lecture Packet # 4
2022
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1
Outline
Basic Concepts of Financial Accounting
Outlined by Generally Accepted Accounting Principles (GAAP)
_______________________________________________________________
Financial Statements
Income Statement: (Revenues -Expenses).
Net Patient Service Revenue
Other Revenue
_______________________
Salaries & Benefits
Supplies
Insurance
Lease
Depreciation
Provision of Bad Debts
Interest
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Basic Concepts of Financial Accounting
Outlined by Generally Accepted Accounting Principles (GAAP)
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Basic Concepts of Financial Accounting
Going Concern:
It is assumed that the accounting entity will operate as a going concern.
The company will have an indefinite life. As a result, assets are valued differently.
e.g. For example, the land, building, and equipment of a hospital may have a value of $50 million when used for patient services.
However, if these services are sold to an outside party (for other purposes), the value of these assets may only be $20 million.
As a result of the Going Concern assumption, assets are viewed over a longer time frame and they are valued higher.
Thus, they are not true market measurements. _____________________________________________________________
The going concern assumption, coupled with the fact that financial statements must be prepared for relatively short periods means that financial accounting data is not exact.
Financial Statements are a systematic way to deal with complex measurements. However, the measure is not perfect. NO MEASURE IS PERFECT.
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Basic Concepts of Financial Accounting
Accounting Period:
An accounting period is the amount of time over which an organization’s managers or outside parities want to evaluate operational results.
The accounting period could be over months, a year, or a fiscal year.
It does not have to coincide with the calendar year.
_____________________________________________________________
Objectivity:
The information reported in financial statements must be based on objective verifiable supporting data and not subjective data.
Financial statements should be based on supporting documentation, such as invoices and contracts.
_______________________________________
Reliability:
Financial statements should be reasonably free of error/bias.
It is assumed that the information fairly represents the economic events which have affected the company.
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Basic Concepts of Financial Accounting
Relevance:
Financial statements must be relevant to their users.
This is always a balancing act.
The information must be able to aid in decision making.
However, there can’t be so much information that the users get bogged down.
_________________________________________________________________
Full Disclosure:
Financial Statements must contain a complete picture of the economic events of a business.
Anything less is viewed as misle
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