Finance for health organizations

Question 1 (1 point)

Culver County Hospital has the lowest cost of any hospital in its region. However, it has continually reported very large operating losses and has depended upon tax support from the county. Assuming that positive operating margins are an objective of Culver County Hospital, the hospital could be described as:
Question 1 options:
A) Efficient and effective

B) Effective but not efficient

C) Efficient but not effective

D) None of the above

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Question 2 (1 point)

Which of the following is the primary goal of a not-for-profit healthcare organization? Choose the best answer.
Question 2 options:
A) To serve the community through the provision of health care services

B) To balance revenues with expenses

C) To provide jobs for those in the community

D) To deliver very high-quality health care services

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Question 3 (1 point)

The controller in a hospital is usually responsible for which of the following activities (choose all that apply):
Question 3 options:
A) Collection of accounts receivable

B) Developing budgets

C) Filing Medicare cost reports

D) All of the Above

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Question 4 (1 point)

St. Luke’s Convalescent Center has $200,000 in surplus funds that it wishes to invest in marketable securities. If transaction costs to buy and sell the securities are $2,200 and the securities will be held for three months, what required annual yield must be earned before the investment makes economic sense?
Question 4 options:
A) 4.4%

B) 3.6%

C) 8.3%

D) 5.6%

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Question 5 (1 point)

In the billing process of a hospital, why are medical records a critical department? The DRG system of Medicare requires proper coding of clinical information in order to achieve accurate and prompt payment and to avoid fines and penalties. which department is a critical entity in order to carry out the billing process of a hospital?
Question 5 options:
Information Technology (IT) department
Finance department
Health Information Management (HIM) department
Patient Accounts department
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Question 6 (1 point)

Community Hospital has annual net patient revenues of $150 million. At the present time, payments received by the hospital are not deposited for six days on average. The hospital is exploring a lockbox arrangement that promises to cut the six days to one day. If these funds released by the lockbox arrangement can be invested at 8 percent, what will the annual savings be? Assume the bank fee will be $2,000 per month.
Question 6 options:
A) $140,000

B) $135, 099

C) $200,337

D) $140,383

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Question 7 (1 point)

Which of the following measures is not used directly as one of the means of determining the reasonableness of a hospital’s charges?
Question 7 options:
A) return on investment (ROI)

B) costs

C) investment level

D) prices of peer hospitals

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Question 8 (1 point)

What contract provision will best protect a hospital being paid on a DRG basis for inpatient services from a catastrophic patient?
Question 8 options:
A) Most favored nation clause

B) Stop loss provision

C) Rate increase limit

D) None of the above

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Question 9 (1 point)

Suppose that HCA and Tenet were to merge. Ignoring potential antitrust problems, this merger would be classified as a:
Question 9 options:
A) Cross-border merger

B) Horizontal merger

C) Conglomerate merger

D) Vertical merger

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Question 10 (1 point)

The following reasons are good motives for mergers except:
Question 10 options:
A) Economies of scale

B) Increased purchasing power

C) Increased value for acquiring company’s shareholders

D) Unused tax shields

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Question 11 (1 point)

If the total book value of the assets of the accounting entity is $4,350,000, and the total liabilities of the accounting entity are $1,235,000, the stockholder’s equity in the accounting entity is:
Question 11 options:
A) $5,585,000

B) $3,115,000

C) $2,470,000

D) None of the Above

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Question 12 (1 point)

If an organization’s Board of Directors were to set aside assets to be used for replacement of plant and equipment, where would this be reflected on the balance sheet?
Question 12 options:
A) Assets Limited as to Use

B) Temporarily Restricted Net Assets

C) Permanently Restricted Net Assets

D) Liability

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Question 13 (1 point)

Which of the following reflects the fundamental accounting equation (or balance sheet equation) in a not-for-profit, business-oriented healthcare organization?
Question 13 options:
A) Equity = Liabilities + Assets

B) Assets = Long-term Debt + Equity

C) Assets = Liabilities + Net Assets

D) Net Assets = Liabilities + Assets

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Question 14 (1 point)

Which of the following best describes “days in accounts receivable?”
Question 14 options:
A) a profitability ratio that measures how quickly an organization generates revenue

B) a liquidity ratio that estimates how quickly an organization converts receivables to cash

C) a liquidity ratio that measures how long it takes an organization to pay its bills

D) a profitability ratio that evaluates credit and collection policies

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Question 15 (1 point)

The _____ is a way for organizations to improve the collection and communication of financial and operating information.
Question 15 options:
A) Performance dashboard

B) Financial bottom-line

C) Holistic perspective

D) Performance perspective

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Question 16 (1 point)

An HMO has just proposed an offer to promote your facility as the region’s “Center of Excellence” for obstetrical deliveries. The HMO covers 700,000 lives in the community served by your facility. The HMO has provided the following information for your consideration: the hospital cost for a normal uncomplicated delivery is $1,800 and for a complicated cesarean delivery is $3,500. Furthermore, the annual rate per 100,000 lives for a normal uncomplicated delivery is 6.0 while for a complicated Cesarean delivery is 1.5. The HMO proposes a capitated per member per month (PMPM) premium to the hospital to provide obstetrical services to their members. What would the break-even premium be?
Question 16 options:
A) $0.01783 PMPM

B) $0.01830 PMPM

C) $0.01336 PMPM

D) $0.016050 PMPM

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Question 17 (1 point)

Calculate the breakeven price from the following information.

quantity of services = $3,000
fixed costs = $45,000
average cost per unit = $150.00
required profit = $30,000
Question 17 options:
A) $175.00

B) $300.00

C) $160.00

D) $310.00

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Question 18 (1 point)

When considering how changes in volume affect total fixed costs, it is important to consider:
Question 18 options:
A) the relevant range

B) the variable cost per unit

C) price

D) All of the Above

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Question 19 (1 point)

Which of the following is the first step in any budgetary process?
Question 19 options:
A) Define standard treatment protocols

B) Define required departmental volumes

C) Define standard cost profiles

D) Define volumes of patients

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Question 20 (1 point)

Use the following information to answer the question below

Your hospital has been approached by a major HMO to perform all their MSDRG 505 cases (foot surgeries). They have offered a flat payment of $8,000 per case. You have reviewed your charges for MSDRG 505 during the last year and found the following profile:

Average Charge: $11,300
Average LOS: 4.5 Days

Cost/Charge Variable Cost %
Routine Charge $3,200 0.75 65

Operating Room 1,850 0.70 80
Anesthesiology 210 0.70 75
Lab 575 0.65 40
Radiology 275 0.65 50
Medical Supplies 3,220 0.60 85
Pharmacy 955 0.55 85
Other Ancillary 1,015 0.75 55
Total Ancillary $8,100 0.70 75

QUESTION
In the above data set, assume that the hospital’s cost-to-charge ratio is 0.75 for routine services and 0.70 for Total Ancillary services. Using this information, what would the average cost of MSDRG 505 be? (Your answer might be slightly different due to rounding. Pick the closest.)
Question 20 options:
A) $7,613

B) $8.070

C) $8,100

D) $8,000

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Question 21 (1 point)

Budgets normally cover a period of:
Question 21 options:
A) 5 years

B) 2 years

C) 3 years

D) 1 year

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Question 22 (1 point)

The following is an example of a _____________ budget:
“The budget for the radiology department is different at 90 percent occupancy than at 80 percent occupancy.”
Question 22 options:
A) rolling

B) flexible

C) forecast

D) fixed

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Question 23 (1 point)

Which of the following is part of a statistics budget?
Question 23 options:
A) Output expectations

B) Responsibility for estimation

C) Estimation methodology

D) All of the above

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Question 24 (1 point)

Flexible budgets vary from static (or forecasted) budgets on the basis of:
Question 24 options:
A) revenue

B) expenses

C) income

D) volume

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Question 25 (1 point)

Efficiency is a relationship between:
Question 25 options:
A) Outputs and organizational goals

B) Inputs and outputs

C) Inputs and organizational goals

D) None of the above

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Question 26 (1 point)

Effectiveness is a relationship between:
Question 26 options:
A) Outputs and organizational goals

B) Inputs and outputs

C) Inputs and organizational goals

D) None of the above

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Question 27 (1 point)

________________ is a phase of management that is longer than budgeting, but shorter than planning.
Question 27 options:
A) Programming

B) Accounting

C) Operating

D) None of the Above

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Question 28 (1 point)

Use the following information to answer the question below

You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budgetary data is presented below:

Budgeted Procedures 10,000
Budgeted Cost $400,000
Desired Profit $80,000

It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38.00 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below:

Payer Volume % Discount %
Blue Cross 20 4
Unity PPO 15 10
Kaiser 10 10
Self Pay 5 40
50%
QUESTION
If the forecasted volume increased to 12,000 procedures and budgeted costs increased to $440,000, while all other variables remained constant, what price should be established?
Question 28 options:
A) $54.75

B) $60.27

C) $57.95

D) $60.25

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Question 29 (1 point)

Using the information in the table below, calculate the amount of the favorable price variance.

Budgeted Actual
Volume 200,000 190,000
Cost per unit $40 $37
Cost $8,000,000 $7,030,000

Question 29 options:
A) $400,000

B) $570,000

C) $970,000

D) $600,000

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Question 30 (1 point)

Using the information in the table below, to determine how much of the supply variance is due to a change in volume.

Budgeted Actual Variance

Volume 1,000 1,100 100
Supplies $10,000 $12,750 $2,750
Question 30 options:
A) $1,000

B) $900

C) $1,250

D) $1.075

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Question 31 (1 point)

What is the present value of a $2,000 per year ordinary annuity at a discount rate of 5% for 10 years?
Question 31 options:
A) $1,228

B) $15,443

C) $25,156

D) None of the Above

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Question 32 (1 point)

Columbus Clinic expects to receive $20,000 five years from now. As part of another contract, the clinic must make a payment of $30,000 on a loan six years from now. The clinic wants to set aside an amount today that, combined with the money received, will cover its obligation of $30,000. Assume that the clinic’s cost of capital is 7%. To the nearest hundred dollars, how much money does the clinic need to set aside today?
Question 32 options:
A) $5,700

B) $7,971.94

C) $5,916.98

D) None of the Above

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Question 33 (1 point)

The profitability index is useful under:
Question 33 options:
A) Capital rationing

B) Mutually exclusive projects

C) Non-normal projects

D) Non-normal projects

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Question 34 (1 point)

Net working capital should be considered in project cash flows because:
Question 34 options:
A) They are sunk costs

B) Firms must invest cash in short-term assets to produce finished goods

C) Firms need positive NPV projects for investment

D) None of the Above

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Question 35 (1 point)

A department manager most often uses his or her hospitals’ financial information for which of the following uses:
Question 35 options:
A) Assess the financial condition of the hospital

B) Assess the efficiency of operations

C) Evaluate the hospital’s stewardship

D) Assess the effectiveness of operations

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Question 36 (1 point)

One use of financial information is to assess the efficiency of operations. In that context, efficiency refers to:
Question 36 options:
A) the degree of financial viability achieved by the organization

B) the degree to which the organization is in compliance with directives

C) the extent to which malfeasance is minimized in the organization

D) the ratio of the organization’s outputs to its inputs

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Question 37 (1 point)

Which of the following tends to insulate management somewhat from the financial results of poor financial planning?
Question 37 options:
A) Capitated rates

B) Cost reimbursement

C) Bundled services

D) Charge payment

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Question 38 (1 point)

Medicare pays for hospice services under which of the following:
Question 38 options:
A) Part A

B) Part B

C) Part D

D) None of the Above

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Question 39 (1 point)

Which of the following is the primary payer for acute-care (hospital) services?
Question 39 options:
A) Medicaid

B) Government payers (all sources)

C) Private payers

D) None of the Above

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Question 40 (1 point)

Which of the following is an element of budgeted financial requirements that is not included in budgeted expenses?
Question 40 options:
A) Interest expense

B) Increases in working capital

C) Labor expense

D) A and B

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Question 41 (1 point)

Columbus Clinic expects to receive $10,000 five years from now. If the clinic’s cost of capital is 12% per year, what is the value of the $10,000 three years from now (to the nearest dollar)?
Question 41 options:
A) $14,049

B) $7,972

C) $5,917

D) None of the above

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Question 42 (1 point)

What is the present value of a $2000 per year annuity at a discount rate of 15% for 15 years?
Question 42 options:
A) $8,137

B) $11,695

C) $17,028

D) None of the Above

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Question 43 (1 point)

What is the effective annual rate of a 12% interest rate per year, compounded monthly?
Question 43 options:
A) 11.27%

B) 12.00%

C) 12.36%

D) $12..68%

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Question 44 (1 point)

If $1,000 is the present value of $1,250 to be received at the end of two years, what is the one-year discount factor (to the closest hundredth of a percentage point)?
Question 44 options:
A) 0.89

B) 1.25

C) 0.80

D) None of the Above

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Question 45 (1 point)

The following reasons are good motives for mergers except:
Question 45 options:
A) Economies of scale

B) Increased purchasing power

C) Increased value for acquiring company’s shareholders

D) Unused tax shields

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Question 46 (1 point)

You will receive a $100,000 inheritance in 20 years. Your investments earn 6% per year, compounded annually. To the nearest hundred dollars, what is the present value of your inheritance?
Question 46 options:
A) $8,700

B) $29,800

C) $31,200

D) $35,500

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Question 47 (1 point)

What is the main reason that relative value units (RVUs) often are used in health care?
Question 47 options:
A) Not all standard units show up in a standard treatment protocol.

B) RVUs enable more accurate pricing.

C) RVUs are the optimal way to estimate the costs of the resources consumed by cost objects such as products and customers.

D) Some departments or cost centers may have large numbers of outputs which make individual costing very time consuming and expensive.

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Question 48 (1 point)

The breakeven point occurs where:
Question 48 options:
A) total fixed costs and total revenue intersect

B) total costs and total revenue intersect

C) total profit margin and total costs intersect

D) total variable costs and total revenue intersect

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Question 49 (1 point)

Increasing marginal volume for cost payers makes economic sense if:
Question 49 options:
A) Cost payers account for 100 percent of your present volume and fixed costs are high.

B) Bad debts are low

C) Fixed costs are high and present cost payer volume is small

D) All of the Above

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Question 50 (1 point)

To maximize the amount of profit realized from a rate increase, charges should be increased most in departments with:
Question 50 options:
A) High charge payer mix/high write-offs for bad debt, charity, & discounts

B) Low charge payer mix/low write-offs for bad debt, charity, & discounts

C) High charge payer mix/low write-offs for bad debt, charity, & discounts

D) Low charge payer mix/high write-offs for bad debt, charity, & discounts

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