Budget and Finance

Question 1

Forecast Budget

Answer 1

Budget is based on previous year, plus or minus based on prediction of tests performed.

Question 2

Appropriation Budget

Answer 2

Fixed amount is divided up

Question 3

Flexible Budget

Answer 3

Fixed and variable line items are itemized. Can be adjusted as needed.

Question 4

Operational Budget

Answer 4

Expenses required to keep lab operating

Question 5

Capital Budget

Answer 5

Purchase of equipment, building, remodeling, etc

Question 6

Zero-Base Budget

Answer 6

Ignore history; build budget from scratch. Prioritize and fund most important first.

Question 7

Rolling-Quarter Budget

Answer 7

Budget each quarter. More accurate than annual.

Question 8

Cash Budget

Answer 8

Look specifically at cash flow

Question 9

Financial Accounting

Answer 9

For external review; double entry bookkeeping, general accounting principles

Question 10

Cost Accounting

Answer 10

Less formal; internal review only. Look at costs per unit.

Question 11

Cost Component: Direct Costs

Answer 11

Costs directly assigned to production of a product (billable test).
Reagents, tech time, QC, equipment depreciation.

Question 12

Cost Component: Indirect Costs

Answer 12

Costs not for direct production, such as those required for acquiring specimens and billing.
Total cost - direct costs. Mostly personnel time for non-testing employees. Office supplies, etc.

Question 13

Cost Component: Variable Costs

Answer 13

Costs that change with production volume.

Reagents, supplies, QC, etc.

Question 14

Cost Component: Fixed Costs

Answer 14

Costs that do not change with production volume.

Rent, utilities, tech coverage, admin, management.

Question 15

Cost Component: Prime Costs

Answer 15

Direct labor and direct material required to produce a billable result.

Direct Labor + Direct Materials

Question 16

Cost Component: Conversion Costs

Answer 16

Costs necessary to produce a billable result WITHOUT considering cost of materials.

Direct Labor + Section Overhead

Question 17

Cost Component: Full Production Costs

Answer 17

All costs required to produce a billable result except Indirect Costs and Ready to Serve Costs.
Encompasses Prime and Conversion Costs.

Direct Labor + Direct Materials + Section Overhead

Question 18

Cost Component: Ready to Serve Costs

Answer 18

Costs needed to keep the lab operational.
e.g. overhead, costs of collecting and reporting, administration

Section Overhead + Collection + Reporting + General Laboratory Overhead

Question 19

Cost Component: Fully Loaded Costs

Answer 19

Full Production + Ready to Serve Costs

Prime Costs + Ready to Serve Costs

Question 20

Cost Formula: Tests to Break Even

Answer 20

Fixed Costs / (Test Price - Variable Costs)

Question 21

Cost Formula: Charge to Break Even

Answer 21

(Fixed Costs / Test Volume) + Variable Costs

Question 22

Cost Formula: Minimum to Break Even

Answer 22

Fixed Costs / (Test Price/Unit - Variable Cost/Unit)

OR

Fixed Costs / (Contribution Margin %)

Question 23

Cost Formula: Contribution Margin %

Answer 23

(Test Price / Unit - Variable Cost / Unit) / Test Price / Unit

Question 24

Pricing Strategy: Cost Oriented Pricing / Mark-Up

Answer 24

Cost + set %

Question 25

Pricing Strategy: Demand-Oriented Pricing

Answer 25

Price is what seller is believed to be willing to pay. Can be different for different segments (STATs)

Question 26

Pricing Strategy: Competition-Oriented Pricing

Answer 26

Price is set according to what competitors are doing.
Going rate
Relative Position
Sealed Bid Pricing

Question 27

Pricing Strategy: Skim Pricing

Answer 27

Use short-term situation to maximize profit.

Question 28

Pricing Strategy: Penetration Pricing

Answer 28

Undercut competition to lure away customers

Question 29

Pricing Strategy: Loss Leader Pricing

Answer 29

Price below cost to attract customers to higher priced items

Question 30

Pricing Strategy: Discount Pricing

Answer 30

Provide discounts based on volume

Question 31

Pricing Strategy: Segmented Pricing

Answer 31

Different prices for different segments of market

Question 32

Pricing Strategy: Price Fixing

Answer 32

Illegal. Competitors agree on pricing.

Question 33

Pricing Strategy: Price Discrimination

Answer 33

Illegal. Different prices for different customers where no difference exists between them.

Question 34

Pricing Strategy: Minimum Price

Answer 34

Illegal. Cannot charge below cost for extended time.

Question 35

Pricing Strategy: Deceptive Pricing

Answer 35

Illegal. Hidden costs; raising price before “discount”.

Question 36

Gross Patient Revenue

Answer 36

Charges at full rate before deductions

Question 37

Net Patient Revenue

Answer 37

Gross revenue minus deductions

Question 38

Contractual Adjustments

Answer 38

Agreed-upon reductions in price for payers

Question 39

Medicare establishment

Answer 39

1965 Title XVII of Social Security Act

Question 40

Medicare part A

Answer 40

Covers hospitialization, hospice, nursing, home health care.

Question 41

Medicare part B

Answer 41

Covers lab tests, physician services, other outpatient services. Fee schedule is the basis for most payers’ reimbursement.

Question 42

Medicare Part C

Answer 42

Alternative to part B. Medicare Advantage Plan. HMO-type coverage.

Question 43

Medicare Part D

Answer 43

Established 2003. Prescription drug coverage.

Question 44

CPT Code Modifier: 26

Answer 44

Procedure includes a combination of physician and technical components.

Question 45

CPT Code Modifier: 59

Answer 45

Distinct procedural service of the same type and same date of service not reported together.

Question 46

CPT Code Modifier: 90

Answer 46

Referred procedure to a reference laboratory. No more than 30% can be referred out.

Question 47

CPT Code Modifier: 91

Answer 47

Repeat clinical laboratory testing.

Question 48

HCPCS Category II codes

Answer 48

Fill in gaps in CPT Category I codes.

Question 49

HCPCS Category III codes

Answer 49

Temporary codes for emerging technologies. Updated 2x per year