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Healthcare Finance > Exam #1 > Flashcards

Exam #1 Flashcards

1
Q

What are the industries in the healthcare sector?

A
  1. Health Services
  2. Insurance
  3. Medical Equipment and Supplies
  4. Pharmaceuticals and Biotech
  5. Others
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2
Q

What are the two areas of healthcare finance?

A
  1. Accounting- Recording economic events

2. Financial Management- Provides tools to make decisions.

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3
Q

What is the difference between a business and a pure charity?

A

A business sustains itself financially by selling goods and services, and competing in the market. A pure charity gets its funds through contributions and provides free services.

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4
Q

What are the benefits of Integrated Delivery Systems?

A
  • Patient capture
  • Provider access to managerial and functional specialists
  • More efficient
  • Better access to capital
  • More ability to recruit and retain management and professional staff
  • One stop shopping
  • More customized services
  • Incentives for providers increases productivity
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5
Q

What is the structure of the finance function within health service organizations?

A

CEO
CFO
Treasurer & Comptroller

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6
Q

What is the primary legal issue facing providers today?

A

Professional Liability (Malpractice)

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7
Q

What are the major current concerns of healthcare managers?

A
  • CMS reimbursement
  • Bad Debt losses
  • Balancing Clinical and Financial Issues
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8
Q

What are the three forms of business organizations, and pros and cons of each?

A
  • Proprietorship
    • easy to start, low taxes, less regulation
    • limited resources, limited life, difficult to sell, liability
  • Partnership
    • same as proprietorship
  • Corporation
    • unlimited life, easy ownership transfer, limited liability
    • double taxation, time and money to start
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9
Q

What are the differences between investor owned and NFP organizations?

A
  • Stockholders (have claim on residual earnings)
  • Taxation
  • Stakeholders
  • Tax Deductible Contributions
  • Issue Tax Exempt Debt
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10
Q

What is the primary goal of investor owned corporations?

A

Shareholder wealth maximization (stock price)

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11
Q

What is the primary goal of NFP organizations?

A

Stick to their mission statement and visions that have been set forth to help the community.

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12
Q

Who are the major third-party payers?

A
  • Private Insurers
    • Blue Cross/Blue Shield
    • Commercial Insurers
    • Self-Insure
  • Public Insurers
    • Medicare
    • Medicaid
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13
Q

What are the primary characteristics of managed care plans?

A
  • Negotiate lower rates with providers by using selective contracting
  • By controlling patient flow they have bargaining power
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14
Q

Describe different types of manages care plans

A
  • Health Maintenance Organization (HMO)

- Preferred Provider Organization (PPO)

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15
Q

What is the difference between fee-for-service and capitation?

A
  • Fee for service is per service provided and is payed after service is provided.
  • Capitation is a set amount payed per person before care is given
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16
Q

What is a stakeholder?

A

Anybody that has a financial interest in the organization. It could be anything from community members to employees.

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17
Q

Who is most interested in the financial condition of a provider?

A

Investors

18
Q

What is the goal of financial accounting?

A

Provide information to outside parties, managers of the organization, and the board of trustees.

19
Q

What are generally accepted accounting principles?

A

A set of objectives or principles that guide how to prepare and present financial statements.

20
Q

What is the purpose of GAAP?

A

Sets the rules for financial statement preparation.

21
Q

What organizations establish GAAP?

A
  • Securities and Exchange Commission (SEC)
  • Financial Accounting Standards Board (FASB)
  • American Institute of Certified Public Accountants (AIC-PA)
22
Q

What is the difference between cash and accrual accounting?

A
  • Cash is recorded when money changes hands.
  • Accrual is recorded when the service is provided. This ensures that revenues are recognized and matched with expenses and time periods.
23
Q

What is the format of the income statement?

A

Operating Income
-Expenses
+Nonoperating Income
=Net Income/Profit

24
Q

What is the difference between gross and net revenue?

A

Gross Revenue- Everything Billed

Net Revenue- Everything Collected (to be collected)

25
Q

What is the difference between patient service revenue and other revenue?

A

Patient service is anything directly provided to the patient. Other revenue is services linked with patient services such as parking, food, etc.

26
Q

What is the difference between charity care and bad debt losses?

A

Charity- Those who would pay, but can’t.

Bad Debt- Those who can pay, but don’t.

27
Q

What is depreciation expense, and what is it’s purpose?

A

It is a non cash expense used to show the wear and tear of fixed assets over many years.

28
Q

What is the difference between operating income and net income?

A

Operating income is from core business revenues, while net income incorporates all revenues including contributions, interest income, etc.

29
Q

Why is net income called the bottom line?

A

Because of it’s location on the income statement, as well as it’s importance.

30
Q

What is the difference between an income statement and cash flows statement?

A

Income shows profitability over a period of time, and cash flows shows how much money changed hands, and where it went over that period.

31
Q

What is the purpose the statement of changes in equity?

A

Provides and indication of how much net income will be retained, and increases equity on the balance sheet.

32
Q

What is the basic format of the statement of changes in equity?

A

Net Income
-Dividends
+Beginning Equity
=Ending Equity

33
Q

What is the difference between the income statement and balance sheet in regards to timing?

A

Balance sheet is a “snapshot in time”

Income statement is a summary of a period of time

34
Q

What is the accounting identity?

A

Assets = Liabilities + Equity

35
Q

What are assets? What are the three categories of assets?

A
  • Resources owned by an organization that can be used to create future revenues.
  • Current assets, Long-term investments, Net property and equipment
36
Q

What makes an asset a current asset?

A

If it can be liquidated within one accounting period

  • Cash
  • Short Term Investments
  • Accounts Receivable
  • Inventory
37
Q

What is Net Working Capital, and how is it measured?

A

Current Assets - Current Liabilities

Shows if you can cover short-term debts.

38
Q

What is the difference between equity section of a NFP vs. Investor Owned organization?

A
  • Amount of claims owned by shareholders of the company.

- Net Assets

39
Q

What is Equity?

A

The amount of total assets financed by non liability capital.

40
Q

What is fund accounting and why is it important?

A

Used by NFP organizations, it helps them classify donations provided based on how they can use them.

  • Unrestricted
  • Temporarily Restricted
  • Permanently Restricted
41
Q

What are the three major sections of a cash flow statement?

A
  • Cash flows from operating activities
  • Cash flows from financing activities
  • Cash flows from investing activities

Healthcare Finance (3 decks)

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