Healthcare Finance Practice Exam

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• The allocation method that distributes indirect costs starting with the department that provides the least amount of revenue-generating services is the:
• Under GAAP, which category is paired with recognition as a fundamental accounting principle?
• What are the key steps in the healthcare revenue cycle from patient access to denial management?
• What does a higher asset turnover ratio indicate?
• What is the accounting term for amounts the customers owe the organization after services are provided?
• How are DRG weights used to determine Medicare payments, and what does a DRG weight represent?
• In the ROI example, what is the initial investment amount?
• Which statement about the relationship between NPV and IRR is true when evaluating a healthcare project?
• The PPACA's name change to the Health Care Reconciliation Act of 2010 occurred shortly after its enactment. This statement is:
• ________________ started by providing access to prescription drug discount cards for no more than $30.00 annually. Then, the program transitioned into providing subsidized access to prescription drug coverage.
• Under accrual accounting, revenues are recognized when earned and expenses are recognized when incurred.
• How is Days in Net Patient Accounts Receivable (DNR) calculated, and what does it indicate?
• What is working capital, and why is it critical for hospital operations?
• Which rate is typically used to evaluate a healthcare capital project, and what might modify it?
• Medicare Part B is financed by monthly premiums from those beneficiaries who voluntarily enroll in the program, and the funds are deposited in the Federal Supplementary Medical Trust Fund.
• The overall success of this department is predicated on both the accuracy of the charge description master and the clinical staff who are recording the transactions.
• What is the quick ratio, and why is it a better liquidity measure than the current ratio in some cases?
• Any payments from a state Medicaid program to a healthcare provider are considered as 'Payment in Full'.
• Which organization develops the HEDIS quality measures?
• Medigap refers to private policies that cover healthcare services not covered by Medicare Parts A or B.
• During the manufacturing and sales cycle, which of the following is measured through appropriate data classification to provide management with additional information?
• How is the current ratio interpreted in healthcare financial analysis?
• When two or more people form an organization, it is called a:
• Which payment model is not based on a specific procedure or hospital stay and is paid per member per month?
• PPO stands for which of the following?
• What is Medicare's Prospective Payment System (PPS) and how does DRG classification affect reimbursement?
• A Prior Authorization (PA) is also considered a cost control measure for the MCOs.
• There are areas of the country in need of primary care physicians, nurses, physician assistants, mental health providers, and dentists. The PPACA addresses this by making available which incentives?
• A Coordinated Care Plan (CCP) includes a network of providers under contract to deliver the approved benefit package. This package is approved by which entity?
• The hospice certification must be obtained no earlier than how many days before care?
• The PPACA focused on improving quality while lowering costs. When the _________ was established, it offered financial incentives to hospitals to improve the quality of care delivered.
• These groups manage care delivered by multiple providers and facilities; the ______ generally provides the full spectrum of care from physician services to skilled nursing facility services.
• The HIM department records copy fees as revenue. Year-to-date budgeted fees are $35,000 and actual fees are $23,000. The director may be asked to explain which variance?
• Community Health Services uses what type of operational budget to justify and prioritize every department annually?
• Which payment method pays a set amount per enrolled member per period, regardless of services rendered?
• The balance sheet presents, at a specific moment in time, the impact of all transactions on which financial elements?
• _____ is a financial obligation supported by a contract and has a time frame for repayment; it can be associated with a large purchase or a loan when an organization uses some of their assets as collateral.
• ________________________ is where accounting information is a tool to communicate without providing any influence that would sway a decision in a particular direction, or that would favor a particular interest group.
• How does clinical integration influence value-based contracts and financial performance?
• Which payment reform approach does the PPACA use to reduce costs and improve quality by paying providers a single price for an episode of care?
• Which term best describes the organization type that operates to serve the community without seeking profit?
• The _____________________ methodology can be applied to procedures that are associated with technical components. This is a lump-sum payment that can be distributed among all the physicians who either performed the procedure or interpreted the results of the procedure.
• In activity-based costing, what determines how overhead is allocated to departments?
• What term describes private policies that cover healthcare services not covered by Medicare Part A or Part B?
• Which program began in 1965 as a federal/state entitlement and pays for medical assistance for low-income individuals?
• According to GAAP, there are two categories of accounting principles: recognition and _________________.
• Which statement about the current ratio is accurate?
• Why is scenario analysis important in healthcare cash flow forecasting?
• Which statement about bundled payments is true?
• Equipment is considered to be a __________, and with some equipment being at a lower price, it is up to the individual organization as to how they record the equipment.
• What is Net Present Value (NPV), and how is it used in healthcare project evaluation?
• The PPACA stops insurance companies from canceling an individual's coverage just because they made a mistake on their insurance application. This protection applies to all health plans for those who get coverage _____________.
• The objective of effective financial reporting is to provide information in a ____________ manner that will assist in making decisions regarding the allocation of resources for the organization.
• In a(n) ______, the HMO directly employs physicians and other health care professionals to provide services to their members.
• A financial report or statement of financial position can provide information about an organization's __________.
• If while on hospice a Medicare beneficiary is in need of care or hospitalization for treatment that is not related to hospice service, Medicare will not pay for this treatment.
• A benefit period is a time frame that is part of a hospital stay until the patient is discharged. The time after the discharge and the next admission needs to be at least _________ consecutive days since the last stay in a hospital or skilled nursing facility.
• Beginning accounts receivable plus _____________ less collections equals _____________.
• What information does the income statement provide for a healthcare organization?
• Which entity is responsible for issuing federal accounting standards that guide federal financial reporting?
• The purpose of the Community Living Assistance Services and Supports Act is to provide American citizens with a new option to finance long-term care services. What is the act commonly known as?
• Which statement best describes operating margin in relation to non-operating items?
• In revenue cycle management, which activity primarily addresses denied claims to pursue payment?
• The PPACA allows ______ to take more control and make better healthcare decisions.
• The _________ are MA plans offered to a society that is limited to only the members of the society.
• Deposits in a bank may be guaranteed by the federal government, however ______________________ can pose a risk for losing value.
• _______________ ultimately supports the recognition principles in that assumptions are explained that are part of the numeric information; these provide additional information to the person reading the financial reports.
• What is activity-based costing (ABC), and how can it be applied in a hospital to improve costing accuracy?
• According to CMS, there are three categories related to targeted populations. Which is NOT among them?
• Which of the following purchases would most likely be considered a capital budget item?
• What do payer contracts specify, and what is bundled payment?
• How does Medicare handle bad debt and charity care for financial reporting?
• What is contribution margin, and how can it be used to analyze a hospital department?
• What is the purpose of AR aging analysis in revenue cycle management?
• What is capitation reimbursement, and how does it differ from fee-for-service?
• What is the primary purpose of a capital budget in healthcare?
• Which statement best describes cash budgeting vs accrual budgeting in healthcare finance?
• If a hospital has EBIT of 2.4 million and interest expense of 0.8 million, what is the interest coverage ratio?
• Medicare covers beneficiaries who ________________________ and have elected to pay a premium for coverage.
• The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 implemented which welfare program?
• In addition to reducing costs and improving access and quality care for the Medicare beneficiary, the PPACA will help to tighten up and reduce the overpayments to the insurance companies.
• _____ is the income that is produced through the sales function of an organization to sell products and/or services to customers; it is the amount that the customers will pay for these products and/or services.
• Which cash flow category would you examine to understand cash generated from core clinical operations?
• Which factors influence capital structure decisions for not-for-profit hospitals?
• The PPACA was enacted on March 23, 2010, and shortly after, the name of the act was changed to the Health Care Reconciliation Act of 2010.
• Net revenue per patient day is calculated as net patient revenue divided by patient days. What does this measure indicate?
• Under the PPACA, individuals may use an out-of-network emergency room provider without penalty.
• Which factor is a key consideration for capital structure decisions for not-for-profit hospitals?
• What are Intergovernmental Transfers (IGT) and Disproportionate Share Hospital (DSH) payments?
• Using the same Triad data, what is Triad's total net assets on its year-end balance sheet?
• Which budget type requires justification for all expenses and starts from a zero base?
• If a hospital has current assets of $4,000,000 and current liabilities of $5,000,000, what is the current ratio?
• Urban Clinic is establishing a new Women's Breast Center with an initial investment of $2,000,000. Monthly operating expenses are $100,000, and the center is expected to generate $40,000 in profits each month. What is the estimated return on investment for one year?
• Which accounting method recognizes revenue in the period it is realized, even if cash has not yet been received?
• A hospital evaluates an ambulance investment: cost $100,000, depreciation $20,000 per year for five years, and annual reimbursements $45,000. What is the accounting rate of return on this investment?
• Which metric indicates how efficiently assets generate revenue?
• What is the primary disadvantage of the payback period method for asset evaluation?
• Which statement describes bundled payment?
• What term describes a network of providers under contract to deliver the benefit package approved by CMS?
• Which department is primarily responsible for billing and cash collection activities with patients?
• In the ambulance ARR scenario, what is the annual depreciation expense?
• Home health eligibility under Medicare requires the physician's attestation that the patient needs home care and is homebound.
• _________________ establishes "the measurement of economic activity, time when such measurements are to be made and recorded, disclosures surrounding this activity, and preparation and presentation of summarized economic information in the form of financial statements.
• Which metric best reflects a hospital's ability to meet short-term obligations with cash?
• Why is operating cash flow a better indicator of ongoing liquidity than net income?
• How does payer mix affect liquidity and profitability for a hospital?
• The Medicaid program, a federal/state entitlement program for low-income individuals, is funded only by the individual state governments.
• Why is net present value (NPV) preferred over the payback period for healthcare capital budgeting decisions?
• In cost-volume-profit analysis, which statement about fixed and variable costs is true?
• Which action most directly improves revenue realization by ensuring services rendered are captured in billing?
• Which financial statement reflects the extent to which an organization's revenues exceed its expenses?
• How do cash collection rate and charge capture impact hospital revenue?
• How is break-even analysis useful for a healthcare facility considering a new service line?
• How is GAAP revenue recognized for patient services?
• How does a DRG weight influence Medicare payments?
• What is the difference between an operating budget and a capital budget in healthcare finance?
• By focusing on improving quality and lowering costs, the PPACA used bundle payments so that the provider was entirely responsible for their profit and loss on a patient, balancing quality care and access. This statement is:
• What is the journal entry to record office supplies charged to the doctor's account by an admin assistant?
• Which is a very important part of the episode-of-care payment method that requires precise expenditure projections to negotiate contracts?
• The acronym CLASS in the PPACA context stands for which option?
• Which of the following is a current asset?
• What does Weighted Average Cost of Capital (WACC) represent for a health system?
• Which component of the balance sheet represents the hospital's residual interest after liabilities are deducted?
• Which type of costs cannot be directly traced to a single product and must be allocated to multiple cost objects?
• Which organization is described as a private, not-for-profit entity identified by HHS as the accrediting body for Qualified Health Plans?
• NCQA is an accrediting entity identified by HHS for Qualified Health Plans. It is a private, not-for-profit organization focusing on accreditation, certification, and recognition of health plans and reporting on the overall quality of managed care plans in the United States.
• Medicare Part B covers services and supplies, such as drugs and biologicals, that are usually self-administered by the patient.
• What is the cost-to-charge ratio, and how is it used in hospital financial analysis?
• People with Amyotrophic Lateral Sclerosis (ALS) were given eligibility for Medicare, without the customary 24-month waiting period.
• According to CMS, ESRD occurs from the destruction of normal kidney tissues over a long period of time. Often, there are no symptoms until the kidney has lost more than _____________ of its function and is usually irreversible and permanent.
• Which form of organization is described as being owned by two or more individuals?
• Which option correctly describes a typical component of calculating WACC?
• Which cost allocation method would distribute overhead directly to departments without considering interdepartmental services?
• In what year was the PPACA enacted?
• Which of the following expresses the asset turnover ratio?
• The goal of the PPACA was to ______, and at the same time, reduce the medical expenditures that Medicare has been facing over the years.
• Which of the following can be a primary care physician (PCP)?
• Which will show who was in contact with the patient, what services were delivered, and any other clinical information that can help in the decision-making process for the patient while in the facility?
• In a balance sheet, the statement that total assets equal total liabilities plus net assets is generally true. Which option reflects this statement?
• What is a pro forma statement, and how is it used for evaluating a new service line?
• _____ is fully responsible for the soft coding of the inpatient medical records.
• Community Hospital is purchasing a new ambulance. The ambulance will cost $150,000, which will be depreciated at $30,000 per year for five years. Related cash inflows from reimbursements are projected to be $80,000 annually. The hospital expects to replace the vehicle when it is fully depreciated. How much is the accounting rate of return on this investment?
• To be eligible for home health services under Medicare Parts A and B, the physician must attest that the patient requires home care and is homebound.
• Which term describes services and supplies that are appropriate to evaluation and treatment and consistent with standard of care, as defined by the American College of Medical Quality?
• Which revenue cycle step involves charge capture and coding before claim submission?
• How is a budget variance analyzed in healthcare finance, and what distinguishes a favorable variance from an unfavorable one?
• The Case Manager helps the patient identify appropriate out-of-network providers to fit the patient's needs and to ensure the continuum of care is uninterrupted by having to change providers. This statement is:
• Which statement best describes the claims submission step in the revenue cycle?
• Among the following components, which is least likely to be integrated within typical IDSs?
• The PPACA looks to save consumers money by both promoting innovation and extending drug discounts to providers that take care of the low-income patients or may be a disproportionate-share hospital. Which option represents this combined approach?
• What is the financial impact of implementing ERP or electronic health record (EHR) systems on healthcare finances?
• Which welfare program was created as part of Welfare Reform Act of 1996?
• Exclusive Provider Organizations (EPO) plans require members to use network providers to receive coverage. True or False?
• Which statement about non-operating revenue is true?
• What is zero-based budgeting, and why might it be used in healthcare?
• In 2010, the PPACA introduced an online marketplace to help consumers compare plans and pick the best one for their needs. Which statement best describes this feature?
• Which payment model incentivizes volume in healthcare financing?
• Community Hospital is evaluating three investments. Which one has the highest profitability index?
• ________________________ is where financial statements demonstrate the important financial relationships of the organization itself.
• A budget created based on productivity projected from historical data is known as a:
• Which statement best differentiates operating margin from net margin?
• Under DRG-based reimbursement, what primarily determines the payment amount for a patient admission?
• The American College of Medical Quality defines ________ as 'accepted healthcare services and supplies provided by healthcare entities, appropriate to the evaluation and treatment of a disease, condition, illness or injury and consistent with applicable standard of care.'
• Which reimbursement methodology can be applied to procedures with technical components and results in a lump-sum payment to be distributed among all involved physicians?
• Under PPACA, the goal was that at least ____ of all premium dollars collected from large employers were spent on healthcare services and supported quality improvement.
• What does the cash flow statement reveal in a healthcare entity?
• What is Internal Rate of Return (IRR), and how is it interpreted for a hospital investment?
• A hospital with a higher Case Mix Index (CMI) will generally experience DRG reimbursements that are:
• The Federal Accounting Standards Advisory Board mission is that it serves the _______________ interest by improving federal financial reporting through issuing federal financial accounting standards.
• Which organization establishes federal accounting standards used in the United States?
• In 2013, the PPACA focused on improving preventative healthcare coverage and expanding the use of which payment method to providers?
• What is the primary purpose of a hospital balance sheet?
• What is Value-Based Purchasing (VBP) in Medicare/Medicaid, and what does it incentivize?
• Which statement describes the relationship between accounts payable practices and liquidity management?
• The responsibility of the SEC is to ____________ and ____________ federal securities laws, issue new and amend existing rules, oversee the inspection of securities firms, oversee private regulatory organizations, and coordinate regulations with federal, state, and foreign authorities.
• Which of the following statements best describes the costs in a facility?
• What is another name for the financial position statement used to summarize assets, liabilities, and equity at a specific date?
• When an organization uses the ___________ accounting method, it will be a better indicator of future cash flows and overall performance than using current cash receipts and disbursements.
• How is Days Cash on Hand (DCOH) calculated, and why is it important?
• In the Triad data, which item is a current liability?
• Under accrual accounting, when is revenue recognized?
• In the ambulance ARR scenario, what is the initial investment?
• Which plan is similar to the PPO, except that patients enrolled in the plan are to receive healthcare services only from network providers?
• What risks do Stark Law and Anti-Kickback Statutes present to healthcare finance teams?
• In 2010, the PPACA put insurance coverage online for consumers to compare coverage between plans. The rules were changed to stop insurance companies from denying coverage to which group due to a preexisting condition?
• What is the primary purpose of value-based contracts in healthcare finance?
• The Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA) is a comprehensive healthcare program where the VA shares the cost of care for covered services and supplies.
• Which statement best defines days payable outstanding (DPO) and what it indicates for a healthcare organization?
• CHAMPVA is administered by the Department of Veterans Affairs with the VA sharing the cost of care.
• Based on a balance sheet with total assets of $25,000,000 and total liabilities of $10,000,000, what is the total equity (net assets)?
• The following allocation method distributes overhead to revenue-generating departments based on a percentage of revenue or square footage:
• According to CMS, the timing and content for certification are for the first 90 days of hospice coverage. The hospice must obtain, no earlier than _____ days prior to care and no later than _____ calendar days after hospice is initiated, oral or written certification of the terminal illness by the medical director of the hospice or the physician member of the hospice organization.
• Which of the following statements correctly defines the interest coverage ratio and its importance for lenders and investors?
• What are common margin improvement strategies in healthcare organizations?
• _____ is where an organization provides a service to a customer, and this customer agrees to pay for the service after it is completed.
• The budget cycle is generally related to which time period of a company?
• What term represents a difference between budgeted amount and actual amount of a line item that is expected to reverse itself in a subsequent period?
• What does Case Mix Index (CMI) measure and how does it impact payment?
• What is a common debt covenant found in healthcare financing, and why are they important?
• Most Integrated Delivery Systems (IDSs) comprise multiple facilities that can provide care along the continuum. They include all of the following, except:
• In the ROI example, what is the monthly profit used to compute ROI?
• Which financial document records all transactions and serves as the primary accounting ledger?
• ________ is not based on a specific procedure or hospital stay, as it is based on a per-member-per-month (PMPM) methodology.
• The PPACA will offset premiums by providing the ______ tax cuts to help families and small businesses obtain more affordable coverage.
• Dr. Phillips, Dr. Patel, and Dr. Blankley want to bring a new practitioner in as an owner. Which action must take place?
• In a DRG-based payment system, what does a higher average DRG weight in a patient mix indicate?
• Triad Healthcare Financial Data shows revenue $2,600,000 and expenses $2,300,000. What is Triad's net income?
• Services rendered and billed to customers for future payment create transactions that are posted to which accounts?