December 11, 2022

Are there any other types of information besides financial that may be useful in making financial decisions?

Identify the major components of a corporate compliance plan, including the establishment of internal controls relating to the finances of an organization.

How do legal and regulatory issues shape and define good financial management of a health care organization?

DQ2 REIMBURSEMENT AND PAYMENT DETERMINATION

Discuss the major reimbursement methods used in health care.

Discuss the major aspects of Medicare benefits.

List some of the important considerations when negotiating a health plan contract.

HSM340 Health Services Finance

Week 2 Discussion

DQ1 ACCOUNTING CONVENTIONS AND METHODS

Discuss the accounting conventions that affect the application of accounting principles.

You are encouraged to Post a 1- to 2-minute multimedia piece responding to the discussion question. Besides posting your individual multimedia piece you are also encouraged to comment on 2 other students’ multimedia pieces. If text comments work better for you than multimedia, then that is ok, especially when commenting on other students’ posts.

Remember, they must still be quality posts. Simply stating, “Nice job, I agree” is not sufficient. Examples of quality posts include:

providing additional information to the discussion;

elaborating on previous comments from others;

presenting explanations of concepts or methods to help fellow students,

presenting reasons for or against a topic in a persuasive fashion,

sharing your own personal experiences that relate to the topic, and

Providing a URL and explanation for an area you researched on the Internet.

DQ2 FINANCIAL PERFORMANCE

Explain why it is important to know the scope of business being reviewed when using financial statements.

providing additional information to the discussion;

elaborating on previous comments from others;

presenting explanations of concepts or methods to help fellow students,

presenting reasons for or against a topic in a persuasive fashion,

sharing your own personal experiences that relate to the topic, and

Providing a URL and explanation for an area you researched on the Internet.

HSM340 Health Services Finance

Week 3 Discussion

DQ1 COST CATEGORIES

Discuss the four types of costs that might be relevant when considering alternative projects.

DQ2 COST INFORMATION

Describe how cost information relates to the three key activities of management: planning, budgeting, and control.

HSM340 Health Services Finance

Week 4 Discussion

DQ1 FINANCIAL SOURCES

List the major nonhospital and nonphysician sectors of the healthcare industry.

DQ2 FINANCIAL THEORIES AND CONCEPTS

Describe some of the major theories used for the detection of out-of-control costs.

HSM340 Health Services Finance

Week 5 Discussion

DQ1 CAPITAL INVESTMENTS

List some of the kinds of information that is needed to evaluate a capital investment project.

DQ2 FUTURE AND PRESENT VALUE

List some of the pros and cons of retiring debt early.

HSM340 Health Services Finance

Week 6 Discussion

DQ1 CASH AND ASSETS

List and describe where cash is generated by an organization and where an organization uses its cash.

DQ2 CASH RESOURCES

List and explain the criteria that should be used when investing an organization’s cash in the short term.

HSM340 Health Services Finance

Week 7 Discussion

DQ1 HMO, MCO AND HEALTH PLANS

Discuss legal and regulatory issues that affect MCOs.

DQ2 FINANCIAL POLICY

Describe the relationship between financial planning and strategic planning.

HSM340 Health Services Finance

Week 1 Assignment

FINANCIAL LAWS AND REGULATIONS

Your professor will divide the class into small groups of 3 or 4 students. Each group will meet using an online collaboration tool such as Cisco Spark, Google Hangout, Skype, etc.

Groups will submit a presentation answering the following questions either by a voice over PowerPoint or another mode of online delivery at the end of the week addressing the following (with references included on the final page APA formatted):

What are five elements pertaining to the establishment of a false claim under the False Claims Act?

HIPAA privacy standards were designed to accomplish what three broad objectives? Explain each.

Stark II laws prohibit physician referrals to entities in which the physician has a financial relationship. What are 10 specific designated health services (DHS) for which referrals by physicians who have financial relationships with the entity providing the DHS are prohibited?

Discuss the following:

Qui tam

HIPAA Privacy Rule

EMTALA

Compliance programs

Please see the Course Assignments section in the Introduction and Resources Module for further details and the grading rubric for this assignment.

HSM340 Health Services Finance

Week 2 Homework

Respond to the following six questions. Each accurate and complete response is worth 10 points.

Explain the difference between the accrual basis of accounting and the cash basis of accounting?

What are the major reasons for accrual accounting? How are revenues and expenses defined under accrual accounting?

What is an audit in the context of financial accounting?

Explain the double-entry accounting system and the duality concept. How are they related?

The HC method, which uses unadjusted historical costs, does not take into account depreciation expenses, purchasing power, and unrealized gains in replacement value. Despite these weaknesses as a financial reporting method, the HC method is used more frequently for accounting purposes than other methods, such as the HC-GPL, CV, and CV-GPL methods. Why is this so?

Define and describe the purpose of fund accounting (now called net assets).

HSM340 Health Services Finance

Week 3 Homework

Respond to the following three problems. Show your work for any calculations performed. Each accurate and complete response is worth 20 points.

Problem 1. David Jones, the new administrator for a surgical clinic, was trying to determine how to allocate his indirect expenses. His staff was complaining that the current method of taking a percentage of revenues was unfair. He decided to try to allocate utilities based on square footage of each department, administration based on direct costs, and laboratory based on tests. Use the information in the chart below to answer the question.

Square Footage

Direct Expenses

Lab Tests

Utilities

200,000

Administration

2,000

500,000

Laboratory

2,000

625,000

Day-op Suite

3,000

1,400,000

4,000

Cystoscopy

1,500

350,000

500

Endoscopy

1,500

300,000

500

Total

10,000

3,375,000

5,000

Based on the scenario above, what are the Endoscopy Department’s total expenses?

Problem 2. Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470 during the last year and found the following profile:

Average Charge

$15,000

Average LOS

5 Days

Routine Charge

$3,600

Cost/Charge 0.80

Variable Cost % 60

Operating Room

2,657

0.80

Anesthesiology

293

0.80

Lab

1,035

0.70

Radiology

345

0.75

Medical Supplies

4,524

0.50

Pharmacy

1,230

0.50

Other Ancillary

1,316

0.80

Total Ancillary

$11,400

0.75

In the above data set, assume that the hospital’s cost to charge ratio is 0.80 for routine services and 0.75 for all other ancillary services. Using this information, what would the average cost of MS-DRG 470 be?

Problem 3. A free-standing ambulatory care center averages $70 in charges per patient. Variable costs are approximately $12 per patient, and fixed costs are about $1.5 million per year. Using these data, how many patients must be seen each day, assuming a 365-day operation, to reach the break-even point?

HSM340 Health Services Finance

Week 4 Homework

Respond to the following three problems. Show your work for any calculations performed. Each accurate and complete response is worth 20 points.

Problem 1. Formulate your answer based on the below information. The intensity of care delivered dropped from a budgeted case mix of 0.90 to an actual case mix of 0.85. What dollar effect did this have on actual costs?

You have been asked by management to explain the variances in costs under your inpatient capitated contract. The following data is provided. Use the following data to calculate the variances.

Budget

Actual

Inpatient Costs

$12,568,500

$16,618,350

Members

42,000

Admission Rate

0.070

0.095

Case Mix Index

0.90

0.85

Cost per Case (CMI = 1.0)

$4,750

$4,900

Problem 2. Based on the information below, what rate must be set to generate the required $80,000 in profit in the preceding example?

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

Unity PPO

Kaiser

Self Pay

50%

Problem 3. What is the amount of variance that is attributed to the difference between the budgeted and actual wage rate per hour?

Use the following data to calculate the variances.

The following information has been prepared for a home health agency.

Budget

Actual

Wage Rate per Hour

$16.00

$17.00

Fixed Hours

320

Variable Hours per Relative

Value Unit (RVU)

1.0

1.1

Relative Value Units (RVUs)

1,000

1,200

Total Labor Hours

1,320

1,640

Labor Costs

$21,120

$27,880

Cost per RVU

$21.12

$23.23

Budgeted costs at actual volume would be $25,344 ($21.12 × 1,200), and the total variance to be explained is $2,536 Unfavorable ($27,880 – $25,344). Be sure to specify whether the variance is favorable or unfavorable.

HSM340 Health Services Finance

Week 5 Assignment

CAPITAL BUDGETING PROCESS

Your professor will divide the class into small groups of 3 or 4 students. Each group will meet using an online collaboration tool such as Cisco Spark, Google Hangout, Skype, etc. to complete this assignment.

Organizations that decide to issue bonds generally go through a series of steps. Discuss the six steps.

An alternative to traditional equity and debt financing is leasing. Leasing is undertaken primarily for what purposes?

Discuss the two major types of leases.

Discuss the terms short-term borrowing and long-term financing.

What are the primary sources of equity financing for not-for-profit healthcare organizations?

The capital budgeting process occurs in several stages, but generally includes what?

Discuss and list the three discounted cash flow methods.

Please see the Course Assignments section in the Introduction and Resources Module for further details and the grading rubric for this assignment.

HSM340 Health Services Finance

Week 6 Assignment

CASH AND WORKING CAPITAL

Your professor will divide the class into small groups of 3 or 4 students. Each group will meet using an online collaboration tool such as Cisco Spark, Google Hangout, Skype, etc.

What are four general phases of the working capital cycle?

What are the three primary sources of short-term funds?

An organization’s short-term investment options for idle cash include what four areas? List and provide their characteristics.

Discuss the term float.

Please see the Course Assignments section in the Introduction and Resources Module for further details and the grading rubric for this assignment.

HSM340 Health Services Finance

Week 7 Homework

Respond to the following three problems. Show your work for any calculations performed. Each accurate and complete response is worth 20 points.

Problem 1. An HMO has a Point of Service (POS) option for its members, but will pay only 80 percent of approved charges. If a member goes out of network for a medical procedure with a charge of $2,000, of which $1,200 is approved, how much must the member pay?

Problem 2. A hospital has contracted with an HMO to provide acute care inpatient services for $1,000 per day, subject to a 10 percent withhold. The proposed budget for inpatient services is based upon expected utilization of 600 days per 1,000 members at $1,000 per day, or $600,000 per 1,000 members. The hospital risk pool will be split equally between the hospital and a primary care physician group. If only 450 days per 1,000 members were utilized in the first year, how much would the hospital be paid per 1,000 members?

Problem 3. An uninsured patient receives services with charges of $5,000 from a hospital. The hospital staff bills the patient $1,000 and records $4,000 as charity care. If the hospital’s ratio of cost to charges is 50%, what amount would the hospital recognize as charity care in Schedule H of IRS Form 990?

HSM340 Health Services Finance

Week 8 Final Exam

Question 1 (CO 2) A statement that reports inflows and outflows of cash during the accounting period in the categories of operations, investing, and financing, is called a(an):

Report of management

Statement of cash flows

Income statement

Balance sheet

Statement of retained earnings

Question 2 (CO 2) Which method(s) of financial reporting does (do) not recognize the impact of changes in unrealized gains in replacement value?

HC-GPL and CV-GPL

CV and CV-GPL

HC and CV

HC and HC-GPL

Question 3 (CO 2) _____ is the most important financial metric to review to determine long-term financial viability.

Total margin

None of the above

Days cash on hand

Return on equity

Hospital cost index

Question 4 (CO 2) What should be a firm’s primary long-term financial objective?

Equity growth

Asset growth

Debt growth

Profit growth

Question 5 (CO 3) The breakeven point occurs where:

total revenue outpaces total avoidable fixed costs

total profit margin and total costs intersect

total fixed costs and total revenue intersect

total costs and total revenue intersect

total variable costs and total revenue intersect

Question 6 (CO 3) SKF Primary Care Clinic is deciding whether to purchase MRI equipment that would enable it to perform MRI imaging services in-house rather than sending its patients to its competitor’s hospital three miles away. From a financial position, if SKF were to make its decision without using net present value analysis, the clinic would need to know (or at least reasonably estimate) which of the following information?

Variable costs, volume, avoidable fixed cost, and total revenue

Revenue per unit, indirect costs, volume, and total revenue

Avoidable fixed costs, revenue per unit, volume, and contribution margin

Unavoidable fixed cost, volume, variable cost, and indirect costs

Total unit cost, indirect costs, profit, and volume

Question 7 (CO 3) Your controller has told you that the marginal profit of DRG 209 (major joint procedure) for a Medicare patient exceeds the marginal profit for an average charge patient. Why might this occur?

High prices

Low Medicare payment

High fixed costs of treatment

Low prices

Question 8 (CO 3) Which of the following is the first step in any budgetary process?

Define standard treatment protocols

Define volumes of patients

Define standard cost profiles

Define required departmental volumes

Question 9 (CO 4) Which of the following is part of a statistics budget?

Estimation methodology

Output expectations

All of the above

Responsibility for estimation

Question 10 (CO 4) Which budgetary issue causes the most strife in all areas of a health care organization?

Setting prices

Deciding whether to use a fixed or flexible budget

Setting volume levels

Allocation of indirect costs

Question 11 (CO 4) Because prices are often fixed in the health care industry, it is increasingly important to:

None of the above

Measure effectiveness

Measure efficiency

Control costs

Question 12 (CO 3) What is the main reason that relative value units (RVUs) often are used in health care?

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

RVUs enable more accurate pricing.

Not all standard units show up in a standard treatment protocol.

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

Question 13 (CO 5) Which of the following is considered a direct cost?

A tracebale cost

Standard cost profiles

Direct labor and material costs

All labor costs

Question 14 (CO 2) A statement that reports inflows and outflows of cash during the accounting period in the categories of operations, investing, and financing, is called a(an):

Statement of cash flows

Statement of retained earnings

Income statement

Balance sheet

Report of management

Question 15 (CO 2) Which of the following is the BEST example of a financial metric?

Length of stay

Employee empowerment

Total margin

Accreditation by the Joint Commission on Accreditation of Healthcare Organizations

Degree of innovation

Question 16 (CO 7) Employee covered health plans are most likely to be?

HMOs.

PPOs.

High deductible health plans with a savings option.

Traditional indemnity plans

Question 17 (CO 7) Capitation plans are more common for physician payment because:

physicians want more risk in their payment plans.

they can better control utilization.

they are concerned about adverse selection.

physicians have larger reserves and can assume more risk.

Question 18 (CO 7) Employer premium costs for health care coverage are often lowest in which type of health plan:

High deductible health plans with savings options.

HMO

POS.

PPO.

Question 19 (CO 7) Suppose that AT&T had made an offer to acquire Merck Pharmaceuticals. Ignoring potential antitrust problems, this merger would be classified as a:

Vertical merger

Horizontal merger

Cross-border merger

Conglomerate merger

Question 20 (CO 1) Which of the following is an element of the charge master?

Charge/price

Charge code

CPT/HCPCS code

All of the above

Question 21(CO 3) Estimate the total variable cost (i.e., including both routine and ancillary) per MSDRG 505 using the departmental cost/charge ratios and variable cost percentages. (Your answer might be slightly different due to rounding. Pick the closest.)

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

$3,892

$8,070

$5,213

$7,613

$5,452

Question 22 (CO 6) Sunrise has received an invoice for medical supplies for $5,000 with terms of a 3% discount if paid within 10 days. The invoice is due on the thirtieth day. What is the annual effective cost of interest on this invoice?

5.4%

27%

36%

54%

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Are there any other types of information besides financial that may be useful in making financial decisions?

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