Healthcare Finance Practice Exam

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• What does Case Mix Index (CMI) measure and how does it impact payment?
• What is the quick ratio, and why is it a better liquidity measure than the current ratio in some cases?
• What is a common debt covenant found in healthcare financing, and why are they important?
• In cost-volume-profit analysis, which statement about fixed and variable costs is true?
• The following allocation method distributes overhead to revenue-generating departments based on a percentage of revenue or square footage:
• 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?
• Which statement describes the relationship between accounts payable practices and liquidity management?
• 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?
• Deposits in a bank may be guaranteed by the federal government, however ______________________ can pose a risk for losing value.
• Community Health Services uses what type of operational budget to justify and prioritize every department annually?
• Which statement describes bundled payment?
• How is Days in Net Patient Accounts Receivable (DNR) calculated, and what does it indicate?
• The PPACA allows ______ to take more control and make better healthcare decisions.
• 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?
• 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 of the following can be a primary care physician (PCP)?
• Under accrual accounting, revenues are recognized when earned and expenses are recognized when incurred.
• Which revenue cycle step involves charge capture and coding before claim submission?
• The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 implemented which welfare program?
• Which option correctly describes a typical component of calculating WACC?
• The objective of effective financial reporting is to assist decisions about the allocation of what?
• A Prior Authorization (PA) is also considered a cost control measure for the MCOs.
• Any payments from a state Medicaid program to a healthcare provider are considered as 'Payment in Full'.
• What does a higher asset turnover ratio indicate?
• ________________________ 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.
• 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.
• Which plan is similar to the PPO, except that patients enrolled in the plan are to receive healthcare services only from network providers?
• What is the difference between an operating budget and a capital budget in healthcare finance?
• Medicare covers beneficiaries who ________________________ and have elected to pay a premium for coverage.
• What is the primary purpose of value-based contracts in healthcare finance?
• Which statement best describes the claims submission step in the revenue cycle?
• The budget cycle is generally related to which time period of a company?
• ________________ 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.
• 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.
• Under accrual accounting, when is revenue recognized?
• In what year was the PPACA enacted?
• What is Value-Based Purchasing (VBP) in Medicare/Medicaid, and what does it incentivize?
• Which term best describes the organization type that operates to serve the community without seeking profit?
• 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?
• What do payer contracts specify, and what is bundled payment?
• Why is net present value (NPV) preferred over the payback period for healthcare capital budgeting decisions?
• Which action most directly improves revenue realization by ensuring services rendered are captured in billing?
• 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.'
• Why is operating cash flow a better indicator of ongoing liquidity than net income?
• 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?
• Dr. Phillips, Dr. Patel, and Dr. Blankley want to bring a new practitioner in as an owner. Which action must take place?
• 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?
• 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 the purpose of AR aging analysis in revenue cycle management?
• 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?
• Which of the following is a current asset?
• What does Weighted Average Cost of Capital (WACC) represent for a health system?
• Which welfare program was created as part of Welfare Reform Act of 1996?
• Under the PPACA, individuals may use an out-of-network emergency room provider without penalty.
• The Medicaid program, a federal/state entitlement program for low-income individuals, is funded only by the individual state governments.
• _____ 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.
• In the ROI example, what is the initial investment amount?
• 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?
• How do cash collection rate and charge capture impact hospital revenue?
• Which statement about non-operating revenue is true?
• How is break-even analysis useful for a healthcare facility considering a new service line?
• Which organization establishes federal accounting standards used in the United States?
• Net revenue per patient day is calculated as net patient revenue divided by patient days. What does this measure indicate?
• 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?
• What is the primary purpose of a capital budget in healthcare?
• If a hospital has current assets of $4,000,000 and current liabilities of $5,000,000, what is the current ratio?
• 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.
• The Federal Accounting Standards Advisory Board mission is that it serves the _______________ interest by improving federal financial reporting through issuing federal financial accounting standards.
• Services rendered and billed to customers for future payment create transactions that are posted to which accounts?
• A budget created based on productivity projected from historical data is known as a:
• Most Integrated Delivery Systems (IDSs) comprise multiple facilities that can provide care along the continuum. They include all of the following, except:
• The allocation method that distributes indirect costs starting with the department that provides the least amount of revenue-generating services is the:
• What are common margin improvement strategies in healthcare organizations?
• _____ 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.
• In 2013, the PPACA focused on improving preventative healthcare coverage and expanding the use of which payment method to providers?
• CHAMPVA is administered by the Department of Veterans Affairs with the VA sharing the cost of care.
• In a DRG-based payment system, what does a higher average DRG weight in a patient mix indicate?
• Which of the following expresses the asset turnover ratio?
• A hospital with a higher Case Mix Index (CMI) will generally experience DRG reimbursements that are:
• What does the cash flow statement reveal in a healthcare entity?
• What is the financial impact of implementing ERP or electronic health record (EHR) systems on healthcare finances?
• Which of the following statements correctly defines the interest coverage ratio and its importance for lenders and investors?
• According to CMS, there are three categories related to targeted populations. Which is NOT among them?
• What is capitation reimbursement, and how does it differ from fee-for-service?
• What term describes private policies that cover healthcare services not covered by Medicare Part A or Part B?
• Which form of organization is described as being owned by two or more individuals?
• If a hospital has EBIT of 2.4 million and interest expense of 0.8 million, what is the interest coverage ratio?
• _______________ 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.
• How is the current ratio interpreted in healthcare financial analysis?
• ________ is not based on a specific procedure or hospital stay, as it is based on a per-member-per-month (PMPM) methodology.
• Why is scenario analysis important in healthcare cash flow forecasting?
• In activity-based costing, what determines how overhead is allocated to departments?
• What is the primary disadvantage of the payback period method for asset 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 _____________.
• _____ is fully responsible for the soft coding of the inpatient medical records.
• Which metric best reflects a hospital's ability to meet short-term obligations with cash?
• Which entity is responsible for issuing federal accounting standards that guide federal financial reporting?
• In revenue cycle management, which activity primarily addresses denied claims to pursue payment?
• Which financial statement reflects the extent to which an organization's revenues exceed its expenses?
• What are Intergovernmental Transfers (IGT) and Disproportionate Share Hospital (DSH) payments?
• What is Internal Rate of Return (IRR), and how is it interpreted for a hospital investment?
• Under DRG-based reimbursement, what primarily determines the payment amount for a patient admission?
• How is GAAP revenue recognized for patient services?
• Which financial document records all transactions and serves as the primary accounting ledger?
• 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.
• The hospice certification must be obtained no earlier than how many days before care?
• 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.
• What is Net Present Value (NPV), and how is it used in healthcare project evaluation?
• Which cash flow category would you examine to understand cash generated from core clinical operations?
• 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.
• Which organization is described as a private, not-for-profit entity identified by HHS as the accrediting body for Qualified Health Plans?
• The PPACA will offset premiums by providing the ______ tax cuts to help families and small businesses obtain more affordable coverage.
• 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?
• How does Medicare handle bad debt and charity care for financial reporting?
• Which component of the balance sheet represents the hospital's residual interest after liabilities are deducted?
• What is Medicare's Prospective Payment System (PPS) and how does DRG classification affect reimbursement?
• 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.
• Medicare Part B covers services and supplies, such as drugs and biologicals, that are usually self-administered by the patient.
• Which type of costs cannot be directly traced to a single product and must be allocated to multiple cost objects?
• Medigap refers to private policies that cover healthcare services not covered by Medicare Parts A or B.
• Triad Healthcare Financial Data shows revenue $2,600,000 and expenses $2,300,000. What is Triad's net income?
• ________________________ is where financial statements demonstrate the important financial relationships of the organization itself.
• How does payer mix affect liquidity and profitability for a hospital?
• 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.
• 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.
• Using the same Triad data, what is Triad's total net assets on its year-end balance sheet?
• Which statement about the relationship between NPV and IRR is true when evaluating a healthcare project?
• What risks do Stark Law and Anti-Kickback Statutes present to healthcare finance teams?
• Which statement best defines days payable outstanding (DPO) and what it indicates for a healthcare organization?
• How is Days Cash on Hand (DCOH) calculated, and why is it important?
• 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?
• Exclusive Provider Organizations (EPO) plans require members to use network providers to receive coverage. True or False?
• The _________ are MA plans offered to a society that is limited to only the members of the society.
• 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.
• Which factor is a key consideration for capital structure decisions for not-for-profit hospitals?
• Which of the following purchases would most likely be considered a capital budget item?
• In the ambulance ARR scenario, what is the initial investment?
• What is contribution margin, and how can it be used to analyze a hospital department?
• Beginning accounts receivable plus _____________ less collections equals _____________.
• Which statement best describes cash budgeting vs accrual budgeting in healthcare finance?
• Which organization develops the HEDIS quality measures?
• Which payment model incentivizes volume in healthcare financing?
• According to GAAP, there are two categories of accounting principles: recognition and _________________.
• 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?
• The goal of the PPACA was to ______, and at the same time, reduce the medical expenditures that Medicare has been facing over the years.
• What are the key steps in the healthcare revenue cycle from patient access to denial management?
• People with Amyotrophic Lateral Sclerosis (ALS) were given eligibility for Medicare, without the customary 24-month waiting period.
• How is a budget variance analyzed in healthcare finance, and what distinguishes a favorable variance from an unfavorable one?
• During the manufacturing and sales cycle, which of the following is measured through appropriate data classification to provide management with additional information?
• 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.
• 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?
• How does clinical integration influence value-based contracts and financial performance?
• Which is a very important part of the episode-of-care payment method that requires precise expenditure projections to negotiate contracts?
• 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 primary purpose of a hospital balance sheet?
• 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.
• What is activity-based costing (ABC), and how can it be applied in a hospital to improve costing accuracy?
• _________________ 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.
• 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)?
• In a(n) ______, the HMO directly employs physicians and other health care professionals to provide services to their members.
• In the ROI example, what is the monthly profit used to compute ROI?
• How does a DRG weight influence Medicare payments?
• 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.
• What is zero-based budgeting, and why might it be used in healthcare?
• Which cost allocation method would distribute overhead directly to departments without considering interdepartmental services?
• Which statement best describes operating margin in relation to non-operating items?
• 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.
• Which statement best differentiates operating margin from net margin?
• What information does the income statement provide for a healthcare organization?
• Which statement about bundled payments is true?
• Under GAAP, which category is paired with recognition as a fundamental accounting principle?
• Which statement about the current ratio is accurate?
• What is the journal entry to record office supplies charged to the doctor's account by an admin assistant?
• Which metric indicates how efficiently assets generate revenue?
• _____ is where an organization provides a service to a customer, and this customer agrees to pay for the service after it is completed.
• What term describes a network of providers under contract to deliver the benefit package approved by CMS?
• PPO stands for which of the following?
• In the ambulance ARR scenario, what is the annual depreciation expense?
• What is the cost-to-charge ratio, and how is it used in hospital financial analysis?
• 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 payment model is not based on a specific procedure or hospital stay and is paid per member per month?
• Which accounting method recognizes revenue in the period it is realized, even if cash has not yet been received?
• Among the following components, which is least likely to be integrated within typical IDSs?
• 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.
• Which payment method pays a set amount per enrolled member per period, regardless of services rendered?
• How are DRG weights used to determine Medicare payments, and what does a DRG weight represent?
• A financial report or statement of financial position can provide information about an organization's __________.
• Community Hospital is evaluating three investments. Which one has the highest profitability index?
• In the Triad data, which item is a current liability?
• Home health eligibility under Medicare requires the physician's attestation that the patient needs home care and is homebound.
• Which department is primarily responsible for billing and cash collection activities with patients?
• Which factors influence capital structure decisions for not-for-profit hospitals?
• What is the accounting term for amounts the customers owe the organization after services are provided?
• The acronym CLASS in the PPACA context stands for which option?
• 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.
• When two or more people form an organization, it is called a:
• 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?
• 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?
• Which budget type requires justification for all expenses and starts from a zero base?
• The balance sheet presents, at a specific moment in time, the impact of all transactions on which financial elements?
• 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.
• 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?
• What is a pro forma statement, and how is it used for evaluating a new service line?
• The PPACA's name change to the Health Care Reconciliation Act of 2010 occurred shortly after its enactment. This statement is:
• 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.
• Which program began in 1965 as a federal/state entitlement and pays for medical assistance for low-income individuals?
• 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: