HSM 340 Midterm Exam Solution Health Services Finance
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HSM 340 Midterm Exam Solution Health Services Finance Question 1.1. (TCO 4) Which of the following is part of a statistics budget? Output expectations Responsibility for estimation Estimation methodology All of the above Question 2.2. (TCO 4) Which budgetary issue causes the most strife in all areas of a health care organization? Setting volume levels Setting prices Allocation of indirect costs Deciding whether to use a fixed or flexible budget Question 3.3. (TCO 4) Effectiveness is a relationship between: Outputs and organizational goals Inputs and outputs Inputs and organizational goals None of the above. Question 4.4. (TCO 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.) $5,213 $3,892 $7,613 $5,452 $8,070 Question 5.5. (TCO 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 fixed costs of treatment Low Medicare payment High prices Low prices Question 6.6. (TCO 2) A statement that reports the financial position (assets, liabilities, and stockholders’ equity) of an accounting entity at a point in time is called a(an): Income statement Statement of retained earnings Balance sheet Statement of cash flows Report of management Question 7.7. (TCO 2) Which of the following is the BEST example of a financial metric? Degree of innovation Employee empowerment
Accreditation by the Joint Commission on Accreditation of Healthcare Organizations Total margin Length of stay 1. (TCO 4) Based on the below information, what dollar effect did the increased admission rate have on cost? 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 42,000 Admission Rate 0.070 0.095 Case Mix Index 0.90 0.85 (Points : 10) Question 2.2. (TCO 4) 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 (Points : 10) Question 3.3. (TCO 4) What is the amount of variance that is attributed to the change in labor productivity? 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 320 320 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. DL Rate Variance = ( SR ? AR ) × AH Where, SR is the standard direct labor rate AR is the actual direct labor rate AH are the actual direct labor hours Question 4.4. (TCO 2) How are revenues and expenses defined under accrual accounting? Question 5.5. (TCO 2) What are the double-entry accounting system and the duality concept? How are they related?