FINANCIAL MANAGEMENT OF HEALTH CARE ORGANIZATIONS: AN INTRODUCTION TO FUNDAMENTAL TOOLS, CONCEPTS, AND APPLICATIONS, FOURTH EDITION
(Test Bank all Chapters) Chapter 1 Multiple Choice 1. Which of the following is the goal of the U.S. health care system? a. Access b. Cost c. Quality d. All of the above Answer: d 2. ACA is the abbreviation for what legislation? a. Accountable Care Organizations b. Patient Protection and Affordable Care Act c. Activity Based Costing d. Administrative Cost Accounting Answer: b 3. Which of the following is not a provision that is expected to have a significant impact from the ACA? a. Requirement that all payments for health care be based on quality of services b. Requirement that almost all individuals have insurance coverage c. Establishment of payment mechanisms for bundled payments and value based purchasing system d. Requirement that states create insurance exchanges Answer: a 4. The number of uninsured U.S. citizens rose between 2001 and 2010 from: a. 5 million to 15 million b. 20 million to 32 million c. 36 million to 50 million d. 55 million to 65 million Answer: c 5. ACA provides a _______________ benefits package: a. $0 b. Minimum
c. Maximum d. $5,000 Answer: b 6. Accountable Care Organizations as part of ACA are: a. Mandatory b. Exclusive c. Voluntary d. State organizations Answer: c 7. Patient –Centered Medical Home is: a. An expensive delivery system b. An indication of poor quality c. A partnership between primary care providers, patients and families d. Not encouraged Answer: c 8. All of the following factors contribute to the rising cost of health care except: a. Aging population b. New and returning consumers in the marketplace c. Chronic Disease d. Providers embracing lean Six Sigma and other techniques to deliver better care with less resources Answer: d 9. All of the following factors could contribute to a decrease in health care costs except: a. Pharmaceuticals going off patent b. Providers using health information technology in robust ways c. Medical technology continuing to develop new systems d. Hospitals overriding physician preference in supplies Answer: c 10. The HITECH Act (2009) was enacted with the goal of: a. Creating and expanding the current health care IT infrastructure b. Promoting electronic data exchange c. Substantially and rapidly increasing EHR adoption d. All of the above Answer: d
True or False 1. Retail Health Care is not viable in today’s health care environment. True or False? Answer: False 2. Litigation under ACA was sufficiently addressed. True or False? Answer: False 3. Providers spend a significant amount of time and expense addressing compliance. True or False? Answer: True 4. Recovery Audit Contractors (RAC) auditors are independent contractors hired by CMS. True or False? Answer: True 5. Value Based Payment has been a part of Medicare since its inception. True or False? Answer: False 6. Value Based Purchasing is designed to address only quality of care incentives. True or False? Answer: False 7. ICD-10 as a coding system has been used in the United States for many years. True or False? Answer: False 8. ACOs are voluntary groups of health care providers who coordinate care to a patient population. True or False? Answer: True 9. U.S. Health System goals remain unchanged. True or False? Answer: True 10. Methods of health care financing remain unchanged. True or False? Answer: False
Chapter 2 Multiple Choice 1. Which of the following is a basic financial statement? a. Balance Sheet
b. Statement of Operations c. Statement of Cash Flows d. All of the above Answer: d 2. Balance Sheet for a non-profit contains all of the following except: a. Organization’s assets b. Organizations liabilities c. Stockholders’ equity d. Cash flow Answer: c 3. Assets are defined as: a. Long term debt b. Cash, investments, inventory and receivables c. Self-insurance reserves d. Accrued pension Answer: b 4. Liabilities are defined as: a. Financial obligations due within a year b. Cash and cash equivalents c. Patient accounts receivable d. Inventories Answer: a 5. Net assets do not include one of the following categories: a. Unrestricted b. Belated c. Temporary d. Permanent Answer: b 6. A statement of operations summarizes the organization’s total assets, liabilities and net assets in what time period? a. Last day of the accounting period b. Over a period of time c. Last quarter d. Annually
Answer: b 7. Other revenue refers to all of the following except: a. Salary and wages b. Appropriations and grants c. Income from investments d. Revenue from contributions Answer: a 8. The statement of changes in net assets includes: a. Account balances b. Accounting Methods c. Why there was a change from one year to the next in the entire net asset section of the balance sheet d. Expense determinations Answer: c 9. Body of the statement of cash flows does not include: a. Cash flows from operating activities b. Cash flows from investing activities c. Cash flows from financing activities d. Current liabilities Answer: d 10. Cash flows from investing activities includes: a. Purchase of plant property and equipment b. Accounts payable c. Accrued pension d. Estimated third party payor settlements Answer: a True or False 1. GAAP requires certain disclosure (footnote) information to give a more clear picture of the financial position. True or False? Answer: False 2. Balance sheet for investor owned entities presents a summary of the entity’s assets, liabilities and net assets. True or False? Answer: False
3. Assets include accrued pension. True or False? Answer: False 4. Liabilities are financial obligations due within a year. True or False? Answer: True 5. Net assets section of a balance sheet for not for profits is analogous to the owner and equity on a for profit balance sheet. True or False? Answer: True 6. Notes to financial statements are called proclamations. True or False? Answer: False 7. Statement of cash flows discloses key noncash investing and financial transactions. True or False? Answer: True 8. Basic Accounting Equation is: assets =liabilities + net assets. True or False? Answer: True 9. Liquidity refers to long term depth. True or False? Answer: False 10. Assets are defined as guaranteed future economic benefits of an organization. True or False? Answer: False
Chapter 3 Multiple Choice 1. Transactions summarized by account are called: a. Journal b. Ledger c. Balance d. Asset Answer: b 2. Which of the following is a standard accounting method used in health care? a. Accrual
b. Cash c. Expense d. Asset Answer: a 3. Rules for recording transactions do not include: a. Increase in revenues, gains or other support account when earnings are received. b. After each transaction, the fundamental account equation must be in balance. c. An accounting method when cash was received or expended. d. Increase an expense account when an asset is used. Answer: c 4. To develop financial statements, transactions a. Must be on a cash basis b. Are recorded according to staff availability c. Focus only on assets d. Have been analyzed and recorded Answer: d 5. Statement of Operations includes: a. Operating Expenses b. Increase in unrestricted net assets c. a & b d. None of the above Answer: c 6. A statement of cash flows includes: a. Cash flows from operating activities b. Cash flows from investing activities c. Cash flows from financing activities d. All of the above Answer: d 7. The “book” refers to transactions a. Only done by computer entry b. Journal recorded chronologically c. Current balance in each account d. Current ratio Answer: b
8. In the accrual accounting method: a. Revenues are recognized when cash is received b. Expenses are recognized when cash is paid out c. Revenues are recognized when revenues are earned d. All of the above Answer: c 9. Functions of an internal audit department include: a. Resources used to generate revenues b. Ensuring that hospitals comply with their financial record keeping c. Reporting and recording of revenues and expenses d. b & c Answer: d 10. Recording transactions assists in: a. Accuracy of financial acts b. Summarizing accounts c. Ease of tracking financial transactions d. All of the above Answer: d True or False 1. Transactions are recorded chronologically in a journal. True or False? Answer: True 2. In health care the cash accounting method is used. True or False? Answer: False 3. Recording of transactions is to occur each quarter. True or False? Answer: False 4. Under accrual accounting, revenues are recognized when cash is received. True or False? Answer: False 5. When cash is paid out, expense is recognized where no resources were used. True or False? Answer: False 6. A statement of cash flows provides information about how much revenue e is generated and amount of resources used. True or False? Answer: True
7. The statement of operations answers the question of how to record transactions. True or False? Answer: False 8. Electronic health record has financial reporting value. True or False? Answer: True 9. Contra-asset is an asset that when increased, decreases the value of a related asset on the books. True or False? Answer: True 10. A balance sheet highlights assets, liabilities and resources used. True or False? Answer: False
Chapter 4 Multiple Choice 1. Analyzing financial statements helps a health care organization to: a. Determine if profitable b. Determine the effectiveness in collecting receivables c. a & b d. None of the above Answer: c 2. Approaches to analyze financial statements do not include: a. Ratio analysis b. Collateral analysis c. Vertical analysis d. Horizontal analysis Answer: b 3. Trend analysis compares changes over: a. 3 month period b. 6 month period c. 1 year period d. Each year with the base year Answer: d
4. Vertical analysis answers which general question? a. What percentage of one line item is another line item? b. Which analysis is best to use in financial decision making? c. What is the percentage change in a line item from one year to the next? d. Which financial statement is best to use in financial decision making? Answer: a 5. Categories of ratios include: a. Liquidity ratios b. Profitability ratios c. Capital Structure ratios d. All of the above Answer: d 6. Vertical analysis is also called: a. Trend analysis b. Financial leverage analysis c. Common-size analysis d. Activity cost analysis Answer: c 7. Which of the following is not a point to consider when using and interpreting ratios? a. No one ratio is necessarily better than any other ratio b. With benchmarking, it is not necessary to make sure the same formula is used c. A ratio can best be interpreted relative to a benchmark d. Ensuring reliability of data Answer: b 8. Liquidity ratios measure: a. A facility’s ability to meet short term obligations, collect receivables and maintain cash position b. Operating revenues per adjusted discharge c. Operating expense per adjusted discharge d. Salary and benefit expense Answer: a 9. Operating margin ratio measures: a. How dependent the organization is on patient related income b. Profits earned from the organization’s main line of business c. How much profit is earned for each dollar invested in assets
d. Total operating expenses incurred from providing patient care services Answer: b 10. Age of Plant ratio provides: a. An indication of the average age of a hospital’s plant and equipment b. An evaluation of the most productive assets c. For every dollar invested in assets d. Overall efficiency of the organizations assets Answer: a
True or False 1. Horizontal analysis looks at the percentage change in a line item from one quarter to another. True or False? Answer: False 2. Vertical analysis looks at the percentage change in a line item from one year to the next. True or False? Answer: False 3. Trend analysis compares changes over a year period. True or False? Answer: False 4. Ratio analysis is the expression of the relationship between two numbers as a single number. True or False? Answer: True 5. Activity ratios answer the question of how profitable the organization is. True or False? Answer: False 6. Age of Plant ratio complements the fixed asset turnover ratio. True or False? Answer: True 7. Capital structure ratios address how an organization’s assets are financed and able to take on new debt. True or False? Answer: True 8. Net assets to total assets ratio reflects an organization’s ability to repay a loan. True or False? Answer: False
9. Fixed asset turnover ratio aids in the evaluation of the most productive assets, plant and equipment. True or False? Answer: True 10. Higher debt increases financial risk by magnifying the returns on net asset or equity. True or False? Answer: True
Chapter 5 1. The working capital cycle includes: a. Obtaining cash b. Billing and collections c. Providing Services d. All of the above Answer: d 2. An asset mix strategy includes: a. How an organization chooses to finance its working capital needs b. The amount of working capital an organization keeps on hand relative to its working capital obligations c. Risk of greater return to lower liquidity d. Coin and currency Answer: b 3. Sources of Temporary Cash include: a. Line of Credit b. Commitment fees c. A & b d. None of the above
Answer: c 4. Finance mix strategy includes a. Cash management b. Investing excess funds in non-liquid assets c. An aggressive asset mix strategy d. Maximizing returns by investing in non-liquid assets Answer: a 5. Which of the following is not a major reason to hold cash: a. Hedge against inflation b. For daily operation purposes c. Precautionary purposes d. Speculative purposes Answer: a 6. Trade payable are referred to as: a. Compensating balances b. Commitment fees c. Accounts payable d. Accounts receivable Answer: c 7. Revenue Cycle Maintenance can be hindered by: a. Patients giving correct demographic information b. Lack of clarity about who is responsible for the bill c. Current health care insurance information d. An accurate/clean final bill
Answer: b 8. Part of the revenue cycle is: a. Registration b. Charge of Capture c. Payment d. All of the above Answer: d 9. Collecting Cash payments includes: a. Electronic billing b. Lockboxes c. Wire Transfer d. b & c Answer: d 10. Methods to monitor accounts receivable: a. Net accounts receivable b. Treasury bills c. Aging Schedule d. a & c Answer: d
True or False 1. The working capital cycle has four phases. True or False? Answer: True 2. Asset mix is the amount of working capital an organization keeps on hand to meet its working capital obligations. True or False? Answer: True
3. Financing mix state what an organization can invest. True or False? Answer: False 4. A major reason for a health care organization to hold cash is for daily operations purposes. True or False? Answer: True 5. A line of credit is considered a long term commitment. True or False? Answer: False 6. Revenue cycle management is driver by the billing process. True or False? Answer: True 7. Scheduling is not a part of the revenue cycle. True or False? Answer: False 8. Incorrect coding of a patient bill hinders collecting that bill. True or False? Answer: True 9. Lockboxes are one form of collecting cash payments. True or False? Answer: True 10. Certificates of deposit are issued by commercial banks as non-negotiable, interest-bearing, short term certificates. True or False? Answer: False
Chapter 6 1. Present value (PV) refers to: a. Worth in future of an amount invested today b. Worth today of future payment c. Worth in the future of a series of payments over time d. None of the above
Answer: b 2. Compound interest method refers to: a. Interest is calculated only on the original principle b. Interest is calculated on a dollar received today c. Interest is calculated on both the original principle and on all interest accumulated since the beginning of interest period. d. All of the Above Answer: c 3. Future Value Table is used : a. As an alternative to calculating the future vale using the formula b. An alternative to calculating the present value c. An alternative to calculating the time value of money d. B&C Answer: a 4. Discounting is: a. Converting present value into its future value b. Value today of a payment to be received c. Calculating the future value using a formula d. Converting future cash flows in the their present value Answer: d 5. Present value of an annuity refers to: a. What series of equal payment in the future is worth today taking into account time value of money b. A factor that when multiplied by a stream of equal payments equals present value c. What an equal series of payments will be worth at some future date using compound interest d. None of the Above
Answer: a 6. Compound growth rate is calculated: a. By loan amortization b. Through any given interest level and time period c. Using an ordinary annuity table d. Using numerical data using revenues, expenses and earnings Answer: d 7. Future value is determined using: a. Worth of a dollar today b. Calculations only on the original principle c. A compound interest method d. Using a simple interest method Answer: C 8. The time value of money refers to: a. Factors that show future value b. Factors that show past value c. Concept that a dollar received today is worth more than a dollar received in the future d. Concept that a dollar received today is worth less than a dollar received in the future Answer: d 9. Annuity due refers to: a. A series of equal annuity payments made or received at the beginning of each period b. A series of equal payments in the future is worth today c. Factors that show the value today of equal flows at the end of each future period d. An equal series of payments worth at some future date Answer: a
10. An effective interest rate is: a. The stated annual interest rate of a loan which does not account for compounding b. The actual interest rate earned or charged which is affected by the number of compounding periods. c. The frequency of compounding for any given interest level and time period d. None of the above Answer: b
True or False 1. Interest determines how much an amount of money invested today will be worth in the future. True or False? Answer: True 2. Opportunity cost are revenues gained by forgoing other opportunities. True or False? Answer: False 3. Future value implies using the compound interest method. True or False? Answer: True 4. To find future value discount..... True or False? Answer: False 5. An annuity is a series of equal payments. True or False? Answer: True 6. Perpetual annuities refers to an organization making an investment to generate an annuity for an infinite period. True or False? Answer: True 7. Amount of Perpetuity = Initial Investment x Interest Rate. True or False? Answer: True 8. An effective interest rate is the stated annual interest rate of a loan. True or False? Answer: False
9. In a simple interest method the principle is the amount invested. True or False? Answer: True 10. Tables and spreadsheets are used to calculate future value. True or False? Answer: True
Chapter 7 1. The component(s) of a capital investment decision are: a. Determining if the investment is worth while b. Costs of investing c. Determining how to finance the investment d. Both a & c Answer: d 2. Capital appreciation is: a. The portion of the profits the company keeps b. When an investment is worth more when it is sold than when it was purchased c. An increase in liabilities d. None of the above Answer: b 3. The strength(s) of the NPV analysis are: a. Answers in dollars, not years b. Accounts for all cash flows in the project c. Discounts at the cost of capital d. All of the above Answer: d 4. The three methods of evaluating large-dollar multiyear investment decisions from Chapter 7 are: a. Payback, net present value and internal rate of reduction b. Payoff, net present value and internal rate of return c. Payback, net present value and internal rate of return d. Payback, net present variables and internal return rate
Answer: c 5. If the IRR is equal to the required rate of return the project should be: a. Accepted b. Rejected c. Handled indifferently d. Reinvented Answer: c 6. Straight-line depreciation is a method that depreciates an asset a(n)__________________ amount each______________________ until it reaches its salvage value. a. Varied, quarter b. Equal, day c. Varied, year d. Equal, year Answer: d 7. Sunk costs are: a. Recoverable b. Not recoverable c. Indicators of future gains d. Management’s poor decisions Answer: b 8. Spreadsheets are ideal for which method? a. NPV b. Payback c. IRR d. None of the above Answer: a 9. The payback method measures how long it will take to recover____________ investment. a. Total b. Past c. Initial d. Non-financial Answer: c
10. The exact cost of capital is___________________ to determine. a. Difficult b. Easy c. Impossible d. Time consuming Answer: a True or False 1. A capital investment is expected to achieve long-term benefits for the organization that generally fall into three categories: financial benefits, nonfinancial returns and the ability to attract more funds in the future. True or False? Answer: False 2. Dividends are payments to creditors. True or False? Answer: False 3. The payback method is in years, not dollars. True or False? Answer: True 4. The payback method does account for the time value of money. True or False? Answer: False 5. IRR analysis assumes reinvestment of proceeds at the internal rate of return. True or False? Answer: True 6. NPV is calculated using ten steps. True or False? Answer: False 7. Goodwill is tangible assets that will be affected by an entities future earnings. True or False? Answer: False 8. Salvage value is the amount of cash to be received when an asset is sold, usually at the end of its useful life. True or False? Answer: True 9. Discounted cash flows are adjusted to account for the cost of capital. True or False? Answer: True 10. If the IRR is less than the required return rate, the project should be accepted. True or False? Answer: False
Chapter 8 Multiple Choice 1. A fund in which monies are set aside each year to ensure that a bond can be liquidated at maturity is a? a. Sinking fund b. Swimming fund c. Bond fund d. Term fund Answer: a 2. Hedging is the art of off-setting high variable rate____________ payments with returns from variable rate______________. a. Investments, debts b. Bonds, investments c. Debt, investments d. Stock, debts Answer: c 3. An asset with clear value that is pledged against a loan to reduce risk to the lender is: a. Colloidal b. Bonds c. Collateral d. Trustee Answer: c 4. A debenture is: a. A secured bond b. An unsecured bond c. Subject to harsh regulations d. Non existent Answer: b 5. A secondary market deals with buying and selling bonds that have already been_______________. a. Called b. Forfeit c. Issued d. Exempted Answer: c
6. Tax-exempt bonds can be used by: a. Any organization b. Tax-exempt organizations c. Tax paying organizations d. No organization Answer: b 7. According to Fitch and S&P’s bond ratings, which rating is highest? a. AAAA b. Aa c. AAA d. BBB Answer: c 8. The highest bond rating a health care provider can usually achieve is: a. AA or Aa b. BBB or Baa c. Aaa or AAA d. Ba or BB Answer: a 9. In a capital lease the lessor aims to lease the asset for_____________ of its economic life. a. None b. Virtually all c. Virtually half d. An insignificant amount Answer: b 10. An organization should borrow____________ -term funds for_____________ -term needs. a. Long, short b. Short, long c. Short, short d. None of the above Answer: c True or False 1. Bonds can only be issued with a fixed rate. True or False? Answer: False 2. There are two types of leases: operating and capital. True or False? Answer: True
3. The primary sources of equity financing for for-profit organizations includes philanthropy and government grants. True or False? Answer: False 4. An operating lease is used for service equipment leased for periods longer than the equipment’s economic life. True or False? Answer: False 5. Fixed rate bonds have no disadvantages. True or False? Answer: False 6. Any increase in assets must be balanced by a similar increase in debt or equity, or both. True or False? Answer: True 7. A letter of credit increases the number of bonds an organization can issue at a given time. True or False? Answer: False 8. Debt capacity is the amount of debt an organization can be reasonably expected to take on and pay off in a timely manner. True or False? Answer: True 9. Callable bonds are issued with no coupon. True or False? Answer: False 10. Bank term loans are usually paid in equal amounts over the life of the loan. True or False? Answer: True
Chapter 9 Multiple Choice 1. Total Revenues can be calculated using the formula: Total Revenues = Price x ___________. a. Quality b. Quantified c. Quantity d. Quagmire Answer: c
2. Major error(s) that must be avoided when using fixed cost information to make decisions are: a. Using fixed costs per unit derived at all levels to forecast costs b. Assuming that cost per unit does not change when volume changes c. Both a & b d. None of the above Answer: b 3. Relevant range is the range of activity over which total fixed costs or per unit variable cost __________. a. Vary b. Do not vary c. Always vary d. Can vary Answer: b 4. Break-even point is where total revenues equal total _____________. a. Expected cash flows b. Total costs c. Industry averages d. CEO’s salary Answer: b 5. Total contribution margin is total revenues - ________________. a. Total fixed costs b. Total units c. Fixed variable costs d. Total variable costs Answer: d 6. Common costs benefit__________________. a. Everyone in an organization b. No one c. A select few d. None of the above Answer: a 7. Product margin = total contribution margin - __________________. a. Voided fixed costs b. Avoidable fixed costs c. Fixed costs d. Total variable costs
Answer: b 8. Per unit contribution margin= per unit revenues - ______________. a. Variable cost b. Total fixed cost c. Per unit variable cost d. Per unit fixed cost Answer: c 9. Controlling costs or decreasing profit margins to meet or beat a predetermined price or reimbursement rate is ___________________. a. Transfer cost pricing b. Variable costing c. Targeted pricing d. Target costing Answer: d 10. Additional costs incurred solely as a result of an action or activity or a particular set of actions or activities are ___________________. a. Incurred costs b. Incremental costs c. Infallible costs d. Incredible costs Answer: b True or False 1. Incremental costs are always unforeseen. True or False? Answer: False 2. The basic break-even equation is: price x volume= variable cost per unit + (fixed cost x volume). True or False? Answer: False 3. Product margin is calculated by this equation: total contribution margin – avoidable fixed costs. True or False? Answer: True 4. A break-even chart shows the break-even point. True or False? Answer: True 5. Variable costs vary per unit over the relevant range. True or False? Answer: False
6. After comparing the product margins between the make-or-buy alternatives the alternative with the higher product margin should be chosen. True or False? Answer: True 7. If an existing service has a negative product margin, it should not be dropped. True or False? Answer: False 8. In healthcare target costing usually involves the provider as the price setter and the government as the price taker. True or False? Answer: False 9. Total contribution margin = total revenue - total variable cost. True or False? Answer: True 10. In a make-or-buy decision buying is always the better alternative. True or False? Answer: False
Chapter 10 Multiple Choice 1. Which of these is a tangible factor? a. History b. Reputation c. Staff d. None of the above Answer: c 2. Which of these is an intangible factor? a. History b. Reputation c. Strength of its board of directors d. All of the above Answer: d 3. Short-term plans primarily include: a. Production b. Financing c. Control d. All of the above
Answer: d 4. The authoritarian approach is often called _________________. a. Top-down spending b. Monopolistic practices c. Top-down budgeting d. Bottom-up strategizing Answer: c 5. The incremental-decremental approach starts with a(n) ______________ budget. a. New b. Outdated c. Industry standard d. Existing Answer: d 6. A program budget is an extension of the ____________________. a. Line-item budget b. Line-category budget c. Line-ending budget d. Zero-based budget Answer: a 7. A performance budget adds ______________ to a program budget. a. Subcategories b. Performance measures c. Overhead d. Cost of capital Answer: b 8. Static budgets use a ______________ level of activity. a. Low b. Flexible c. Static d. High Answer: c 9. An operating budget is comprised of a _______________ and a _______________. a. Statistics budget; expense budget b. Revenue budget; expense budget c. Cost report; Expense report d. Revenue budget; statistics budget
Answer: b 10. A capital budget summarizes the major ______________ for the year. a. Costs b. Income c. Variances d. Purchases Answer: d True or False 1. Budgets can never be modified. True or False? Answer: False 2. Cash budgets display all of the organization’s projected cash inflows and outflows. True or False? Answer: True 3. Budgets do not need to be monitored for variances. True or False? Answer: False 4. Budgeting is rarely needed for established organizations. True or False? Answer: False 5. A program budget is the least detailed budget. True or False? Answer: False 6. Capital budgets are always larger for outpatient facilities. True or False? Answer: False 7. After the cost of labor, the next largest cost is the cost of supplies. True or False? Answer: True 8. Pro forma financial statements can’t be subjected to the same analysis as other financial documents. True or False? Answer: False 9. Flexible budgets accommodate for multiple levels of activities. True or False? Answer: True 10. The statistics budget is the first budget to be prepared. True or False? Answer: True
Chapter 11 Multiple Choice 1. Decentralization is: a. A major type of responsibility centered within an organization b. The degree of dispersion of responsibilities c. The compounding for any given interest d. Proceeds lost by forgoing other opportunities Answer: b 2. Advantages of decentralization include: a. Loss of control b. Decreased goal congruence c. Greater speed d. Lack of managerial talent Answer: c 3. Disadvantages of decentralization include: a. Increased need for condition and formal communication b. More efficient use of time c. More relevant information d. Higher quality decisions Answer: a 4. Types of responsibility centers include all but one of the following: a. Service centers b. Profit centers c. Cost centers d. Managerial talent centers Answer: d 5. Measures of performance responsibility centers include: a. Responsibility b. Authority c. Accountability d. All of the above Answer: d 6. Budget variances are: a. A result of positive revenues b. The difference between what was budgeted and what actually occurred
c. A budget that accommodates a range of activities d. A tangible asset pledged to repay a loan Answer: b 7. Common variances used by health care organizations include a. Revenue variance b. Traditional profit center c. Expense variance d. a & c Answer: d 8. Budget variances associated with short term strategies include a. Revenue enhancement b. Cost containment c. Revenue attainment d. b & c Answer: d 9. Common complications when using measures to judge financial performance include: a. Loss of control b. Greater speed c. Promotion of short term thinking d. Efficient use of time Answer: c 10. Major employee compensation model which of the following advantages: a. Income predictability b. At risk distribution c. Income contingent on uncontrollable forces d. No financial incentives Answer: a True or False 1. The degree of decentralization has to balance the advantages and disadvantages within a healthcare organization. True or False? Answer: True 2. Loss of control is a disadvantage of decentralization. True or False? Answer: True
3. Transfer center is a type of responsibility center. True or False? Answer: False 4. A basic attribute of a responsibility center is authority. True or False? Answer: True 5. The result of a favorable variance is less income received than budgeted. True or False? Answer: False 6. Budget variance measures that are long term promote revenue enhancement. True or False? Answer: True 7. Cost centers are responsible for providing services and controlling their costs. True or False? Answer: True 8. Budget variances should not occur with approved budgets. True or False? Answer: False 9. Cost containment means eliminating certain classes of cost. True or False? Answer: False 10. At risk compensation system is based totally on achieving performance goals. True or False? Answer: True
Chapter 12 Multiple Choice 1. Cost to charge ratio (CCR) is on the most common methods used by : a. Physicians b. Hospitals c. Dentists d. a & c Answer: d 2. Costs to which payments is not directly attached include: a. Administration b. Patient care services c. Pharmacy Services d. Food Services Answer: a
3. Which of the following is not a step for allocating indirect costs to service: a. Determine an allocation base and compile costs to service basic statistics b. Convert basic statistics while disregarding square feet and number of employees. c. Convert basic statistics for the step down approach d. Calculate allocation percentages Answer: b 4. Activity based costing cost finding method: a. Allocates costs b. Uses static measures to determine costs c. Estimates costs of a service by measuring costs of activities it takes to produce a service. d. Determines cost of an object including both direct and indirect costs Answer: c 5. Activity based costing is: a. Top down approach b. Bottom up approach c. Horizontal approach d. Vertical approach Answer: b 6. The key terms used in costing include: a. Direct Cost b. Indirect Cost c. Cost Drive d. All of the above Answer: d 7. In a step down cost finding method, the following areas are allocated: a. Utilities b. Laboratory c. Pediatric Services d. a & b Answer: d 8. In the step down allocation method: a. Order in which services are allocated makes a difference in the final costs b. Allocation basis used to allocate costs makes a difference c. Number of centers to which costs are allocated makes a difference d. All of the above Answer: d
9. Activity Based Costing is: a. A newer method b. An old established method c. Not used in healthcare d. None of the above Answer: a 10. Which of the following is not a method to estimate costs: a. Step down method b. Activity ratio c. Cost to charge ratio d. Activity based costing Answer: b True or False 1. The step down method is a cost finding method. True or False? Answer: True 2. Direct costs include payments not attached to a service. True or False? Answer: False 3. An allocation base is a dynamic method of determining costs related to providing care. True or False? Answer: False 4. Activity based costing is a step down method. True or False? Answer: False 5. Traditional cost allocation is a top down approach. True or False? Answer: True 6. A cost driver is that which causes a change in the cost of an activity. True or False? Answer: True 7. Cost to charge ratio is based on assumed relationship of costs to charges. True or False? Answer: True 8. Fully allocated cost includes both direct and all other costs allocated. True or False? Answer: True
9. Cost to charge ratio is a common method used by dentists. True or False? Answer: True 10. Laboratory costs are allocated on the basis of lab test costs. True or False? Answer: True
Chapter 13 Multiple Choice 1. In the healthcare payment system are various stakeholders. These include: a. Contractors b. Patients c. Vendors d. a & c Answer: b 2. The objectives of the U.S. healthcare payment system include: a. Access b. Cost c. Quality d. All of the above Answer: d 3. Medicare’s value based payment demonstrations have had what effect on expenditures? a. Great success b. Fair success c. Little or no effect d. None of the above Answer: c 4. Blue Cross Blue Shield got its start in: a. 1929 b. 1949 c. 1959 d. 1965 Answer: a 5. The Medicare program was enacted as part of the Social Security Act in: a. 1955 b. 1960 c. 1965 d. 1967
Answer: c 6. Health Maintenance Organization (HMO) is: a. A perspective payment method b. A legally Incorporated organization that offers health insurance c. An organization that rations care d. A rating method used by indemnity insurers Answer: b 7. Value Based Purchasing is: a. A monthly payment by a person to an insurer b. A method of reimbursement based on payment for services rendered c. A method to control costs through monitoring and prescribing d. A payment methodology designed to provide incentives to providers for delivering quality care at lower costs Answer: d 8. Never events are: a. Adverse patient outcomes due to provider negligence that are not typically not reimbursed b. Methods of rewarding quality of care c. Quality populations based on payment d. Payment strategies for reducing health care spending Answer: a 9. Accountable care organizations performance is measured by: a. Patient experience b. Care coordination c. Preventative health care d. All of the above Answer: d 10. Hospital reimbursement by Medicare includes: a. Case rates b. Ambulatory payment classifications c. Cash Rates d. a & b Answer: d True or False 1. A payor may be a regulator. True or False? Answer: True
2. Evidence based medicine refers to the best evidence currently available. True or False? Answer: True 3. Shared savings is a payment strategy used to give the patient a percentage share of savings on their care. True or False? Answer: False 4. Medicare is not part of the Social Security Act. True or False? Answer: False 5. Copayments and deductibles have been a part of insured patients responsibility from the beginning of employer insurance offerings. True or False? Answer: False 6. Medicare has only two parts, A & B. True or False? Answer: False 7. Per diem rates refer to a rate that covers everything a hospital provides during an entire inpatient stay. True or False? Answer: False 8. Steerage is influencing of patients to use a particular set of providers. True or False? Answer: True 9. Capitation is a form of payment that compensates the provider a certain amount per capita for a defined set of services. True or False? Answer: True 10. Experience rating is a method of setting group premium rates that are based on projected healthcare costs of a group. True or False? Answer: False