Healthcare Finance Test 1 Practice

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• Form 990 is a report filed with state regulators that is used to rank hospitals on patient satisfaction.
• Which of the following statements about benefit corporations (B corporations) is most correct?
• Net patient revenue (NPR) is defined as NPR from gross charges by subtracting which categories?
• What is the purpose of scenario analysis in capital budgeting?
• White Memorial Hospital has a debt-to-equity ratio of 0.67. What is the hospital's debt ratio?
• Alternative payment models (APMs) differ from traditional fee-for-service in that they
• The Government Accounting Procedures (GAP) is the set of rules and regulations that govern the content and format of financial statements.
• Which statement best describes the relationship between accrual accounting and cash flow?
• Which statement about healthcare reform is incorrect?
• Which of the following statements about the balance sheet is correct?
• In not-for-profit organizations, return on equity is typically viewed as irrelevant.
• Payer mix variance analysis informs adjustments to which financial areas?
• Integrated delivery systems are able to provide higher-quality care at lower cost than stand-alone specialized provider organizations.
• Which of the following statements about debt management ratios is incorrect?
• Which statement best describes the relation of net income and cash flow?
• Which of the following is an example of non-operating income?
• Which of the following items are included in a business's set of financial statements?
• Which statement about regulatory and legal issues is most correct?
• In calculating NPR, what does 'contractual adjustments' refer to?
• Which statement about income statement expenses is most correct?
• Which statement about hospitals is most correct?
• The best approach to liquidity assessment.
• Which statement accurately reflects the balance sheet identity?
• A single ratio value is seldom meaningful; analysts rely on trend and benchmarking across periods and peers.
• Analysts interpret ratio results primarily through trend and comparison rather than a single value.
• Which statement about net income is most correct?
• Under accrual accounting, do revenues reported on the income statement always represent cash collections?
• The requirement to provide financial accounting information is driven by the need for outside stakeholders (primarily investors) to have reliable information about the financial status of an organization.
• Which statement accurately describes bundled payments and shared savings arrangements for providers?
• What is bad debt expense in healthcare accounting, and how does it differ from charity care?
• What does supply chain finance aim to improve?
• What is the difference between general net assets and restricted net assets in a tax-exempt hospital?
• Which of the following concerning operating income is most correct?
• A taxpayer in the 40 percent tax bracket makes a charitable contribution of 100,000 to a not-for-profit hospital. How much does the tax bill decrease as a result?
• Assume that Jane Adams pays income taxes at a 35 percent rate. What would be the after-tax amount on $100 of interest income she receives?
• Carter Health System's return on equity, given a profit margin of 5.4 percent, sales of $4 million, total assets of $2 million, and debt financing of $800,000, is most nearly what?
• Net patient revenue components when deriving NPR from gross charges: which items are included?
• What is the difference between capital budgeting and operating budgeting in a healthcare setting?
• Accounting rules and regulations provide an exact answer to every accounting question, leaving no opportunity for negotiation, compromise, or interpretation in the preparation and presentation of financial statements.
• The statement: The return on equity (ROE) is irrelevant for not-for-profit organizations.
• Which statement about accountable care organizations (ACOs) is most correct?
• What is activity-based costing (ABC) in healthcare?
• In ratio analysis, a single value has little meaning; analysts use trend and comparative analyses to interpret the numbers.
• Which is a typical method hospitals use to manage accounts receivable (AR) days?
• There are several types of managed care organizations (MCOs). Regardless of type, all MCOs have an incentive to reduce utilization.
• Which of the following individuals are not stakeholders in not-for-profit corporations?
• Fund accounting is used by investor-owned (for-profit) businesses to differentiate between operating funds and retirement funds.
• What does the cash conversion cycle measure?
• What is the purpose of a pro forma income statement?
• Describe the concept of contribution margin in a hospital's service line and why it matters for decision making.
• How does days in accounts receivable (A/R) relate to liquidity, and what strategies can improve it?
• Suppose two hospitals are identical in all ways except that one is newer and the other older. Which statement about comparative financial statement analysis is most correct?
• What is the difference between operating cash flow and net income, and why is it important in hospital budgeting?
• Which of the following is a measure of asset efficiency mentioned in the material?
• Which of the following statements about financial condition analysis is most correct?
• Cost allocation in a hospital assigns indirect costs to cost objects using drivers. Which of the following statements is correct?
• From a financial perspective, businesses and pure charities are identical.
• Which statements about balance sheet organization are correct?
• Which financial statement provides information about assets, liabilities, and equity at a point in time?
• Operating analysis uses benchmarking in the same way as financial statement analysis.
• Assume Mercy Hospital uses accrual accounting. Which statement is most correct?
• From a provider's perspective, which third-party payment method has utilization risk?
• Which statement best describes risk sharing in alternative payment models?
• Why is it important for tax-exempt hospitals to track donor-imposed restrictions on net assets?
• Which category accounts for the largest share of healthcare expenditures in the United States?
• What is the primary impact of accurate coding in hospital billing?
• Which statement about the cash flow statement is correct?
• The cash flow statement presents cash inflows and outflows from which activities?
• Profit margin is defined as which of the following?
• KPI stands for?
• Which statement best describes Medicare reimbursement for physicians?
• When an asset impairment occurs without any cash outlay, which financial statement is affected directly?
• Inaccurate coding can lead to which of the following outcomes?
• Given the balance sheet values, what is total liabilities?
• Because the organizational and financial goals of for-profit and not-for-profit provider organizations differ, their financial decision-making processes lead to different decisions.
• Which costing method is required by GAAP for external reporting?
• Which statement best describes the impact of declines in volumes and changes in price on net patient revenue?
• The set of rules and regulations that govern the content and format of financial statements is called Government Accounting Procedures (GAP).
• Which mechanism is designed to align reimbursement with quality and efficiency, often using targets for outcomes and costs?
• What is healthcare cost shifting?
• Which statement concerning net income versus cash flow is most correct?
• If the value of diagnostic equipment falls due to obsolescence, how is the balance sheet adjusted to preserve the accounting identity?
• What is the primary purpose of a cash budget in hospital finance?
• Which statement about fee-for-service reimbursement is incorrect?
• What is clinical integration?
• Which statement best describes the difference between accrual accounting and cash accounting in healthcare finance?
• Explain payer mix and two major implications for hospital financial performance.
• If an organization's non operating and operating activities are profitable in a given year, which statement is most correct?
• Which ratio is most informative for liquidity?
• What is depreciation, and how is it treated differently for tax purposes and financial reporting in healthcare organizations?
• Which statement about the income statements is most correct?
• Which statement correctly describes the accounting equation for the balance sheet?
• Payer mix affects hospital revenue and risk; which statement best describes this relationship?
• A medical home (patient-centered medical home) is a team-based model of care led by a personal physician who works collaboratively with the team's other healthcare professionals to provide continuous, coordinated, and integrated care throughout a patient's lifetime.
• Within healthcare finance, the comptroller and treasurer often supervise managers responsible for which functions?
• Which of the following is a common driver used in cost allocation?
• What is a primary benefit of activity-based costing in healthcare?
• The role of finance in healthcare organizations has increased in importance over time because the finance function must support activities such as
• Which statement best describes non-operating income?
• Explain the concept of encumbrances in budgeting and how they affect spending control.
• Financial statement analysis is typically used to evaluate past financial condition.
• Net patient revenue equals patient service revenue less provision for bad debts. Which statement is true?
• Which statement best describes the primary purpose of the income statement?
• What is a finance charge in patient billing?
• Which statement about cash versus actual accounting is most correct?
• It is always easy to determine whether a given ratio value is 'good' or 'bad'.
• Which of the following statements is true about not-for-profit corporations?
• What does limited liability in a corporation mean?
• Define a hurdle rate and its role in evaluating healthcare capital projects.
• Seasonality can distort financial ratios. Which of the following is true about this effect?
• Which statement is NOT typically a component of the balance sheet?
• Which statement about revenues is most correct?
• IPPS stands for Inpatient Prospective Payment System.
• Which statement about adverse selection and underwriting is incorrect?
• To be workable, insurance must have which characteristics?
• Carlisle Clinic, a not-for-profit organization, reported an equity balance of $1,000,000 on its December 2012 balance sheet. Assuming net income of $200,000 for the year and no other equity adjustments during 2012, what was Carlisle Clinic's equity balance as of December 31, 2011?
• In addressing high charity care with low reimbursements, a hospital may pursue which action?
• What is working capital, and which two actions illustrate its management in a hospital?
• A single ratio value cannot reliably indicate overall performance.
• Pay-for-performance plans typically
• According to surveys of members of the American College of Healthcare Executives and Healthcare Financial Management Association, which concerns were identified?
• A pro forma balance sheet is prepared to
• Which equation best describes the accounting identity?
• Assume that Reginald Worthington, who pays 40 percent in income taxes, plans to contribute 100,000 to not-for-profit Ravenswood Community Hospital. Without contribution, his tax bill would be 500,000. What would be his tax bill if he makes the contribution?
• Most providers' primary legal concern is
• What is payer contract leakage and why is it important to monitor?
• Explain the role of a balance sheet in healthcare finance and name its three major sections.
• The days-cash-on-hand ratio and current ratio both are rough measures of liquidity. The best way to assess liquidity is to construct a cash budget.
• Which statement concerning depreciation expense is most correct?
• What does the 'days cash on hand' metric measure in hospital finance?
• Regarding the finance departments of large healthcare organizations, which statement is correct?
• Which statement best describes the relationship between ROA and ROE when a firm has debt?
• In the United States, the highest proportion of healthcare expenditures is for
• Which of the following statements about not-for-profit corporations is most correct?
• Which statements about the Medicare IPPS (hospital inpatient payment system) are most correct?
• If the business uses $30,000 of its cash to pay salaries, which balance sheet change occurs?
• Which statement about coding is incorrect?
• Contribution margin ratio is defined as
• Which statement best describes interpreting ratio analysis results?
• The four Cs (character, capability, charisma, and courtesy) as described in the textbook summarize the attributes needed to be a good financial manager.
• The primary goal of not-for-profit corporations is expressed in a mission statement and often involves service to the community.
• Because financial statements are based on historical data, financial statement analysis is typically used only to evaluate an organization's past financial condition.
• Why are risk adjustments important in reimbursement planning?
• Grady Home Health has a profit margin of 15 percent on sales of $20 million. If the firm has debt of $7.5 million and total assets of $22.5 million, what is Grady's return on assets?
• The primary difference between financial statement analysis and operating analysis is that operating analysis does not use benchmarking.
• Cost allocation relies on drivers to assign indirect costs to cost objects. Which statement is true?
• Which statement describes how ACOs handle performance targets?
• Which statement about moral hazard is true?
• Describe the impact of Medicare's Hospital IPPS payment methodology on hospital cost management and pricing strategy.
• When evaluating a capital project using net present value, what discount rate should be used?
• Which of the following is not a finance activity?
• Like the balance sheet, the income statement reports the status of an organization over some period.
• What is the breakeven point in units for a hospital service line, and which costs are included in its calculation?
• How do capital leases differ from operating leases in healthcare financial reporting under current standards?
• Which item would appear as a liability on the balance sheet, given typical items?
• Which strategy helps optimize the cash conversion cycle?
• Which item is an example of equity in the given balance sheet?
• What is the primary function of capital markets in healthcare organizations?
• Which statement about the Chief Financial Officer's role is true?
• Under capitation, providers are paid a fixed amount per enrolled patient and thus assume utilization risk.
• Which statement about investor-owned (for-profit) corporations is incorrect?
• Which statement about healthcare reform is true regarding its impact on private insurers and major government programs?
• Charity care in healthcare finance refers to
• In evaluating a capital project, which statement best describes what the hurdle rate accounts for?
• Define liquidity ratios and name two commonly used in healthcare finance.
• In physician payment, which statement best describes the role of relative value units (RVUs)?
• Which of the following activities are characteristic of businesses?
• What is a DRG-based prospective payment system, and how does it affect hospital reimbursement?
• Which statement best defines return on assets (ROA)?
• Assume that John Richards pays income taxes at a 30 percent rate. He currently owns a not-for-profit (municipal) bond that pays 5 percent interest. What interest rate would have to be set on a for-profit (corporate) bond to produce the same amount of usable (after-tax) income?
• Which statement about investor-owned (for-profit) corporations is incorrect?
• Which statement about financial statement analysis is most correct?
• Which of the following would most likely appear as an asset on the balance sheet of a healthcare organization?
• Which statement about healthcare providers is incorrect?
• What is the purpose of a capital budget in a hospital, and what methods are commonly used to evaluate proposals?
• Which statement best defines the primary role of finance in an organization?
• What is the primary purpose of the net patient revenue line on a hospital income statement, and how does payer mix impact its calculation?
• Which statement best describes the CFO's role in mergers or affiliations in healthcare?
• Consider the balance sheet scenario where the business uses $10,000 of cash to pay for suppliers that were ordered on credit terms and have already been received and recorded on the balance sheet. Which statement reflects the resulting balance sheet change?
• In the Medicare IPPS system, what does DRG stand for and what is its role?
• Rate banding in hospital pricing is used to
• A pro forma balance sheet is particularly useful for evaluating financing needs under different scenario assumptions. Which option best describes this use?
• Which statement about equity is most correct?
• Medicare DSH payments are designed to
• Define operating margin and explain why it matters in healthcare finance compared to total profit margin.
• What is the purpose of a forecast model in healthcare finance, and what are common approaches (e.g., top-down vs bottom-up)?
• Which of the following statements is not a limitation of ratio analysis?
• If a business has total assets of 500,000 and total liabilities of 300,000, and 20,000 of net fixed assets are written off, what is the total equity after the write-off?
• How does rate setting differ between fee-for-service and value-based care models?
• Which statement reflects accrual accounting revenue recognition?
• What term describes the periodic allocation of the cost of tangible fixed assets over their useful lives?
• Which factor most directly reduces days in accounts receivable in a hospital setting?
• Payer mix variance analysis is used to
• Common-size financial statements are created by dividing all income statement items and balance sheet accounts by total assets.
• Charity care is reported as part of which financial concept?
• Which of the following would most likely appear as a liability on the balance sheet of a healthcare organization?
• What is a cost-to-charge ratio (CCR) and how is it used in pricing and reimbursement analysis?
• Which statement about the legal forms of for-profit business organization is most correct?
• Which statement about the limitations of financial condition analysis is most correct?
• Capital budgeting decisions in healthcare primarily concern
• Which statement best describes how a fee-for-service system incentivizes providers?
• Under accrual accounting, are all expenses reported on the income statement cash costs?
• Explain the difference between full absorption costing and variable costing in healthcare cost accounting and when each is appropriate.
• In accrual accounting, when is revenue recognized?
• Using the given balance sheet, what is the total equity?