Quiz 1 Study Guide
Quiz 1 Study Guide CLM 355
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This 6 page Study Guide was uploaded by Sharon Liang on Saturday January 23, 2016. The Study Guide belongs to CLM 355 at University of Kentucky taught by Dr. John Williams in Spring 2016. Since its upload, it has received 84 views. For similar materials see Healthcare Finance in Clinical Laboratory Sciences at University of Kentucky.
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Date Created: 01/23/16
CLM 355 Quiz 1 Study Guide Chapter 1 1) Why is it necessary to have a book dedicated to healthcare finance? While all industries have certain individual characteristics, the healthcare industry is unique 2) What’s the purpose of this book? This book is designed to introduce healthcare finance 3) Briefly describe the organization of this book. One part could cover multiple chapters 4) What features in the book are designed to make learning easier? Learning objectives, boldface terms, key questions, industry practice, chapter supplement, etc. 5) From a financial perspective, briefly define a business? Business can be thought of as an entity that obtains financing (capital) from the marketplace; uses those funds to buy land, buildings, and equipment; operates those assets to create goods and services; and sells those goods and services to create revenue 6) What’s the difference between a business and pure charity and between a business and governmental agency? A business sustains itself financially by selling goods and services. Instead of selling goods and services, pure charities instead obtain funds by soliciting contributions then uses those funds to provide charitable (free) services. Generally speaking, governmental agencies don’t receive revenues by selling services nor soliciting contributions. Instead, the revenues are derived from taxing populations that benefit from governmental services. 7) What’s the role of finance in today’s health services organizations? The primary role of finance in all businesses is to plan for, acquire, and use resources to maximize efficiency and value of the enterprise. 8) How has the role changed over time? Today, health services organizations must negotiate, sign, and monitor contracts with managed care organizations and third party payers. 9) What are the 4 Cs? Cost, capital, control, cash 10)Briefly describe the typical structure of the finance department within a health services organization. The head of the finance department is the CFO (chief finance officer) or vice president of finance who reports directly to the CEO. The CFO has 2 senior directors who help manage finance activities. The comptroller/controller is responsible for accounting and reporting activities such as routine budgeting, preparation of financial statements, payables management, and patient accounts manager. On the other hand, the treasurer is responsible for the acquisition and management of the capital (funds). In larger organizations, the patient accounts manager reports to the comptroller while the cash manager reports to the treasurer. In smaller organizations, the finance department is held by one person (business practice manager). 11)Name a few settings in which health services are provided. Hospitals, ambulatory care facilities, nursing homes, longterm care facilities, or even home. 12)What are some important issues facing healthcare managers today? Issues that healthcare managers are facing include balancing clinical and financial issues, which means improving financial performance without negatively impacting clinical performance. 13)What are 3 primary forms of business organization and how do they differ? The 3 forms of business are partnership, proprietorship, and corporation. A proprietorship is when a business is owned by an individual. A partnership is when 2 or more people associate to conduct a business that’s not incorporated. A corporation is a legal entity separating owners and managers. 14)What’s the purpose of hybrid forms? They’re designed to limit owners’ liability without needing to fully incorporate. 15) What are major differences between investorowned and notforprofit corporations? For an investorowned corporation, the owners of investorowned corporations are well defined and exercise control of the business by voting of the directors. Second of all, the residual earnings belong to the owners so management is responsible only to the stockholders for the profitability of the firm. Lastly, investorowned corporations are subject to various forms of tax at the local, state, and federal levels. Since notforprofit firms lack shareholders, no individuals have ownership rights to the firm’s residual earnings or exercises control of the firm. Instead, control is exercised by a board of trustees that’s not constrained by outside oversight, as is the board of directors of a forprofit organization, which must answer to stockholders. Additionally, notforprofit corporations are exempt from all taxation. Lastly, individual contributions to not forprofit corporations can be deducted from taxable income by the donor, so not forprofit firms have access to taxsubsidized contribution capital. 16) What pressures recently have been placed on notforprofit hospitals to ensure that they meet their charitable mission? Notforprofits face the pressure of being organized and continue running so that it operates exclusively for the public, rather than private, interest. 17)What are the purpose and content of IRS Form 990? The purpose is to provide both the IRS and the public with financial information about notforprofit organizations. It’s also used by government agencies to prevent organizations from abusing their taxexempt status. Form 990 requires significant disclosures related to governance and board of directors. 18) What’s the purpose of healthcare reform? The purpose is to all US citizens and legal residents with access to affordable health insurance, to reduce healthcare costs, and to improve care and quality. 19) Will reform have a greater impact on insurers or providers? Insurers. 20) What is an accountable care organization (ACO) and what is it designed to accomplish? An ACO is a network of physicians, other clinicians, and hospitals and clinics that share responsibilities for providing coordinated care to patients. It’s designed to improve quality in care while reducing costs. 21)What is the medical home model and its purpose? A medical home is a team based model of care led by a personal physician who provides continuous and coordinated care throughout a patient’s lifetime with the goal of maximizing health outcomes. 22) What are different types of hospitals and what trends are occurring in the hospital industry? Hospitals differ in function, average length of patient stay, and ownership. General acute care hospitals provide general medical and surgical services and selected acute specialty services are short stay facilities. Specialty hospitals such as women’s, psychiatric, etc limit admissions based off of illnesses, conditions, genders, and ages. Governmental hospitals, which make up 25% of total hospitals are broken down into federal and public entities. Public hospitals are funded wholly or in part by city, state, county, or district tax. Lastly, private notforprofit hospitals are nongovernmental entities organized for the sole purpose of providing inpatient healthcare services. 23) What trends are occurring in outpatient and long term care? In 1980s and 1990s, there was a substantial growth in outpatient care such as nontraditional ambulatory care settings such as home health care, ambulatory surgery centers, urgent care centers, diagnostic imaging centers, rehab/sports medicine centers, and clinical labs. These new settings offer patients increased amenities and convenience compared to hospital based services plus they were a lot cheaper. Long term care has experienced tremendous growth during the past 50 years. It accounted for 1% of healthcare expenditures in 1960s and is expected to go up to 20% in 2030s. 24)What is an integrated delivery system? Many healthcare experts extolled benefits of providing hospital care, ambulatory care, longterm care, and business support services through this single entity. 25) Do you think an integrated delivery system will be more or less prevalent in the future? I would say more prevalent because there’ll always be patients who need a variety of healthcare professionals and this systems makes it easier for them to access the type of professionals they need. Chapter 2 1) Briefly explain the following characteristics of insurance: a. pooling of losses Since pooling is defined as losses spread over a large group of individuals so that each individual realizes the average loss of the pool rather than the actual loss incurred, pooling implies the sharing of losses by the entire group and prediction of future losses with some accuracy. b. payment only for random losses A random loss is unforeseen and unexpected and occurs as a result of chance. Insurance is based on the premise that payments are only made for losses at random. c. risk transfer Risk transfer is the transfer of a risk from an insured to an insurer. Insurance plans almost always involve risk transfers with the exception of selfinsurance, which is the assumption of a risk by a business or individual itself rather than by the insurance company. d. indemnification Indemnification is defined as an reimbursement to the insured from losses. When it comes to health insurance, indemnification occurs when the insurer or provider pays the insured fully or partially for expenses related to injury or illness 2) What is adverse selection and how do insurers deal with it? Adverse selection occurs when individuals and businesses are more likely to have claims are more inclined to buy insurance than those that are less likely to have claims. Therefore if the tendency of adverse selection unchecks, those that are sick or likely to be sick will seek health insurance causing insurers to experience more claims than expected, which also triggers a premium increase because healthier members seek insurance from other firms at a lower cost or forgo insurance altogether. 3) What is the moral hazard problem and how do insurers mitigate it? Moral hazards are when owners set failing businesses on fire to collect insurance. Insurers set up coinsurance and copayment plans to mitigate the problem. 4) What are some different types of private insurers? Blue Cross/Blue Shield, self insurers, and commercial insurers 5) Briefly, what are origins and purposes of Medicare? Medicare was established by Congress in 1965 primarily for ages 65+ 6) What is Medicaid and how is it administered? Medicaid is a program funded by the states and the federal government in order to provide a safety net for low income mothers and children; elderly; blind; and disabled individuals who receive benefits from Supplemental Security Income (SSI). 7) What is meant by the term managed care? Managed care describes a continuum of plans which can vary significantly in their approaches in providing combined insurance and healthcare services. 8) What are some different types of managed care plans? Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), and managed feefor service 9) Briefly describe the impact of the ACA on health insurance. The ACA introduced numerous provisions to expand insurance coverage and improve insurance affordability along with easier access. 10) What is a Health Insurance Exchange (HIE)? It’s an online marketplace primarily created by the states or federal government that insurers use to post plan details and consumers use to buy health insurance. 11) Briefly explain these following payment methods: a. cost based The payer agrees to reimburse the provider for costs that incurred in providing services to the insured population. However the reimbursement is limited to allowable costs which are costs related directly to the provision of healthcare services b. charge based and discounted charges Payers who have reimbursed providers on the basis of billed charges later pay discounted charges generally ranging from 2050% sometimes more c. per procedure A separate payment is made for each procedure performed on a patient and is more commonly used in outpatient than inpatient settings d. per diagnosis Provider is paid a rate that depends on patient’s diagnosis. Diagnoses with higher resource utilization tend to be more costly and have higher reimbursement rates e. per day/per diem Provider is paid a fixed amount each day a service is being provided and this method is only applicable in inpatient settings f. bundled Payers make a single prospective payment covering all services delivered in one episode whether the services are rendered by single or multiple providers g. capitation Provider is paid a fixed amount per covered life per period (usually a month) regardless of the amount of services provided 12) What is the major difference between feeforservice reimbursement and capitation? For feeforservice, providers are reimbursed while for capitation, providers are paid. 13) What are provider incentives created under feeforservice reimbursement and capitation? Under feeforservice, the key to provider success is to work harder, increase utilization, and increase profits. Under capitation, the key to profitability is to work smarter, decrease utilization, and reduce cost 14) Briefly describe the coding systems used in hospitals (ICD codes) and medical practices (CPT codes). ICD codes are used to designate diseases as well as signs, symptoms, and external causes of injury while CPT codes are used to specify medical treatments. 15) What is the link between coding and reimbursement? Correct coding ensures correct reimbursement. 16) Briefly describe the method used by Medicare to reimburse for inpatient settings. It starts with 2 national base payment rates (operating and capital expenses), which then adjusts to account for two factors that affect the cost of providing care, which are patient’s condition and treatment; and market conditions in the facility’s geographic location 17) Explain the method used by Medicare to reimburse physician services. Medicare pays for physician services using a resource based relative value scale (RBRVS). In the RBRVS system, payments for services are determined by resource costs needed to provide them measured by weights called Relative Value Units (RVUs). RVUs consist of 3 components including a work RVU consisting the skill level and training required along with the intensity and time required for the service; a practice expense RVU including equipment and supplies cost; and a malpractice expense RVU accounting for the relative risk and cost of potential malpractice claims. The RVU per service is multiplied by a dollar conversion factor to determine payment amount. 18) Briefly describe the impact of the ACA on payments to providers. ACA requires Medicare to factor quality into payments for physicians and most other clinicians.
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