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Chapter 1-4 Exam Study Guide

by: Tony Phillips

Chapter 1-4 Exam Study Guide HCMN 415

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This study guide covers important terms and calculations found in chapter 1-4 in the Finance healthcare management course. Including Key concepts from each chapter, Tax calculations, Cost allocatio...
Financing & Organization of Health Care Services in the US
Dr. Cassandra R. Henson
Study Guide
Healthcare, finance, Management
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This 6 page Study Guide was uploaded by Tony Phillips on Wednesday February 24, 2016. The Study Guide belongs to HCMN 415 at a university taught by Dr. Cassandra R. Henson in Spring 2016. Since its upload, it has received 88 views.

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Date Created: 02/24/16
STUDY GUIDE CH: 1-4 Healthcare management 415 Henson Chapter 1: 5 Basic Uses for Healthcare Finance  Evaluate the financial condition of the organization  Evaluate the stewardship of the organization o Stewardship- Responsible use of resources  Evaluate the efficiency of the organization o Are you preforming task at the lowest cost?  Asses the effectiveness of the organization, geared towards performance and how well it is being accomplished  Compliance- Reporting of information if anyone is not doing what they are told Healthcare Finance- The Accounting and financial management principles and practices used within healthcare organization to ensure the financial well being of the enterprise. Finance Management- The primary role as a finance manager is to acquire and use resources to maximize the efficiency and value of the enterprise Public Value- Having good positive relations with communities. Performance Measure- A standard that is used to measure ones ability and work output in the work environment. Ensuring that everyone is doing his or her job properly and to the highest quality. For Profit- Primary goal of an organization like this is to maximize financial return to shareholders. Not For Profit- Primary goal of an organization like this is to maximize the quality of patient and consumer outcome. Government Owned- Medicare and Medicaid are examples of government owned organizations. Medicare is focused on helping older individuals that require more health insurance, usually over the age of 65. Medicaid is a joint federal-state program focused on low-income families and individuals. Financial Need- Understanding how much an employee should be making financially Opportunity- Making the change in finances to enable the direct effort fro someone to have all the same opportunities as someone else (Internal Control) Rationalize- Ensuring that everyone can get what he or she need in a timely manor Major Drivers in Healthcare cost (Internally)  Staff  Pharmaceuticals  Insurance Companies STUDY GUIDE CH: 1-4 Healthcare management 415 Henson EHR: To help maintain and regulate healthcare costs, hospitals use Electronic Health Records (EHR’s) to help reduce the number of duplicate test being preformed on patients so that patients spend less unnecessary time and money in service. 3 Primary Goals of Healthcare  Asses  Quality  Cost Donald Cressey’s Fraud Triangle: factors that cause someone to commit occupational fraud. It consists of three components, which, together, lead to fraudulent behavior Perceived Rationalization Opportunity Perceived unshareable financial need Internal Controls (5):  To communicate tat you’re establishing internal controls  What to asses and how to manage it (What to measure)  To establish protocol (How to measure it)  Identify data points to capture  Monitor the control overtime *Patients drive everything that is established and measured* 4 C’s of Finance  Costs- Must be continuously monitored  Cash- Must have a certain volume of liquidity  Capitol- Equipment, building, vehicles etc.  Control- Being able to run the organization and feed the finances Regulators:  Joint Commission  C.M.S- Center for Medicare and Medicaid Services  EMTALA- The act requiring any and all health providers to provide emergency medical treatment regardless of ability to pay STUDY GUIDE CH: 1-4 Healthcare management 415 Henson  H.I.P.P.A- Health Insurance Portability and Accountability Act of 1996  C.O.N- Certificate of Need- Required by facilities wanting to expand and grow services and facilities  H.S.C.R.C- Health Services Cost Review Commission Chapter 2: Tax Calculations  (AT = BT x (1- Tax Rate))  AT- After Taxes  BT- Before Taxes  T- Tax Rate Business in an Entity is something that  Raises Money  Invests Money  Produces a product and/or service  Attempts to sell this product/service Four Legal Types of Business:  Proprietorship  Partnership  Corporation  Hybrid Advantages to proprietor/Partnership  Few Regulations  No corporate Tax  Ease of Formation Disadvantages  Difficult to raise capitol  Difficult to transfer owners creating limited life on the business  Unlimited Liabilities Advantages for a Corporation  Unlimited Life  Business is owned by an entity of board members making it easier to transfer owner  Easy to raise capitol STUDY GUIDE CH: 1-4 Healthcare management 415 Henson Disadvantages for a Corporation  Cost of formation and reporting  Double or even triple taxation on investors Advantages to Hybrid (Limited Partnership) LP  Hybrid is not primarily used in Healthcare  General Partners have control of company  Limited Liability Investor Owned Corporations  Investors become owners by buying stock  Primary market transaction system is the Initial Public Offerings (IPO’s) Payment Types  Fee for service- Rewards providers for delivering the expected service, the better the quality of service is the better the pay will be  Capitation- Provider pays fixed amount based on the number of members/patients assigned to provider o Physician with a capitation payment system would get paid $15 per patient per month working with 100 members EBIT- Earnings Before Interest and Taxes Chapter 3: Payment Methods for Patients  I.C.D- International Classification of Diseases, codes are used for designing diseases plus a wide variety of signs, symptoms and external cases of injury  C.P.T- Current Procedural Terminology, codes are used to specify medical procedures (treatments)  H.C.P.C.S- Healthcare Common Procedure Coding System Risk Transfer- Transferring the risk of care to the company, originally from the individual Random loss- Having lost an asset from a natural disaster Indemnification- Reimbursement for expenses Adverse Selection- Those that have higher health risk are more likely to purchase insurance HMO- Health Maintenance Organization STUDY GUIDE CH: 1-4 Healthcare management 415 Henson Cost Vary  Fixed Cost- Do not fluctuate with volume, Examples like equipment or utilities  Variable Cost- Fluctuating value with volume, examples include nurses supplies like bandages and staff hours, variable cost change if you have more staff member working more overtime then usual in a given week.  Total Cost = Fixed Cost + Variable Cost Financial Accounting- Basic analysis of the organizations financial status, reports the numbers, background checks and basic information Managerial Accounting- Applying action and more accurate numbers to what the financial accountant gathered. Chapter 4: Cost Allocation-  Create a cost pool, then a Cost Driver  Cost Pool- One or more  Cost Driver- 3 Methods to Cost Allocation  Direct Method- Direct overhead correlation (One to One)  Reciprocal Method- An allocation from indirect to direct, involving multiple departments going either up the chain or down the chain of command  Step-Down Methods- Involving multiple departments but only moving one direct down the chain of command Total Cost Equation  Total Cost = Fixed Cost + Variable Cost 5 Steps to Activity Based Allocation  Step 1- Identify the relevant activities  Step 2- Determine cost of each activity annually  Step 3- Determine unit of measure (Volume)  Step 4- Collect activity data from matrix  Step 5- Calculate the total cost by aggregating it to each activity Pool Allocation- A memory allocation scheme that is very fast, but limited in its usage. STUDY GUIDE CH: 1-4 Healthcare management 415 Henson Pooling- Is a strategy used to spread out investments to manage and minimize risk; expenses are spread out over a group of individuals within the business Example of Cost Allocation Activity Annual Cost Driver (unit of measure) Volume Allocation Check-In $25,000 # of procedures 2,000 AC/V= 12.5% Exam $300,000 # of exams 150,000 AC/V= 50% Report $75,000 # of reports 75,000 AC/V= 100% Total $400,000


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