Questions and Answers of Financial Management For Public Health

Definitions. Define the terms listed in the key terms list.
Increased costs. What are several factors that have led to increased health care costs?
Cost control. What are several of the efforts that have been attempted by payors to control costs?
Malpractice reform. What specific impacts will the provisions of the ACA have on malpractice reform?
Information technology. What is the trend of information technology usage in health care, and what effects are likely from that trend?
Mergers and acquisitions. What advantages do health care organizations seek to obtain by merging with each other or by acquiring or being acquired by another health care organization?
Process techniques. What are two or more techniques that health care organizations can implement to increase operational efficiency?
Overall costs. Which two factors may have the strongest tendency to increase health care costs? Which two may particularly decrease those costs? Why?
The “gap.” Describe the “gap” that health care organizations are facing. What unique problems does it present? And what benefits?
Definitions. Define the terms in the key terms list.
Financial statement terminology.a. What are each of the major financial statements commonly called in for-profit health care entities? In not-for-profit health care entities?b. Describe the three
Balance equation. What is the primary accounting equation that describes the balance sheet of a not-for-profit, business-oriented health care entity?
Balance sheet. The following questions relate to the balance sheet:a. What is the name of this statement in not-for-profit health care entities?b. What are its main sections in investor-owned health
Statement of operations. The following questions relate to the statement of operations of not-for-profit health care entities:a. What are the major reductions of revenue taken to get from gross to
Statement of changes in net assets. The following questions relate to the statement of changes in net assets:a. What is the purpose of this statement?b. What are the main sections of this
Statement of cash flows. The following questions relate to the statement of cash flows of a not-for-profit health care entity:a. What are the statement’s main sections?b. What is the purpose of
Financial statement element. Where in the financial statements does important explanatory information appear?
Financial statement element. In which financial statement would an entity identify its purchase of long-term investments?
Accounting methods. How does the accrual basis of accounting differ from the cash basis of accounting?
Balance sheet. The following are account balances as of September 30, 20X1, for Ray Hospital. Prepare a balance sheet at September 30, 20X1. (Hint: net assets will also need to be calculated.) Givens
Balance sheet. The following are account balances as of September 30, 20X1, for Stone Hospital. Prepare a balance sheet at September 30, 20X1. (Hint: net assets will also need to be calculated.)
Statement of operations. The following are annual account balances as of September 30, 20X1, for Snead Hospital. Prepare the portion of the statement of operations ending with operating income for
Statement of operations. The following are annual account balances as of September 30, 20X1, for Moore Hospital. Prepare a statement of operations for the 12-month period ending September 30, 20X1.
Multiple statements. The following are account balances as of September 30, 20X1, for Exton Outpatient Center. Prepare (a) a balance sheet, (b) a statement of operations, and(c) a statement of
Multiple statements. The following are account balances (in thousands) on September 30, 20X1, for Marview Medical Center. Prepare (a) a balance sheet, (b) a statement of operations, and (c) a
Statement of cash flows. The following are account balances (in thousands) at December 31, 20X1, for Sunview Hospital. Prepare a statement of cash flows for the year ended December 31, 20X1. (Hint:
Statement of cash flows. The following are account balances (in thousands) at December 31, 20X1, for Hilltop Hospital. Prepare a statement of cash flows for the year ended December 31, 20X1. (Hint:
Multiple statements. The following are account balances (in thousands) for Lima Health Plan. Prepare (a) a balance sheet and (b) an income statement for the year ended December 31, 20X0. Givens (in
Multiple statements. The following are account balances (in thousands) at September 30, 20X1, for Media Health Plan. Prepare (a) a balance sheet and (b) an income statement. Givens (in '000s) Income
Multiple statements. The following are account balances (in thousands) at September 30, 20X1, for Louis Medical Center. Prepare (a) a balance sheet, (b) a statement of operations, and (c) a statement
Multiple statements. The following are account balances (in thousands) at September 30, 20X1, for Sharpe Medical Center. Prepare (a) a balance sheet, (b) a statement of operations, and (c) a
Multiple statements. The following are account balances (in thousands) at September 30, 20X1, for Putman Outpatient Center. Prepare (a) a balance sheet, (b) a statement of operations, and (c) a
Multiple statements. The following are account balances (in thousands) at September 30, 20X1, for Chester Hospital. Prepare (a) a balance sheet, (b) a statement of operations, and (c) a statement of
Multiple statements. The following are account balances (in thousands) at September 30, 20X1, for Upper Merion Hospital. Prepare (a) a balance sheet, (b) a statement of operations, and (c) a
Definitions. Define the key terms in the list above.
Accrual versus cash basis of accounting. Explain the difference between the accrual basis of accounting and the cash basis of accounting. What are the major reasons for using accrual accounting?
Accrual accounting. How are revenues and expenses defined under accrual accounting?
Journal versus ledger. What are the purposes of a journal and a ledger?
Adjustment of three accounts. Give two examples of transactions that involve the adjustment of three accounts, rather than the usual two accounts.
Contra-asset. Give an example of a contra-asset, and explain how it is recorded on the ledger as a transaction.
Prepaid expense. Explain what a prepaid expense is and how it is recorded on the ledger as a transaction.
Timing of transactions. How would transactions differ if supplies were (a) completely paid for and consumed in one period or (b) paid for in one period but not used until the next period?
Timing of transactions. Are transactions recorded on a fiscal-year basis or a calendaryear basis? Does it have to be one or the other; if so, why?
For-profit versus not-for-profit transactions. What are the major differences in recording transactions for a for-profit organization versus a not-for-profit one, or are there any?
Transactions plus multiple statements. List and record each transaction for the Claymont Outpatient Clinic, under the accrual basis of accounting, at December 31, 20X1.Then develop a balance sheet as
Transactions plus multiple statements. The following are the financial transactions for the Family Home Health Care Center, a not-for-profit, business-oriented organization.Beginning balances at
Statement of operations. The following is a list of account balances for Krakower Healthcare Services, Inc. on December 31, 20X1. Prepare a statement of operations as of December 31, 20X1. (Hint:
Statement of operations. The following is a list of account balances (in thousands) for the Kirkland County Hospital on September 30, 20X1. Prepare a statement of operations as of September 30, 20X1.
Statement of cash flows. The following is a list of account balances for Hover Hospital on June 30, 20X1. Prepare a statement of cash flows as of June 30, 20X1. Givens Transfer to parent corporation
Multiple statements. The following is a list of accounts (in thousands) for St. Paul’s Hospital on December 31, 20X1. Prepare a balance sheet and statement of operations as of December 31, 20X1.
Transactions plus multiple statements. St. Catherine’s Diagnostic Center had the following ending balances at December 31, 20X0, for its assets, liabilities, and net assets accounts.List and record
Transactions plus multiple statements. Ambulatory Center, Inc., had the following ending balances for its assets, liabilities, and net assets accounts as of December 31, 20X0.List and record each
Transactions plus multiple statements. Happy Valley Hospital, Inc., had the following ending balances (in thousands) for its assets, liabilities, and net assets as of December 31, 20X0.List and
Transactions plus multiple statements. Glenwood Hospital had the following ending balances (in thousands) for its assets, liabilities, and net assets accounts as of December 31, 20X0.List and record
Definitions. Define the key terms in the list above.
Horizontal and vertical analyses. Compare horizontal and vertical analyses, including trend analysis. How are they used?
Vertical analysis. Explain common-sized analysis.
Ratio analysis. What is the purpose of ratio analysis? What are the four benchmark categories of ratios?
Medians. Why is it that an industry median may not be an appropriate benchmark with which a particular organization wants to compare itself?
Ratio interpretation. How do the current, quick, and acid test ratios differ from the average payment period ratio? To what categories do these ratios belong?
Ratio interpretation. How do capital structure ratios and liquidity ratios differ in providing insight into an organization’s ability to pay debt obligations? Identify two situations where an
Ratio interpretation. What is the difference between the operating margin ratio and a return on total assets ratio? What is the difference between operating revenue per adjusted discharge ratio and
Ratio interpretation. What capital structure ratio measures the ability to pay debt service payments?
Ratio interpretation. How would you describe the plant and equipment status of a health care provider with an increasing age of plant ratio?
Profitability analysis. Compare the profitability ratios for Hightower Hospital with its industry benchmarks (Exhibit 4.17). Hightower has increased its patient volume, negotiated higher rates for
Ratio analysis. Compare the capital structure ratios for Avon Hospital against industry benchmarks (Exhibit 4.18). Note that during this time period, Avon has refinanced its fixed rate debt with
Ratio analysis. The statement of operations and balance sheet for Longwood Community Hospital for the years ended 20X0 and 20X1 are shown in Exhibits 4.19a and 4.19b.Compute the following ratios for
Ratio analysis. Exhibits 4.20a and 4.20b show the statement of operations and balance sheet for Louisville Community Hospital for the years ended 20X0 and 20X1. Compute the following ratios for both
Ratio analysis. Exhibit 4.21 lists the financial ratios for 189-bed Collingswood Community Hospital. Assess the revenue, expense, and profitability; liquidity; activity; and capital structure of
Ratio analysis. Radnor Healthcare System, an 800-bed institution, is located in a highly competitive, urban market area. Using the financial ratios from Exhibit 4.22 for the current and previous
Ratio analysis, unknown bed size. Compare Spring Hill Community Hospital’s liquidity;revenue, expense, and profitability; activity; and capital structure ratios with its national industry
Ratio analysis, unknown bed size. Exhibit 4.24 displays the financial ratios for St. Joe Hospital. Compare its liquidity; revenue, expense, and profitability; activity; and capital structure ratios
Ratio analysis. Swift Community Hospital, a 310-bed facility, is a sole provider hospital in a rural New England area serving a large market. Recently, a wealthy philanthropist made a major
Ratio analysis. Allen Community Hospital is a small, 95-bed hospital. The hospital just completed a major renovation of its facility, which has helped to attract new physicians and patients to the
Horizontal, vertical, and ratio analyses. Exhibits 4.27a and 4.27b show the statement of operations and balance sheet for the 310-bed Wakeland Community Hospital for 20X0 and 20X1. Adjusted
Horizontal, vertical, and ratio analyses. Exhibits 4.28a and 4.28b show the statement of operations and balance sheet for the 375-bed Island Regional Medical Center for 20X0 and 20X1.a. Perform a
Horizontal, vertical, and ratio analyses. Exhibits 4.29a and 4.29b show the statement of operations and balance sheet for Resort Hospital for 20X1 and 20X0. The debt principal payment each year for
Horizontal, vertical, and ratio analyses. Exhibits 4.30a and 4.30b show the balance sheet and income statement for the 660-bed Williams Academic Medical Center for the years 20X0 and 20X1. Assume
Definitions. Define the key terms listed previously.
Working capital. What is the function of working capital?
Working capital cycle. In terms of cash flow, what are the stages of the working capital cycle?
Working capital management strategy. Describe the two components of a working capital management strategy.
Asset mix strategies. Compare aggressive and conservative asset mix strategies. The comparison should address goals, liquidity, and risk.
Borrowing. What is the difference between temporary and permanent working capital needs? What is the general rule about when to borrow long term or short term?
Borrowing. In terms of risk and return (profit), compare the advantages and disadvantages of both short- and long-term borrowing to meet working capital needs.
Cash. State the three reasons why a health care facility holds cash.
Cash. What are the main sources of temporary cash?
Loans. What is an unsecured loan?
Loans. What are the two types of unsecured bank loans? Describe each one.
Compensating balance. How do compensating balances affect the “true” interest rate the borrower pays?
Discounts. What does “1.5/15 net 25” mean?
Discounts. What is the formula to determine the approximate annual interest cost for not taking a discount? When should discounts be taken?
Revenue cycle management. What are the objectives of billing, credit, and collections policies?
Revenue cycle management. Why is preregistration important in the revenue cycle management process?
Revenue cycle management. What is the major obstacle that health care providers face in receiving their payments electronically?
Revenue cycle management. Identify two problems that can delay the billing process.
Billing. In the hospital’s billing process, why is medical records a critical department?
Revenue cycle management. As more health care costs are shifted to the patient through high-deductible health plans, what policy can a health care provider implement to ensure timely payment for
Lockboxes. Describe the lockbox technique for managing collection float.
Revenue cycle management. What is the critical step in capturing charges and identifying billing items?

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