Questions and Answers of Financial Management Theory

Briefly, what are the origins and purpose of Medicare?
What is meant by the term managed care?
What are the different types of managed care plans?
What is a health insurance exchange (HIE)?
What is a high-deductible health plan (HDHP)?
Briefly explain the following payment methods:a. Cost basedb. Charge based and discounted chargesc. Per procedured. Per diagnosise. Per diemf. Bundledg. Capitation
What provider incentives are created under fee-for-service reimbursement? Under capitation?
Briefly describe the method used by Medicare to reimburse providers for inpatient services.
Explain the method used by Medicare to reimburse providers for physician services.
Briefly describe the impact of healthcare reform on payments to providers.
Briefly describe the major third-party payers.
a. What are the primary characteristics of managed care plans?b. Describe different types of managed care plans.
What is the difference between fee-for-service reimbursement and capitation?
Describe the provider incentives under each of the following reimbursement methods:a. Cost basedb. Charge based (including discounted charges)c. Per procedured. Per diagnosise. Per diemf. Bundled
What medical coding systems are used to support fee-for-service payment methodologies?
Briefly describe how Medicare pays for the following:a. Inpatient servicesb. Physician services
What are some features of healthcare reform that affect healthcare insurance and reimbursement?
What are the five components of a full set of financial statements?
Why are the notes and supplementary information sections important parts of the financial statements?
What are the five account types used in financial accounting?
What are the historical foundations of financial accounting statements?
Who are the primary users of financial accounting information?
Why are widely accepted principles important for the measurement and recording of economic events?
What entities are involved in regulating the development and presentation of financial statements?
What does GAAP stand for, and what is its primary purpose?
What is the purpose of the auditor’s opinion?
What is the purpose of the Sarbanes-Oxley Act (SOX), and what are some of its provisions?
Why is it important to understand the basic concepts that underlie the preparation of financial statements?
What is the goal of financial reporting?
Briefly explain the following concepts as they apply to the preparation of financial statements:a. Relevanceb. Faithful representationc. Accounting entityd. Going concerne. Accounting periodf.
Briefly explain the differences between cash and accrual accounting and give an example of each.
Why does GAAP favor accrual over cash accounting?
What is the primary purpose of the income statement?
In regard to time, how do the income statement and balance sheet differ?
What are the major components of the income statement?
What categories of revenue are reported on the income statement?
Briefly, what is the difference between gross patient service revenue and net patient service revenue?
Describe how the following adjustments to revenue are reported on the income statement:a. Contractual discounts and allowancesb. Charity carec. Implicit price concessions (formerly bad debt losses)
Is income from securities investments included in the operating revenue section? If not, why not?
What is an expense?
Briefly, what are some of the commonly reported expense categories?
What is the logic behind depreciation expense?
What is operating income?
Why is operating income such an important measure of profitability?
What is nonoperating income?
Why is nonoperating income reported separately from revenues? Is this always the case?
Why is net income called the “bottom line”?
What is the difference between net income and operating income?
What happens to net income?
What is the difference between net income and cash flow?
How can income statement data be used to estimate cash flow?
What is depreciation cash flow, and what is its expected use?
Why do not-for-profit businesses need to make a profit?
Are there appreciable differences in the income statements of notfor-profit businesses and investor-owned businesses?
What are the impacts of taxes and depreciation on net income and cash flow?
What is the depreciation shield?
What is the purpose of the statement of changes in equity (net assets)?
How does the statement differ between not-for-profit and forprofit entities?
Explain how ratio analysis can be used to help interpret income statement data.
What is the total profit margin, and what does it measure?
a. What is a stakeholder?b. Which stakeholders are most interested in the financial condition of a healthcare provider?c. What is the goal of financial accounting?
a. What are generally accepted accounting principles (GAAP)?b. What is the purpose of GAAP?c. What organizations are involved in establishing GAAP?
Briefly describe the following concepts as they apply to the preparation of financial statements:a. Relevanceb. Faithful representationc. Accounting entityd. Going concerne. Accounting periodf.
Explain the difference between cash accounting and accrual accounting. Be sure to include a discussion of the revenue recognition and matching principles.
Briefly describe the format of the income statement.
a. What is the difference between gross revenues and net revenues? b. What is the difference between patient service revenue and other revenue?
a. What is meant by the term expense?b. What is depreciation expense, and what is its purpose?c. What are some other categories of expenses?
a. What is the difference between operating income and net income?b. Why is net income called the “bottom line”?c. What is the difference between net income and cash flow?d. Is financial
a. What is the purpose of the statement of changes in equity?b. What is its basic format?
Entries for the Warren Clinic’s 2020 income statement are listed below in alphabetical order. Reorder the data in the proper format. Depreciation expense General/administrative expenses Interest
Consider the following income statement:a. How does this income statement differ from the one presented in exhibit 3.1?Exhibit 3.1b. What is BestCare’s total profit margin? How can it
Consider this income statement:a. How does this income statement differ from the ones presented in exhibit 3.1 and problem 3.2?b. Why does Green Valley show an income tax expense, while the other two
Great Forks Hospital reported net income for 2020 of $2.4 million on total revenues of $30 million. Depreciation expense totaled $1 million.a. What were total expenses for 2020?b. What were total
Brandywine Homecare, a not-for-profit business, had revenues of$12 million in 2020. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million. All
Assume that Mainline Homecare, a for-profit corporation, had exactly the same situation as reported in problem
However, Mainline must pay taxes at a rate of 30 percent of pretax(operating) income. Assuming that the same revenues and expenses reported for financial accounting purposes would be reported for tax
Consider Southeast Home Care, a for-profit business. In 2020, its net income was $1,500,000 and it distributed $500,000 to owners in the form of dividends. Its beginning-of-year equity balance
Bright Horizons Skilled Nursing Facility, an investor-owned company, constructed a new building to replace its outdated facility.The new building was completed on January 1, 2020, and Bright Horizons
What are the three major sections of the balance sheet?
What is the accounting identity, and what information does it provide?
What is the relationship between assets and financing (capital)?
What are the three major categories of asset accounts?
What is the primary difference between current assets and the remainder of the asset section of the balance sheet?
Give some examples of current asset accounts.
What is the difference between gross property and equipment and net property and equipment?
How does accumulated depreciation relate to the income statement?
What are liabilities?
What are some of the accounts that would be classified as current liabilities?
Briefly describe accruals and provide an example.
What is the difference between notes payable and long-term debt?
What is the difference between long-term debt and current portion of long-term debt?
What are net assets (equity)?
What are the differences in the equity sections of not-for-profit and investor-owned providers?
What is the relationship between the retained earnings account(net assets without donor restrictions) on the balance sheet and earnings (net income or excess of revenues over expenses) reported on
What type of health services organization is most likely to use fund accounting?
Explain the differences between funds with and without donor restrictions.
Is there a significant difference in the economic content of balance sheets created using fund accounting and those prepared under conventional accounting guidelines?
Briefly explain the three major categories shown on the cash flow statement.
In your view, what is the most important piece of information reported on the cash flow statement?
a. What is the difference between the income statement and balance sheet in regard to timing?b. What is wrong with the following statement? “The clinic’s cash balance for 2020 was $150,000, while

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