TCO 2) A statement that reports inflows and outflows of cash during the accounting period in the categories of operations, investing, and financing, is called a(an):
Income statement
Statement of retained earnings
Balance sheet
Statement of cash flows
Report of management
Question 2. Question :
(TCO 2) Two major methods of asset valuation are:
: historical cost and future cost
historical cost and acquisition cost
historical cost and replacement cost
acquisition cost and future cost
Question 3. Question :
(TCO 2) _____ is the most important financial metric to review to determine long-term financial viability.
Return on equity
Total margin
Days cash on hand
Hospital cost index
None of the above
Comments:
Question 4. Question :
(TCO 2) What should be a firm’s primary long-term financial objective?
Profit growth
Debt growth
Asset growth
Equity growth
Question 5. Question :
(TCO 2) Explain the difference between the accrual basis of accounting and the cash basis of accounting.?
Question 6. Question :
(TCO 2) What is an accounting entity?
Question 7. Question :
(TCO 2) The HC method, which uses unadjusted historical costs, does not take into account depreciation expenses, purchasing power, and unrealized gains in replacement value. Despite these weaknesses as a financial reporting method, the HC method is used more frequently for accounting purposes than other methods, such as the HC-GPL, CV, and CV-GPL methods. Why is this so?
Question 8. Question :
(TCO 2) Define and describe the purpose of fund accounting (now called net assets).
TCO 3) When considering how changes in volume affect total fixed costs, it is important to consider:
the relevant range
the variable cost per unit
price
both A and B
both B and C
Question 2. Question :
(TCO 3) To maximize the amount of profit realized from a rate increase, charges should be increased most in departments with:
High charge payer mix/high write-offs for bad debt, charity, & discounts
Low charge payer mix/low write-offs for bad debt, charity, & discounts
High charge payer mix/low write-offs for bad debt, charity, & discounts
Low charge payer mix/high write-offs for bad debt, charity, & discounts
Question 3. Question :
(TCO 3) Your controller has told you that the marginal profit of DRG 209 (major joint procedure) for a Medicare patient exceeds the marginal profit for an average charge patient. Why might this occur?
High fixed costs of treatment
Low Medicare payment
High prices
Low prices
Question 4. Question :
(TCO 3)
Your hospital has been approached by a major HMO to perform all their DRG 225 cases (foot surgeries). They have offered a flat payment of $8,000 per case. You have reviewed your charges for DRG 225 during the last year and found the following profile:
Average Charge: $11,300
Average LOS: 4.5 Days
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Cost/Charge Variable Cost %
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Routine Charge $3,200 0.75 65
Operating Room 1,850 0.7 80
Anesthesiology 210 0.7 75
Lab 575 0.65 40
Radiology 275 0.65 50
Medical Supplies 3,220 0.6 85
Pharmacy 955 0.55 85
Other Ancillary 1,015 0.75 55
Total Ancillary $8,100 0.7 75
In the above data set, assume that the hospital’s cost-to-charge ratio is 0.75 for routine services and 0.70 for Total Ancillary services. Using this information, what would the average cost of DRG 225 be? (Your answer might be slightly different due to rounding. Pick the closest.)
$7,613
$8,100
$7,613
$8,000
$8,070
Instructor Explanation: Chapter 15
Points Received: 0 of 5
Comments:
Question 5. Question :
(TCO 3) David Jones, the new administrator for a surgical clinic, was trying to determine how to allocate his indirect expenses. His staff was complaining that the current method of taking a percentage of revenues was unfair. He decided to try to allocate utilities based on square footage of each department, administration based on direct costs, and laboratory based on tests. Use the information in the chart below to answer the question.
Square Footage Direct Expenses Lab Tests
Utilities 200,000
Administration 2,000 500,000
Laboratory 2,000 625,000
Day-op Suite 3,000 1,400,000 4,000
Cystoscopy 1,500 350,000 500
Endoscopy 1,500 300,000 500
Total 10,000 3,375,000 5,000
Based on the scenario above, what are the Day Op Suite’s total expenses?
2342769
Instructor Explanation:
What are the Day Op Suite’s total expenses?
What are the Cystoscopy Department’s total expenses?
What are the Endoscopy Department’s total expenses?
Question 6. Question :
(TCO 3) Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470 during the last year and found the following profile:
Average Charge $15,000
Average LOS 5 Days
Routine Charge $3,600 Cost/Charge 0.80 Variable Cost % 60
Operating Room 2,657 0.80 80
Anesthesiology 293 0.80 80
Lab 1,035 0.70 30
Radiology 345 0.75 50
Medical Supplies 4,524 0.50 90
Pharmacy 1,230 0.50 90
Other Ancillary 1,316 0.80 60
Total Ancillary $11,400 0.75 50
The HMO in the above example has indicated that their doctors use less expensive joint implants. If this less expensive implant were used, your medical supply charges would be reduced by $2,000. What is the estimated reduction in variable cost?
If medical supply charges would be reduced by $2,000, estimated reduction in variable cost will be $900
Question 7. Question :
(TCO 3) How are costs classified?
Page 1
Question 1.1. (TCO 7) Employee covered health plans are most likely to be? (Points : 5)
High deductible health plans with a savings option.
HMOs.
PPOs.
Traditional indemnity plans
Question 2.2. (TCO 7) Capitation plans are more common for physician payment because: (Points : 5)
they can better control utilization.
physicians want more risk in their payment plans.
they are concerned about adverse selection.
physicians have larger reserves and can assume more risk.
Question 3.3. (TCO 7) The James Clinic is an organization of 100 physicians in a variety of specialties. They recently contracted with Prudential Health Plan on a capitated basis to provide all medical services to Prudential’s members for the next three years. This HMO model would be defined as a: (Points : 5)
Staff Model
Group Model
Individual Practice Association Model
Network Model
Question 4.4. (TCO 7) Suppose that AT&T had made an offer to acquire Merck Pharmaceuticals. Ignoring potential antitrust problems, this merger would be classified as a: (Points : 5)
Cross-border merger
Horizontal merger
Conglomerate merger
Vertical merger
Question 5. 5. (TCO 7) An HMO has a Point of Service (POS) option for its members, but will pay only 80 percent of approved charges. If a member goes out of network for a medical procedure with a charge of $2,000, of which $1,200 is approved, how much must the member pay? (Points : 10)
Question 6. 6. (TCO 7) A hospital incurs $10 million of cost to treat Medicaid patients and receives $7 million in payment. Actual charges for these Medicaid patients were $20 million. The net community benefit expense that would be reported in Schedule H of IRS Form 990 would be? (Points : 10)
Question 7. 7. (TCO 7) How is charity care usually defined? (Points : 10)
