Deck 17: Revenue Cycle and Financial Management

Question 1

Use the following to answer the following questions.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities. A commitment was made to an optical imaging system and service to be implemented at the first of the year. The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department. It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years), and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually. The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month. The accounting department uses straight line depreciation, that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
In the process of finalizing the operating budget, the health information manager was obligated to define the consequences if one or more of the department's programs had to be terminated (i.e., contracted transcription services, cancer registry, etc.). This implies the hospital is using which budget method?

A) Flexible budget method
B) Rolling budget method
C) Zero-based budget method
D) None of the above

Answer 1

Zero-based budget method

Question 2

Use the following to answer the following questions.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities. A commitment was made to an optical imaging system and service to be implemented at the first of the year. The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department. It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years), and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually. The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month. The accounting department uses straight line depreciation, that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
The monthly fee for leasing the van in the health information imaging service is considered a fixed cost.

A) Yes
B) No

Answer 2

Yes

Question 3

Which of the following is a performance measure?

A) Operating margin ratio
B) Capitalization ratio
C) Accounts receivable turnover ratio
D) Total asset ratio

Answer 3

Operating margin ratio

Question 4

If an organization wants to know how long the collection period is that it is extending to its debtors on average, it would likely calculate the long-term debt ratio.

Question 5

Use the following to answer the following questions.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities. A commitment was made to an optical imaging system and service to be implemented at the first of the year. The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department. It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years), and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually. The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month. The accounting department uses straight line depreciation, that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
The finance officer will calculate the _____ for the proposed imaging system to determine the cash flows for the project.

A) Ratio analysis
B) Operating margin ratio
C) Net operating revenue
D) Net present value

Question 6

Use the following to answer the following questions.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities. A commitment was made to an optical imaging system and service to be implemented at the first of the year. The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department. It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years), and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually. The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month. The accounting department uses straight line depreciation, that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
Because the proposed imaging system is competing with other departmental proposals for authorized funding, what capital evaluation measure, in particular, is expected to be analyzed before the hospital makes an objective decision?

A) Net present value
B) Payback method
C) Account rate of return
D) Both b and c

Question 7

The current ratio can be calculated by using current liabilities as the denominator.

Question 8

The process of allocating the costs of indirect departments to direct departments can be accomplished by which method?

A) Step-down method
B) Double-distribution method
C) Simultaneous-equations method
D) All of the above

Question 9

When calculating the net accounts receivable turnover ratio, the correct divisor is net accounts receivables.

Question 10

Use the following to answer the following questions.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities. A commitment was made to an optical imaging system and service to be implemented at the first of the year. The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department. It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years), and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually. The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month. The accounting department uses straight line depreciation, that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
Because the revenue from the approved imaging system will be significant, the Health Information Services Department will now be considered an indirect cost department.

A) Yes
B) No

Question 11

The days of revenue in patient accounts receivable ratio provides a measure of the average time receivables are outstanding.

Question 12

A discounting factor is required for determining which measure?

A) Payback period
B) Accounting rate of return
C) Net present value
D) Operating margin ratio

Question 13

_____ ratios measure the ability of an organization to meet its short- and long-term obligations.

A) Accounts receivable
B) Capitalization
C) Liquidity
D) Turnover

Question 14

Use the following to answer the following questions.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities. A commitment was made to an optical imaging system and service to be implemented at the first of the year. The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department. It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years), and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually. The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month. The accounting department uses straight line depreciation, that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
In addition, the Capital Expenditure Committee will examine the _______ to objectively determine whether the benefits to be received from the optical imaging system are the best alternative use of the organization's investment funds.

A) Charge Master
B) Opportunity cost
C) Ratio analysis
D) Both b and c

Question 15

Use the following to answer the following questions.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities. A commitment was made to an optical imaging system and service to be implemented at the first of the year. The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department. It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years), and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually. The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month. The accounting department uses straight line depreciation, that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
Before the Capital Evaluation Committee authorizes the acquisition of the proposed imaging system, it will also examine other capital evaluation measures. All the following are capital evaluation measures except:

A) Accounting rate of return.
B) Operating margin ratio.
C) Net present value.
D) Payback year.

Question 16

When a current ratio is 3.2, it indicates that the health care organization has only 3% of the cash it needs to cover its liabilities.

Question 17

Use the following to answer the following questions.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities. A commitment was made to an optical imaging system and service to be implemented at the first of the year. The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department. It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years), and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually. The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month. The accounting department uses straight line depreciation, that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
The _____ officer (of the four employed by the institution) will most likely be responsible for obtaining the financing for the new imaging system and service, if it is necessary, including developing the investment report showing this new service.

A) Chief financial
B) Managerial finance
C) Patient account
D) None of the above

Question 18

Use the following to answer the following questions.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities. A commitment was made to an optical imaging system and service to be implemented at the first of the year. The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department. It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years), and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually. The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month. The accounting department uses straight line depreciation, that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
The Health Information Services Department, with its added health information imaging service, will still be considered a nonpatient-revenue-generating department.

A) Yes
B) No

Question 19

Fiscal-clinical analysis can be facilitated by examining the master charge list (or detailed billing statement) for a patient.

Question 20

Use the following to answer the following questions.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities. A commitment was made to an optical imaging system and service to be implemented at the first of the year. The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department. It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years), and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually. The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month. The accounting department uses straight line depreciation, that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
In the process of calculating the net cash outflow, equipment depreciation was considered an outflow. Do you agree?

A) Yes
B) No

Question 21

One of the financial statements most useful to the Director of Health Information Management is the ____________________________________________________________.

Question 22

To analyze what has actually been expended compared with that which was budgeted can he determined from the ____________________ report.

Question 23

Balance sheet numbers are used in computing liquidity and capitalization ratios.

Question 24

In the process of preparing the various budgets, the proposed outlay for the optical imaging equipment would be included in the ____________________ budget.

Question 25

During the planning process, the health information manager had no internal historical data (except for the number of physicians on the staff) available to accurately predict the volume of outpatient clinic use it could anticipate for an optical imaging service. Because of this, a ____________________ budget would not be possible for the first year of service.

Question 26

____________________ is an example of variable costs.

Question 27

The current ratio is a measurement of performance for evaluating the effective use of resources to deliver a service.

Question 28

An organization's current liabilities can be located on its income statement.

Question 29

The predicted cost for two new full-time employees to operate the Health Information Imaging Service for physician offices would be included in the ____________________ budget.

Question 30

In preparation for implementing the system, the health information manager assigned a fee to the various services that will be provided by the Health Information Services Department, including that for the new health information imaging service for physician offices. These charges will be incorporated in the ______________________________ by the managerial accountant.

Question 31

____________________ is an example of fixed costs.

Question 32

The payback method ignores the time value of money.

Question 33

The health information manager would include the estimated upkeep costs, and supplies for the proposed imaging system in the ____________________ budget.

Question 34

To calculate the _________________________ for the committee's review, the net cash inflow and outflow was calculated for the proposed imaging system.

Question 35

Performance ratios use data from the statement of revenues and expenses.

Question 36

The amount of money received from a payer less the actual cost to provide the service represents the ____________________ gained by the transaction.

Question 37

The condition of the ____________________ budget will be examined to determine whether sufficient cash will be available to meet the upcoming expenses for implementing the new service and also the one-time expense associated with the acquisition of the equipment and software.

Question 38

The statement of revenues and expenses and the balance sheet provide the foundation for ____________________ analysis.

Question 39

The accounting rate of return takes into consideration the time value of money and when inflows are received.

Question 40

After the imaging proposal was approved, the health information manager was able to complete the operating budget for consolidation in the hospital's ____________________ budget.

Question 41

What is the major difference between a balance sheet and an income statement (or statement of revenues and expenses)?

Question 42

Why is the cash budget so important in managing a health care institution?

Question 43

What are "rolling budgets?"

Question 44

Can an organization be effective but not efficient? Discuss the circumstances in which this could be true.

Question 45

List the major phases in developing the revenue budget.

Question 46

Name the four general types of budgets.

Question 47

____________________ to determine whether what is being expended in the newly implemented system is what was planned.

Question 48

Explain each of the following: accounting rate of return, payback method, and net present value.

Question 49

What is a chart of accounts?

Question 50

What does it mean to say that a cost is direct?

Question 51

Define the terms variable costs and fixed costs. Give examples of each.

Question 52

What is the major conceptual difference between zero-base budgeting and conventional budgeting?

Question 53

What is the purpose of a budget?

Question 54

What does writing off accounts receivable mean?

Question 55

The financial accountant will add a designated account to the ____________________ for processing each transaction for the new imaging service.

Question 56

Under what conditions would you advocate developing a flexible budget?

Question 57

One of the first steps in the budgeting process is to develop the statistics budget. Why?

Question 58

Explain the benefits of performing ratio analysis.

Question 59

Which financial statement depicts the financial activity of an organization for a period of time?

Question 60

What is the fundamental accounting equation?

Question 61

Use the following to answer the following questions.

Referring to the information given, compute the operating margin ratio.

Question 62

A free-standing ambulatory care center incurs medical record folder costs of $3 per new patient and has a monthly rent payment on its space of $12,000. Which of these is a variable cost?

Question 63

Besides monitoring the progress of the new imaging system, the health information manager is also interested in monitoring the overall financial stability of health information services quarterly. Which financial statement will depict the financial activity of the organization for this period of time?

Question 64

In addition, the health information manager wants to carefully monitor the accounts receivables for the newly implemented system to track the (number of days) of revenue in accounts receivable. What financial statement would supply the needed information?

Question 65

Saint Elsewhere Community Hospital is considering investing $90,000 in new transcription equipment to replace its current equipment, which is completely depreciated and outmoded. An alternative to this investment is a long-term contract with a local transcription firm to perform the transcription service. It is expected that the hospital would save $20,000 per year in operating costs if the transcription was performed internally. The expected and depreciable life of the equipment is 6 years. Calculate the net present value of the investment.

Question 66

Saint Elsewhere Community Hospital is considering investing $90,000 in new transcription equipment to replace its present equipment, which is completely depreciated and outmoded. An alternative to this investment is a long-term contract with a local transcription firm to perform the transcription service. It is expected that the hospital would save $20,000 per year in operating costs if the transcription was performed internally. The expected and depreciable life of the equipment is 6 years. Assuming that Saint Elsewhere can borrow or invest money at 8%, calculate the payback year.

Question 67

You have submitted a request to the board of directors to purchase a computer-based patient record system. The system is anticipated to save $45,000 in personnel operating costs each year for the next 3 years and will cost $110,000 to install. Operating and maintenance costs for the 3 years are estimated to be $5000 per year. The money to buy the equipment would come from an equipment fund, which is now earning 8%. Should the new system be purchased? Why?

Question 68

Use the following to answer the following questions.

Referring to the information given, compute the current ratio.

Question 69

The manager wants to calculate the operating margin ratio to evaluate the use of the department's resources in achieving its desired goals. What formula (data) should be used?

Question 70

The CFO asks you to compare the value of purchasing new high-speed photocopying equipment with contracted copying services. What capital expenditure evaluation method would you use?

Question 71

On what report would the manager locate the gross revenue for health information imaging services to use as the numerator when calculating the accounts receivable turnover for the new imaging service?

Question 72

Define job order costing and explain how it is used in a health care organization.

Question 73

Use the following to answer the following questions.

Referring to the information given, compute the current ratio.

Question 74

The health information manager wants to calculate the accounts receivable turnover for the new imaging service. To do this, the manager will need what numerical data for the numerator of this equation?

Question 75

Use the following to answer the following questions.

Referring to the information given, compute the return on assets.

Question 76

Which financial statement depicts the financial condition of an organization as of one date in time?

Question 77

The health information manager needs to order some unexpected supplies for the new imaging services to improve processing efficiency. Before ordering, the manager wants to examine the financial condition of the department. What financial report should be analyzed?

Question 78

You have submitted a request to the board of directors to purchase a computer-based patient record system. The system is anticipated to save $45,000 in personnel operating costs each year for the next 3 years and will cost $110,000 to install. Operating and maintenance costs for the 3 years are estimated to be $5000 per year. The money to buy the equipment would come from an equipment fund, which is now earning 8%. Calculate the payback period for the investment.

Question 79

Use the following to answer the following questions.

Referring to the information given, compute the days of revenue in patient accounts receivable.

Question 80

It has now been 6 months since the new imaging rental services have been in operation. What report would the health information manager analyze to examine the department's current profit and loss position?