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31 Cards in this Set
- Front
- Back
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Income statement helps you answer what question
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- Is the medical practice making money
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NET INCOME =
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REVENUES - EXPENSES
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Describe income statement
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Income statement summarizes the operations of organization with focus on revenues expenses and profitability
- Contains operational results over SPECIFIED PERIOD OF TIME |
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Name sources of revenues
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- Net patient service revenue - net signifies amount shown is less than clinics gross charges for services provided
Fee for service environment - services are paid on basis of utilization Capitation - premium revenue reported at start of each contract Other revenue - interest on investments, contributions and consulting. |
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Name sources of expenses
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- LABOR - dominant portion of cost structure
- MEDICAL SUPPLIES - cost of supplies actually consumed - PURCHASED MEDICAL SERVICES - outside contractors (diagnostic center) - DEPRECIATION EXPENSE - spreads the cost of fixed asset over many years - PROVISION FOR BAD DEBTS - expected amount that will never be collected - INTEREST EXPENSE - debt capital during year - OTHER - small general and administration fees |
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Most important piece of information on income statement is _
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Profitability
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To get cash flow you must add _ to net income
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Depreciation expense
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As a rough estimate cash flow can be thought as _
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Net income plus major non-cash expenses
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What does balance sheet tell you
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What is medical practice worth today
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Define balance sheet
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Snapshot of financial position of organization AT A GIVEN POINT IN TIME
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Assets
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Resources owned by organization in dollar terms
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Liabilities
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Claims against resources owned by organization
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Equity
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Residual claim that depends on asset values and amount of liabilities
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ASSETS =
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LIABILITIES + EQUITY
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Current assets
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Cash and other assets that are expected to be converted into cash within one accounting period
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Long-term investments
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Money invested in securities whose maturities exceed one year
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Fixed assets
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Property and Equipment
Highly illiquid and are used over long period of time |
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Current liabilities
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Liabilities that must be paid within one accounting period
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Long-term debt
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Debt financing to the organization with maturities of more than one accounting period
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What does statement of cash flow tell you
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If there is enough cash to keep practice run smoothly
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3 parts of statement of cash flow
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- Cash flows from operating activities - sources and uses of cash tied directly to operations
- Cash flows from investing activities - gross investment in fixed assets - Cash flows from financing activities - securities investments and financing |
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Gross collection rate
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Receipts/charges
Tells you what percentage of your production is contributing to bottom line |
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Net collection rate
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receipts/charges minus discounts and write offs - tells you what percentage of ADJUSTED production is contributing to bottom line
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Two general categories of costs
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Fixed costs - remain the same regardless of volume (rent, insurance, utilities)
Variable costs - fluctuate with volume (medical supplies, staffing) |
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Profit margin
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NET INCOME/TOTAL REVENUES - if it equals to 4.5% that means that each dollar of revenues generated produced 4.5% of profit. Judgements relative to peers could be made, slop from previous year should alert managers to examine increases in expenses
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Return on Assets (ROA)
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Net income/total assets - tells how productively a business is using its assets
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Return on Equity (ROE)
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Net income/total equity - tells how well the managers are utilizing owner supplied capital
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Current ratio
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Current assets/current liabilities - tells creditors whether a business is able to meet its cash obligations in timely manner. If it equals to 3.5 it means that liquidation of current assets at book value would provide 3.5 dollars of cash for every one dollar of current liabilities
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Days cash on hand
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Cash + short term investments/ (expenses - non-cash expenses)/ 365 = no of days
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Old paradigm of health care while new paradigm
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Take care of medical staff and third party payers
New paradigm - relate to patients as customers not just clinical material |
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Qualities of leader
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Character
Competence Commitment |
