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31 Cards in this Set

  • Front
  • Back
Income statement helps you answer what question
- Is the medical practice making money
Describe income statement
Income statement summarizes the operations of organization with focus on revenues expenses and profitability
- Contains operational results over SPECIFIED PERIOD OF TIME
Name sources of revenues
- 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.
Name sources of expenses
- 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
Most important piece of information on income statement is _
To get cash flow you must add _ to net income
Depreciation expense
As a rough estimate cash flow can be thought as _
Net income plus major non-cash expenses
What does balance sheet tell you
What is medical practice worth today
Define balance sheet
Snapshot of financial position of organization AT A GIVEN POINT IN TIME
Resources owned by organization in dollar terms
Claims against resources owned by organization
Residual claim that depends on asset values and amount of liabilities
Current assets
Cash and other assets that are expected to be converted into cash within one accounting period
Long-term investments
Money invested in securities whose maturities exceed one year
Fixed assets
Property and Equipment
Highly illiquid and are used over long period of time
Current liabilities
Liabilities that must be paid within one accounting period
Long-term debt
Debt financing to the organization with maturities of more than one accounting period
What does statement of cash flow tell you
If there is enough cash to keep practice run smoothly
3 parts of statement of cash flow
- 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
Gross collection rate
Tells you what percentage of your production is contributing to bottom line
Net collection rate
receipts/charges minus discounts and write offs - tells you what percentage of ADJUSTED production is contributing to bottom line
Two general categories of costs
Fixed costs - remain the same regardless of volume (rent, insurance, utilities)
Variable costs - fluctuate with volume (medical supplies, staffing)
Profit margin
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
Return on Assets (ROA)
Net income/total assets - tells how productively a business is using its assets
Return on Equity (ROE)
Net income/total equity - tells how well the managers are utilizing owner supplied capital
Current ratio
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
Days cash on hand
Cash + short term investments/ (expenses - non-cash expenses)/ 365 = no of days
Old paradigm of health care while new paradigm
Take care of medical staff and third party payers
New paradigm - relate to patients as customers not just clinical material
Qualities of leader