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61 Cards in this Set
- Front
- Back
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Income Statement
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Revenues and expenses DURING a particular period of time. Profit and loss statement. Changes to finances over a particular period of time.
Income, Expenses, Net income (profit or loss) |
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Balance Sheet
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Summary of financial balances of a company at a GIVEN point in time.
Assets- current, fixed, other Liabilities- current and long term Equity- owner Common financial ratios |
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Assets
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What the company owns.
Current- can be converted into cash in a short period Fixed- long term assets |
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Liabilities
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Company debts
Current- obligations that must/will be paid in the near future Long term- oblications payable over a long period |
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Equity
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Difference between assets and liabilities (owner's investment, retailed earnings)
Value of property, ownership interest Increase with revenue Decrease with expenses |
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Common Financial Ratios
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debt ratio, current ratio, working capital, assets to equity ratio, debt to equity ratio
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Methods of Payment for Healthcare
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Cost-payment basis- cost compared to charge
Fee schedule- diagnosis and eligible fee table Price-related payment- percentage or other factors applied to price |
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Healthcare prices
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Establish prices to cover costs, losses to gov payers, discounted on uninsured, and reasonable return on investment.
Create prices for specific services |
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Factors Influencing Price
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Desired net income
Competitive position- greater ability to dictate price Market structure- more buys fewer sellers is more favorable Price elasticity |
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Revenue
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Amount earned by an organization, money in. Earned by providing care to patients
What comes in as payment for services from whatever source |
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Cost Shift
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One group underpays resulting in another group over paying.
Gov doesnt cover full cost of care--> margin of loss must be recuperated |
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Controlling Revenue
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Price setting, payer contract negotiation, billing/coding management
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Classifying Revenue
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After service: fee for service (traditional), discounted fee for service
Before service: predetermined per person |
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Deductions from Revenue
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Contractual allowances
Bad Debt Charity Services |
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Contractual Allowances
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Difference paid between full established rate and agreed upon contractual rate pain
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Characterizing Revenue (Service Line)
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Grouping of similar products to determine which are profitable and how market share compares to competitors.
Hospital Service line: MDCs Long term service line: continuing care retirement Physicians group service lines: office visits, surgical procedures |
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Dept Ratio
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Total liabilities/total assets
above 1.0 = poor risk |
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Working Capital
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current assets- current liabilities
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Current Ratio
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Current assets/current liabilities
indicates an organizattions ability to meet its current debt obligations. Tells if enough cash is on hand to pay bills that are due |
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Dept to Equity Ratio
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Total liabilities/owners equity
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Assets to Equity Ratio
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total assets/owners equity
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Expense
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Cost related to earning a revenue-"cost of doing business"- money out
Includes every expired cost that is deductible from revenue Salary, payroll, utility An expired cost |
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Expired Cost
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Used up while carrying out business, matched against revenue
Ex- pay nurse who took care of patient who has been discharged |
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Unexpired Cost
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Not yet used up and will be matched against future revenues
Ex: electric bill recorded as expense, actually cost because will be used in the month that it is paid |
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Cost
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Expenses/money out-take away
Ex: supplies used to change surgical dressing, IV fluid |
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Charge
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Revenue/money in-add
What is billed to the patient for the supplies used |
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Budget
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Instrument through which activities or organization are quantified in financial terms
Reflect objectives activities and priorities |
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Budget Objectives
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Written expression in quantitative terms of policies and plans
Evaluation of financial performance Took for monitoring and controlling costs Cost awareness |
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Line Item
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Single budget item associated with an amount of money allocated to it. Made by budget units of units, sub-units, departments, or divisions
Ex: line item associated with staff, disposable equipment, utility costs |
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Static Budget
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Single level of operations, amount never changes after approval, measured by how it differs from results
Variance= difference between budget and actual results Planning |
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Flexible Budget
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Adjusted to actual level of activity
Created using budgeted revenue and/or budgeted cost Look at range of activity to review prior budgets Performance |
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Operating Budget
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Deal with actual short term revenue and expenditures-day to day managment of a unit
1 year |
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Capital Budget
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Futuristic view
5-10 years |
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Fixed Costs
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Costs do not change even though volume or activity rises or falls
Ex: salaries, payroll taxes, employee benefits, rent, insurance Service |
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Variable Costs
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Change in direct proportion to changes in activity or volume
Ex: part time labor, drugs and medical supplies, food for residents of group home, utilities Actual use |
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Contribution Margin
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Amount remaining after subtracting variable costs from revenue
Use profit to over other costs Determined on total or per unit basis Relationship between cost, profit, and value |
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Analyzing Mixed Costs
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Predominant characteristics and step method- manager decides if it is more fixed or variable= subjective
High to low method: variable cost= high - low/ change in activity Large or small amounts |
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Efficiency Cost
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Total cost incurred by an organization as a result of an out of control situation
EC= TRP T= time problem occurred R= Loss per unit time P= probability problem is correctable Want to minimize |
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Budget Variances
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Differences between standard and actual prices and quantities, difference in budget and actual amount.
Increase variance= increase cost efficiency |
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Capital Projects
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Acquisition of assets that are long lasting, budgets used to plan, monitor, and control these
Ex: equipment, buildings, land |
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Discounted Fee For Service
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Contracted fee agreed upon to be paid after services
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Fee For Service
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Provider paid after the services are rendered
Traditional method |
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Managed Care
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Coordination of all healthcare services for an individual, with the plan receiving predetermined amount per member premiums
HMO and PPO |
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Medicare/Medicaid
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Fixed fee schedule, government source of health care revenue
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Payer Mix
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Percentage of revenue coming from private insurance vs gov insurance vs self-paying individuals
Important--> Medicare/caid pay hospitals less that what it costs to treat patients |
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Diagnosis
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Identification of the nature of an illness to other problem by examination of the symptoms
Way of grouping services and expenses |
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General Services Expenses
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Group of expenses, day-to-day operations
Ex: rent, utilities, insurance, and salaries |
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Support Services Expenses
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Group of expenses- general, insurance, social security taxes, welfare, pension expenses
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Operating Expenses
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Money spent as a result of performing normal daily operations
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Bundled Services
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Fixed payment based on some set of services provided on a diagnosis or on a day basis
One charge for everything |
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Specific Services
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Unbundled, allows providers to receive payment a la cart, based on specific services provided
Ex: OR time- one fee vs charging 10 min increments |
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Health Maintenance Organization (HMO)
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Members pay fixed monthly premium and receive comprehensive care in return
Must use certain providers |
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Preferred Provider Organization (PPO)
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Group of providers (panel) limited in size and utilization review powers
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Financial Accounting
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Preparation of general purpose financial statements that must be standardized according to accounting rules
Ex: balance sheet |
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Managerial Accounting
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Inform internal managers and staff of financial status
Generate discussion about internal financial strategy and achievement of goals |
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Duality Principle
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Value of assets must equal the combined value of liabilities
Assets= Liabilities + Net assets |
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Cost of Capital
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Typically interest rate, additional amount the organization pays for the ability to acquire assets
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Return on Investment (ROI)
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Establishing a cost basis for assets is critical in pricing services
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Accural vs Cash
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Cash- revenue and expenses recorded when received or paid
Accural: recorded when incurred |
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Identifiable Cost
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Direct and supporting patient care
ex: player scholarships, uniform, equiptment |
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Allocated Costs
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General and administrative expense and patient expense
EX: academic support, laundry, books |
