TEST BANK for Financial Management of Health Care Organizations an Introduction to Fundamental Tools

FINANCIAL MANAGEMENT OF HEALTH CARE ORGANIZATIONS: AN INTRODUCTION TO FUNDAMENTAL TOOLS, CONCEPTS, AND APPLICATIONS, 4th EDITIONChapter 1Multiple Choice1. Which of the following is the goal of the U.S. health care system?a. Accessb. Costc. Qualityd. All of the above2. ACA is the abbreviation for what legislation?a. Accountable Care Organizationsb. Patient Protection and Affordable Care Actc. Activity Based Costingd. Administrative Cost Accounting3. Which of the following is not a provision that is expected to have a significant impact from theACA?a. Requirement that all payments for health care be based on quality of servicesb. Requirement that almost all individuals have insurance coveragec. Establishment of payment mechanisms for bundled payments and value based purchasingsystemd. Requirement that states create insurance exchanges4. The number of uninsured U.S. citizens rose between 2001 and 2010 from:a. 5 million to 15 millionb. 20 million to 32 millionc. 36 million to 50 milliond. 55 million to 65 million5. ACA provides a benefits package:a. $0b. Minimum(Test Bank all Chapters)c. Maximumd. $5,0006. Accountable Care Organizations as part of ACA are:a. Mandatoryb. Exclusivec. Voluntaryd. State organizations7. Patient –Centered Medical Home is:a. An expensive delivery systemb. An indication of poor qualityc. A partnership between primary care providers, patients and familiesd. Not encouraged8. All of the following factors contribute to the rising cost of health care except:a. Aging populationb. New and returning consumers in the marketplacec. Chronic Diseased. Providers embracing lean Six Sigma and other techniques to deliver better care with lessresources9. All of the following factors could contribute to a decrease in health care costs except:a. Pharmaceuticals going off patentb. Providers using health information technology in robust waysc. Medical technology continuing to develop new systemsd. Hospitals overriding physician preference in supplies10. The HITECH Act (2009) was enacted with the goal of:a. Creating and expanding the current health care IT infrastructureb. Promoting electronic data exchangec. Substantially and rapidly increasing EHR adoptiond. All of the above or 1. Retail Health Care is not viable in today’s health care environment. or ? 2. Litigation under ACA was sufficiently addressed. or ? 3. Providers spend a significant amount of time and expense addressing compliance. or? 4. Recovery Audit Contractors (RAC) auditors are independent contractors hired by CMS. or? 5. Value Based Payment has been a part of Medicare since its inception. or ? 6. Value Based Purchasing is designed to address only quality of care incentives. or ? 7. ICD-10 as a coding system has been used in the United States for many years. or ? 8. ACOs are voluntary groups of health care providers who coordinate care to a patient population. or ? 9. U.S. Health System goals remain unchanged. or ? 10. Methods of health care financing remain unchanged. or ? Chapter 2Multiple Choice1. Which of the following is a basic financial statement?a. Balance Sheetb. Statement of Operationsc. Statement of Cash Flowsd. All of the above2. Balance Sheet for a non-profit contains all of the following except:a. Organization’s assetsb. Organizations liabilitiesc. Stockholders’ equityd. Cash flow3. Assets are defined as:a. Long term debtb. Cash, investments, inventory and receivablesc. Self-insurance reservesd. Accrued pension4. Liabilities are defined as:a. Financial obligations due within a yearb. Cash and cash equivalentsc. Patient accounts receivabled. Inventories5. Net assets do not include one of the following categories:a. Unrestrictedb. Belatedc. Temporaryd. Permanent6. A statement of operations summarizes the organization’s total assets, liabilities and net assets in what time period?a. Last day of the accounting periodb. Over a period of timec. Last quarterd. Annually7. Other revenue refers to all of the following except:a. Salary and wagesb. Appropriations and grantsc. Income from investmentsd. Revenue from contributions8. The statement of changes in net assets includes:a. Account balancesb. Accounting Methodsc. Why there was a change from one year to the next in the entire net asset section of thebalance sheetd. Expense determinations9. Body of the statement of cash flows does not include:a. Cash flows from operating activitiesb. Cash flows from investing activitiesc. Cash flows from financing activitiesd. Current liabilities10. Cash flows from investing activities includes:a. Purchase of plant property and equipmentb. Accounts payablec. Accrued pensiond. Estimated third party payor settlements or 1. GAAP requires certain disclosure (footnote) information to give a more clear picture of thefinancial position. or ? 2. Balance sheet for investor owned entities presents a summary of the entity’s assets, liabilitiesand net assets. or ? 3. Assets include accrued pension. or ? 4. Liabilities are financial obligations due within a year. or ? 5. Net assets section of a balance sheet for not for profits is analogous to the owner and equity ona for profit balance sheet. or ? 6. Notes to financial statements are called proclamations. or ? 7. Statement of cash flows discloses key noncash investing and financial transactions. or? 8. Basic Accounting Equation is: assets =liabilities + net assets. or ? 9. Liquidity refers to long term depth. or ? 10. Assets are defined as guaranteed future economic benefits of an organization. or ? Chapter 3Multiple Choice1. Transactions summarized by account are called:a. Journalb. Ledgerc. Balanced. Asset2. Which of the following is a standard accounting method used in health care?a. Accrualb. Cashc. Expensed. Asset3. Rules for recording transactions do not include:a. Increase in revenues, gains or other support account when earnings are received.b. After each transaction, the fundamental account equation must be in balance.c. An accounting method when cash was received or expended.d. Increase an expense account when an asset is used.4. To develop financial statements, transactions a. Must be on a cash basisb. Are recorded according to staff availabilityc. Focus only on assetsd. Have been analyzed and recorded5. Statement of Operations includes:a. Operating Expensesb. Increase in unrestricted net assetsc. a & bd. None of the above6. A statement of cash flows includes:a. Cash flows from operating activitiesb. Cash flows from investing activitiesc. Cash flows from financing activitiesd. All of the above7. The “book” refers to transactions a. Only done by computer entry b. Journal recorded chronologically c. Current balance in each account d. Current ratio8. In the accrual accounting method:a. Revenues are recognized when cash is receivedb. Expenses are recognized when cash is paid outc. Revenues are recognized when revenues are earnedd. All of the above9. Functions of an internal audit department include:a. Resources used to generate revenuesb. Ensuring that hospitals comply with their financial record keepingc. Reporting and recording of revenues and expensesd. b & c10. Recording transactions assists in:a. Accuracy of financial actsb. Summarizing accountsc. Ease of tracking financial transactionsd. All of the above or 1. Transactions are recorded chronologically in a journal. or ? 2. In health care the cash accounting method is used. or ? 3. Recording of transactions is to occur each quarter. or ? 4. Under accrual accounting, revenues are recognized when cash is received. or ? 5. When cash is paid out, expense is recognized where no resources were used. or ? 6. A statement of cash flows provides information about how much revenue e is generated andamount of resources used. or ? 7. The statement of operations answers the question of how to record transactions. or ? 8. Electronic health record has financial reporting value. or ? 9. Contra-asset is an asset that when increased, decreases the value of a related asset on thebooks. or ? 10. A balance sheet highlights assets, liabilities and resources used. or ? Chapter 4Multiple Choice1. Analyzing financial statements helps a health care organization to:a. Determine if profitableb. Determine the effectiveness in collecting receivablesc. a & bd. None of the above2. Approaches to analyze financial statements do not include:a. Ratio analysisb. Collateral analysisc. Vertical analysisd. Horizontal analysis3. Trend analysis compares changes over:a. 3 month periodb. 6 month periodc. 1 year periodd. Each year with the base year4. Vertical analysis answers which general question?a. What percentage of one line item is another line item?b. Which analysis is best to use in financial decision making?c. What is the percentage change in a line item from one year to the next?d. Which financial statement is best to use in financial decision making?5. Categories of ratios include:a. Liquidity ratiosb. Profitability ratiosc. Capital Structure ratiosd. All of the above6. Vertical analysis is also called:a. Trend analysisb. Financial leverage analysisc. Common-size analysisd. Activity cost analysis7. Which of the following is not a point to consider when using and interpreting ratios?a. No one ratio is necessarily better than any other ratiob. With benchmarking, it is not necessary to make sure the same formula is usedc. A ratio can best be interpreted relative to a benchmarkd. Ensuring reliability of data8. Liquidity ratios measure:a. A facility’s ability to meet short term obligations, collect receivables and maintain cashpositionb. Operating revenues per adjusted dischargec. Operating expense per adjusted discharged. Salary and benefit expense9. Operating margin ratio measures:a. How dependent the organization is on patient related incomeb. Profits earned from the organization’s main line of businessc. How much profit is earned for each dollar invested in assetsd. Total operating expenses incurred from providing patient care services10. Age of Plant ratio provides:a. An indication of the average age of a hospital’s plant and equipmentb. An evaluation of the most productive assetsc. For every dollar invested in assetsd. Overall efficiency of the organizations assets or 1. Horizontal analysis looks at the percentage change in a line item from one quarter to another. or ? 2. Vertical analysis looks at the percentage change in a line item from one year to the next. or ? 3. Trend analysis compares changes over a year period. or ? 4. Ratio analysis is the expression of the relationship between two numbers as a single number. or ? 5. Activity ratios answer the question of how profitable the organization is. or ? 6. Age of Plant ratio complements the fixed asset turnover ratio. or ? 7. Capital structure ratios address how an organization’s assets are financed and able to take onnew debt. or ? 8. Net assets to total assets ratio reflects an organization’s ability to repay a loan. or ? 9. Fixed asset turnover ratio aids in the evaluation of the most productive assets, plant andequipment. or ? 10. Higher debt increases financial risk by magnifying the returns on net asset or equity. or? Chapter 51. The working capital cycle includes:a. Obtaining cashb. Billing and collectionsc. Providing Servicesd. All of the above2. An asset mix strategy includes:a. How an organization chooses to finance its working capital needsb. The amount of working capital an organization keeps on hand relative to its working capitalobligationsc. Risk of greater return to lower liquidityd. Coin and currency3. Sources of Temporary Cash include:a. Line of Creditb. Commitment feesc. A & bd. None of the above4. Finance mix strategy includesa. Cash managementb. Investing excess funds in non-liquid assetsc. An aggressive asset mix strategyd. Maximizing returns by investing in non-liquid assets5. Which of the following is not a major reason to hold cash:a. Hedge against inflationb. For daily operation purposesc. Precautionary purposesd. Speculative purposes6. Trade payable are referred to as:a. Compensating balancesb. Commitment feesc. Accounts payabled. Accounts receivable7. Revenue Cycle Maintenance can be hindered by:a. Patients giving correct demographic informationb. Lack of clarity about who is responsible for the billc. Current health care insurance informationd. An accurate/clean final bill8. Part of the revenue cycle is:a. Registrationb. Charge of Capturec. Paymentd. All of the above9. Collecting Cash payments includes:a. Electronic billingb. Lockboxesc. Wire Transferd. b & c10. Methods to monitor accounts receivable:a. Net accounts receivableb. Treasury billsc. Aging Scheduled. a & c or 1. The working capital cycle has four phases. or ? 2. Asset mix is the amount of working capital an organization keeps on hand to meet its working capitalobligations. or ? 3. Financing mix state what an organization can invest. or ? 4. A major reason for a health care organization to hold cash is for daily operations purposes. or? 5. A line of credit is considered a long term commitment. or ? 6. Revenue cycle management is driver by the billing process. or ? 7. Scheduling is not a part of the revenue cycle. or ? 8. Incorrect coding of a patient bill hinders collecting that bill. or ? 9. Lockboxes are one form of collecting cash payments. or ? 10. Certificates of deposit are issued by commercial banks as non-negotiable, interest-bearing, shortterm certificates. or ? Chapter 61. Present value (PV) refers to:a. Worth in future of an amount invested todayb. Worth today of future paymentc. Worth in the future of a series of payments over timed. None of the above2. Compound interest method refers to:a. Interest is calculated only on the original principleb. Interest is calculated on a dollar received todayc. Interest is calculated on both the original principle and on all interest accumulated since thebeginning of interest period.d. All of the Above3. Future Value Table is used :a. As an alternative to calculating the future vale using the formulab. An alternative to calculating the present valuec. An alternative to calculating the time value of moneyd. B&C4. Discounting is:a. Converting present value into its future valueb. Value today of a payment to be receivedc. Calculating the future value using a formulad. Converting future cash flows in the their present value5. Present value of an annuity refers to:a. What series of equal payment in the future is worth today taking into account time value ofmoneyb. A factor that when multiplied by a stream of equal payments equals present valuec. What an equal series of payments will be worth at some future date using compound interestd. None of the Above6. Compound growth rate is calculated:a. By loan amortizationb. Through any given interest level and time periodc. Using an ordinary annuity tabled. Using numerical data using revenues, expenses and earnings7. Future value is determined using:a. Worth of a dollar todayb. Calculations only on the original principlec. A compound interest methodd. Using a simple interest method8. The time value of money refers to:a. Factors that show future valueb. Factors that show past valuec. Concept that a dollar received today is worth more than a dollar received in the futured. Concept that a dollar received today is worth less than a dollar received in the future9. Annuity due refers to:a. A series of equal annuity payments made or received at the beginning of each periodb. A series of equal payments in the future is worth todayc. Factors that show the value today of equal flows at the end of each future periodd. An equal series of payments worth at some future date10. An effective interest rate is:a. The stated annual interest rate of a loan which does not account for compoundingb. The actual interest rate earned or charged which is affected by the number of compoundingperiods.c. The frequency of compounding for any given interest level and time periodd. None of the above or 1. Interest determines how much an amount of money invested today will be worth in the future. or ? 2. Opportunity cost are revenues gained by forgoing other opportunities. or ? 3. Future value implies using the compound interest method. or ? 4. To find future value discount..... or ? 5. An annuity is a series of equal payments. or ? 6. Perpetual annuities refers to an organization making an investment to generate an annuity for aninfinite period. or ? 7. Amount of Perpetuity = Initial Investment x Interest Rate. or ? 8. An effective interest rate is the stated annual interest rate of a loan. or ? 9. In a simple interest method the principle is the amount invested. or ? 10. Tables and spreadsheets are used to calculate future value. or ? Chapter 71. The component(s) of a capital investment decision are:a. Determining if the investment is worth whileb. Costs of investingc. Determining how to finance the investmentd. Both a & c2. Capital appreciation is:a. The portion of the profits the company keepsb. When an investment is worth more when it is sold than when it was purchasedc. An increase in liabilitiesd. None of the above3. The strength(s) of the NPV analysis are:a. Answers in dollars, not yearsb. Accounts for all cash flows in the projectc. Discounts at the cost of capitald. All of the above4. The three methods of evaluating large-dollar multiyear investment decisions from Chapter 7are:a. Payback, net present value and internal rate of reductionb. Payoff, net present value and internal rate of returnc. Payback, net present value and internal rate of returnd. Payback, net present variables and internal return rate5. If the IRR is equal to the required rate of return the project should be:a. Acceptedb. Rejectedc. Handled indifferentlyd. Reinvented6. Straight-line depreciation is a method that depreciates an asset a(n) amount each until it reaches its salvage value.a. Varied, quarterb. Equal, dayc. Varied, yeard. Equal, year7. Sunk costs are:a. Recoverableb. Not recoverablec. Indicators of future gainsd. Management’s poor decisions8. Spreadsheets are ideal for which method?a. NPVb. Paybackc. IRRd. None of the above9. The payback method measures how long it will take to recover investment.a. Totalb. Pastc. Initiald. Non-financial10. The exact cost of capital is to determine.a. Difficultb. Easyc. Impossibled. Time consuming or 1. A capital investment is expected to achieve long-term benefits for the organization thatgenerally fall into three categories: financial benefits, nonfinancial returns and the ability toattract more funds in the future. or ? 2. Dividends are payments to creditors. or ? 3. The payback method is in years, not dollars. or ? 4. The payback method does account for the time value of money. or ? 5. IRR analysis assumes reinvestment of proceeds at the internal rate of return. or ? 6. NPV is calculated using ten steps. or ? 7. Goodwill is tangible assets that will be affected by an entities future earnings. or ? 8. Salvage value is the amount of cash to be received when an asset is sold, usually at the end of itsuseful life. or ? 9. Discounted cash flows are adjusted to account for the cost of capital. or ? 10. If the IRR is less than the required return rate, the project should be accepted. or ? Chapter 8Multiple Choice1. A fund in which monies are set aside each year to ensure that a bond can be liquidated atmaturity is a?a. Sinking fundb. Swimming fundc. Bond fundd. Term fund2. Hedging is the art of off-setting high variable rate payments with returns fromvariable rate.a. Investments, debtsb. Bonds, investmentsc. Debt, investmentsd. Stock, debts3. An asset with clear value that is pledged against a loan to reduce risk to the lender is:a. Colloidalb. Bondsc. Collaterald. Trustee4. A debenture is:a. A secured bondb. An unsecured bondc. Subject to harsh regulationsd. Non existent5. A secondary market deals with buying and selling bonds that have alreadybeen.a. Calledb. Forfeitc. Issuedd. Exempted6. Tax-exempt bonds can be used by:a. Any organizationb. Tax-exempt organizationsc. Tax paying organizationsd. No organization7. According to Fitch and S&P’s bond ratings, which rating is highest?a. AAAAb. Aac. AAAd. BBB8. The highest bond rating a health care provider can usually achieve is:a. AA or Aab. BBB or Baac. Aaa or AAAd. Ba or BB9. In a capital lease the lessor aims to lease the asset for of its economic life.a. Noneb. Virtually allc. Virtually halfd. An insignificant amount10. An organization should borrow -term funds for -term needs.a. Long, shortb. Short, longc. Short, shortd. None of the above or 1. Bonds can only be issued with a fixed rate. or ? 2. There are two types of leases: operating and capital. or ? 3. The primary sources of equity financing for for-profit organizations includes philanthropy andgovernment grants. or ? 4. An operating lease is used for service equipment leased for periods longer than the equipment’seconomic life. or ? 5. Fixed rate bonds have no disadvantages. or ? 6. Any increase in assets must be balanced by a similar increase in debt or equity, or both. or? 7. A letter of credit increases the number of bonds an organization can issue at a given time. or ? 8. Debt capacity is the amount of debt an organization can be reasonably expected to take on andpay off in a timely manner. or ? 9. Callable bonds are issued with no coupon. or ? 10. Bank term loans are usually paid in equal amounts over the life of the loan. or ? Chapter 9Multiple Choice1. Total Revenues can be calculated using the formula: Total Revenues = Price x .a. Qualityb. Quantifiedc. Quantityd. Quagmire2. Major error(s) that must be avoided when using fixed cost information to make decisions are:a. Using fixed costs per unit derived at all levels to forecast costsb. Assuming that cost per unit does not change when volume changesc. Both a & bd. None of the above3. Relevant range is the range of activity over which total fixed costs or per unit variable cost .a. Varyb. Do not varyc. Always varyd. Can vary4. Break-even point is where total revenues equal total .a. Expected cash flowsb. Total costsc. Industry averagesd. CEO’s salary5. Total contribution margin is total revenues - .a. Total fixed costsb. Total unitsc. Fixed variable costsd. Total variable costs6. Common costs benefit.a. Everyone in an organizationb. No onec. A select fewd. None of the above7. Product margin = total contribution margin - .a. Voided fixed costsb. Avoidable fixed costsc. Fixed costsd. Total variable costs8. Per unit contribution margin= per unit revenues - .a. Variable costb. Total fixed costc. Per unit variable costd. Per unit fixed cost9. Controlling costs or decreasing profit margins to meet or beat a predetermined price orreimbursement rate is .a. Transfer cost pricingb. Variable costingc. Targeted pricingd. Target costing10. Additional costs incurred solely as a result of an action or activity or a particular set of actions oractivities are .a. Incurred costsb. Incremental costsc. Infallible costsd. Incredible costs or 1. Incremental costs are always unforeseen. or ? 2. The basic break-even equation is: price x volume= variable cost per unit + (fixed cost x volume). or ? 3. Product margin is calculated by this equation: total contribution margin – avoidable fixed costs. or ? 4. A break-even chart shows the break-even point. or ? 5. Variable costs vary per unit over the relevant range. or ? 6. After comparing the product margins between the make-or-buy alternatives the alternative withthe higher product margin should be chosen. or ? 7. If an existing service has a negative product margin, it should not be dropped. or ? 8. In healthcare target costing usually involves the provider as the price setter and the governmentas the price taker. or ? 9. Total contribution margin = total revenue - total variable cost. or ? 10. In a make-or-buy decision buying is always the better alternative. or ? Chapter 10Multiple Choice1. Which of these is a tangible factor?a. Historyb. Reputationc. Staffd. None of the above2. Which of these is an intangible factor?a. Historyb. Reputationc. Strength of its board of directorsd. All of the above3. Short-term plans primarily include:a. Productionb. Financingc. Controld. All of the above4. The authoritarian approach is often called . a. Top-down spending b. Monopolistic practices c. Top-down budgeting d. Bottom-up strategizing5. The incremental-decremental approach starts with a(n) budget. a. New b. Outdated c. Industry standard d. Existing6. A program budget is an extension of the . a. Line-item budget b. Line-category budget c. Line-ending budget d. Zero-based budget7. A performance budget adds to a program budget. a. Subcategories b. Performance measures c. Overhead d. Cost of capital8. Static budgets use a level of activity. a. Low b. Flexible c. Static d. High9. An operating budget is comprised of a and a . a. Statistics budget; expense budget b. Revenue budget; expense budget c. Cost report; Expense report d. Revenue budget; statistics budget10. A capital budget summarizes the major for the year.a. Costsb. Incomec. Variancesd. Purchases or 1. Budgets can never be modified. or ? 2. Cash budgets display all of the organization’s projected cash inflows and outflows. or? 3. Budgets do not need to be monitored for variances. or ? 4. Budgeting is rarely needed for established organizations. or ? 5. A program budget is the least detailed budget. or ? 6. Capital budgets are always larger for outpatient facilities. or ? 7. After the cost of labor, the next largest cost is the cost of supplies. or ? 8. Pro forma financial statements can’t be subjected to the same analysis as other financialdocuments. or ? 9. Flexible budgets accommodate for multiple levels of activities. or ? 10. The statistics budget is the first budget to be prepared. or ? Chapter 11Multiple Choice1. Decentralization is:a. A major type of responsibility centered within an organizationb. The degree of dispersion of responsibilitiesc. The compounding for any given interestd. Proceeds lost by forgoing other opportunities2. Advantages of decentralization include:a. Loss of controlb. Decreased goal congruencec. Greater speedd. Lack of managerial talent3. Disadvantages of decentralization include:a. Increased need for condition and formal communicationb. More efficient use of timec. More relevant informationd. Higher quality decisions4. Types of responsibility centers include all but one of the following:a. Service centersb. Profit centersc. Cost centersd. Managerial talent centers5. Measures of performance responsibility centers include:a. Responsibilityb. Authorityc. Accountabilityd. All of the above6. Budget variances are:a. A result of positive revenuesb. The difference between what was budgeted and what actually occurredc. A budget that accommodates a range of activitiesd. A tangible asset pledged to repay a loan7. Common variances used by health care organizations includea. Revenue varianceb. Traditional profit centerc. Expense varianced. a & c8. Budget variances associated with short term strategies includea. Revenue enhancementb. Cost containmentc. Revenue attainmentd. b & c9. Common complications when using measures to judge financial performance include:a. Loss of controlb. Greater speedc. Promotion of short term thinkingd. Efficient use of time10. Major employee compensation model which of the following advantages:a. Income predictabilityb. At risk distributionc. Income contingent on uncontrollable forcesd. No financial incentives or 1. The degree of decentralization has to balance the advantages and disadvantages within ahealthcare organization. or ? 2. Loss of control is a disadvantage of decentralization. or ? 3. Transfer center is a type of responsibility center. or ? 4. A basic attribute of a responsibility center is authority. or ? 5. The result of a favorable variance is less income received than budgeted. or ? 6. Budget variance measures that are long term promote revenue enhancement. or ? 7. Cost centers are responsible for providing services and controlling their costs. or ? 8. Budget variances should not occur with approved budgets. or ? 9. Cost containment means eliminating certain classes of cost. or ? 10. At risk compensation system is based totally on achieving performance goals. or ? Chapter 12Multiple Choice1. Cost to charge ratio (CCR) is on the most common methods used by :a. Physiciansb. Hospitalsc. Dentistsd. a & c2. Costs to which payments is not directly attached include:a. Administrationb. Patient care servicesc. Pharmacy Servicesd. Food Services3. Which of the following is not a step for allocating indirect costs to service:a. Determine an allocation base and compile costs to service basic statisticsb. Convert basic statistics while disregarding square feet and number of employees.c. Convert basic statistics for the step down approachd. Calculate allocation percentages4. Activity based costing cost finding method:a. Allocates costsb. Uses static measures to determine costsc. Estimates costs of a service by measuring costs of activities it takes to produce a service.d. Determines cost of an object including both direct and indirect costs5. Activity based costing is: a. Top down approach b. Bottom up approachc. Horizontal approachd. Vertical approach6. The key terms used in costing include:a. Direct Costb. Indirect Costc. Cost Drived. All of the above7. In a step down cost finding method, the following areas are allocated:a. Utilitiesb. Laboratoryc. Pediatric Servicesd. a & b8. In the step down allocation method:a. Order in which services are allocated makes a difference in the final costsb. Allocation basis used to allocate costs makes a differencec. Number of centers to which costs are allocated makes a differenced. All of the above9. Activity Based Costing is:a. A newer methodb. An old established methodc. Not used in healthcared. None of the above10. Which of the following is not a method to estimate costs:a. Step down methodb. Activity ratioc. Cost to charge ratiod. Activity based costing or 1. The step down method is a cost finding method. or ? 2. Direct costs include payments not attached to a service. or ? 3. An allocation base is a dynamic method of determining costs related to providing care. or? 4. Activity based costing is a step down method. or ? 5. Traditional cost allocation is a top down approach. or ? 6. A cost driver is that which causes a change in the cost of an activity. or ? 7. Cost to charge ratio is based on assumed relationship of costs to charges. or ? 8. Fully allocated cost includes both direct and all other costs allocated. or ? 9. Cost to charge ratio is a common method used by dentists. or ? 10. Laboratory costs are allocated on the basis of lab test costs. or ? Chapter 13Multiple Choice1. In the healthcare payment system are various stakeholders. These include:a. Contractorsb. Patientsc. Vendorsd. a & c2. The objectives of the U.S. healthcare payment system include:a. Accessb. Costc. Qualityd. All of the above3. Medicare’s value based payment demonstrations have had what effect on expenditures?a. Great successb. Fair successc. Little or no effectd. None of the above4. Blue Cross Blue Shield got its start in:a. 1929b. 1949c. 1959d. 19655. The Medicare program was enacted as part of the Social Security Act in:a. 1955b. 1960c. 1965d. 19676. Health Maintenance Organization (HMO) is:a. A perspective payment methodb. A legally Incorporated organization that offers health insurancec. An organization that rations cared. A rating method used by indemnity insurers7. Value Based Purchasing is:a. A monthly payment by a person to an insurerb. A method of reimbursement based on payment for services renderedc. A method to control costs through monitoring and prescribingd. A payment methodology designed to provide incentives to providers for delivering qualitycare at lower costs8. Never events are:a. Adverse patient outcomes due to provider negligence that are not typically not reimbursedb. Methods of rewarding quality of carec. Quality populations based on paymentd. Payment strategies for reducing health care spending9. Accountable care organizations performance is measured by:a. Patient experienceb. Care coordinationc. Preventative health cared. All of the above10. Hospital reimbursement by Medicare includes:a. Case ratesb. Ambulatory payment classificationsc. Cash Ratesd. a & b or 1. A payor may be a regulator. or ? 2. Evidence based medicine refers to the best evidence currently available. or ? 3. Shared savings is a payment strategy used to give the patient a percentage share of savings ontheir care. or ? 4. Medicare is not part of the Social Security Act. or ? 5. Copayments and deductibles have been a part of insured patients responsibility from thebeginning of employer insurance offerings. or ? 6. Medicare has only two parts, A & B. or ? 7. Per diem rates refer to a rate that covers everything a hospital provides during an entireinpatient stay. or ? 8. Steerage is influencing of patients to use a particular set of providers. or ? 9. Capitation is a form of payment that compensates the provider a certain amount per capita for adefined set of services. or ? 10. Experience rating is a method of setting group premium rates that are based on projectedhealthcare costs of a group. or ?