Solution Manual For Introduction to Health Care Finance and Accounting 2th Edition Carlene Harrison,

Instructor Manual: Introduction to Health Care Finance and Accounting 2e Carlene Harrison, William P. Harrison, Carol Taylor

Solution Manual For Introduction to Health Care Finance and Accounting 2e Carlene Harrison, William P. Harrison, Carol Taylor Chapter 1: The Environment of Healthcare Finance

TABLE OF CONTENTS Purpose and Perspective of the Chapter ................................................................................................... 2 Chapter Objectives ..................................................................................................................................... 2 Complete List of Chapter Activities and Assessments............................................................................. 2 Key Terms.................................................................................................................................................... 2 What's New in This Chapter ...................................................................................................................... 4 Chapter Outline .......................................................................................................................................... 4 Case Study Scenario Activities .................................................................................................................. 9

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Instructor Manual: Chapter 1: The Environment of Healthcare Finance

PURPOSE AND PERSPECTIVE OF THE CHAPTER Although many of the accounting and financing needs of healthcare facilities are much like those of other businesses, some are unique to healthcare. This chapter looks briefly at the background of financing in healthcare before describing what the various types of business organization formats—such as proprietorships, LLCs, and corporations—look like in the healthcare world. The chapter also provides an overview of the different types of medical facilities and what services they provide.

CHAPTER OBJECTIVES The following objectives are addressed in this chapter:         

Explain the similarities and differences of health care from other types of businesses. Discuss the background of financing health care in the United States. Analyze the factors causing the growth of inpatient hospital facilities until the mid-1980s and the decline after that time. Identify the variety of services provided in outpatient settings. Analyze the growth in outpatient services and home-based services. Describe the functions of nursing homes, the rise of life-care facilities, and hospice care as a specialty within health care. Describe the legal differences between proprietorships, partnerships, and corporations. Explain the use of professional corporations (PCs) and limited liability partnerships (LLPs) to control business liability. Discuss the differences in function and mission between for-profit, not-for-profit, and governmental healthcare organizations.

COMPLETE LIST OF CHAPTER ACTIVITIES AND ASSESSMENTS Refer to the Learning Objectives Mapping document, posted on the online resources, for a comprehensive guide to how this chapter's learning activities and assessments support the learning objectives. [return to top]

KEY TERMS Capitation plans: Insurance programs that pay providers a specific amount in advance to provide healthcare services to members. Providers are normally paid on a per-member, per-month (PMPM) basis. Unless otherwise stipulated in the contract, the provider bears the full costs of providing agreed services to members and accepts the monthly payment amounts as the full amount due under the contract. Certificate of Need (CON): A legal document required in 36 states and federal jurisdictions issued by healthcare authorities prior to the expansion of an existing hospital or construction of a new facility. Corporation: A business entity where the business is separate and distinct from its ownership, providing limited liability to its stockholders.

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Instructor Manual: Chapter 1: The Environment of Healthcare Finance

Equity: Ownership. Fee-for-service: The reimbursement to a medical service provider for specified services based on a fee schedule established by the third-party payer and agreed to by the provider. Health maintenance organizations (HMOs): A form of managed care healthcare insurance. A primary care physician ―gatekeeper‖ coordinates patient care and directs patients to specialists. Plan participants are required to use medical service providers within the HMO network. Hospice care: Care designed to meet the needs of dying patients and their families, keeping the patient free of pain and attending to the spiritual and emotional issues faced during this stage of life. Hospital Survey and Construction Act of 1946: Legislation that required the states to implement plans for hospital construction programs and provided federal grants to finance the construction of community hospitals. Inpatient facilities: These facilities, most commonly hospitals, provide medical services where the patient resides in the facility for a minimum of one overnight stay. Limited liability partnership (LLP): A structure authorized under state statutes for a medical services partnership to limit the partners’ liability in malpractice. Long-term-care facilities: These facilities, such as nursing homes and life-care facilities, meet extended care needs of patients who are no longer able to live independently. Managed care: A term used to describe efforts to provide quality care at a reasonable cost. Outpatient facilities: Facilities that provide medical services without overnight stays. Palliative care: The medical care provided to a patient at the last stages of life, designed to manage the symptoms of the patient’s final illness and provide relief from pain. Partnership: A business owned by two or more individuals or entities. Preferred provider: Healthcare insurance programs that restrict plan participants to an approved list of providers who have contractually agreed to accept established reimbursement schedules for medical services. Professional corporation (PC): A legal form of business, also known as a professional association (PA), established to allow proprietorships to limit the liability of the owner. Proprietorship: A business owned by one individual. Spend-down: A term used for the process that occurs when an individual’s financial resources are exhausted and the individual becomes eligible for Medicaid assistance in meeting nursing home bills. Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982: Legislation that abolished the former cost-plus Medicare reimbursement system and replaced it with standardized reimbursement tables. Telehealth services: Allows a patient to schedule an appointment and meet with a healthcare professional remotely, who assesses a patient’s needs virtually through video or audio. [return to top]

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Instructor Manual: Chapter 1: The Environment of Healthcare Finance

WHAT'S NEW IN THIS CHAPTER The following elements are improvements in this chapter from the previous edition:  

A discussion on the COVID-19 pandemic and its impact on telehealth services has been included. Inpatient and hospital trends statistics were updated to reflect changes due to the COVID-19 pandemic.

[return to top]

CHAPTER OUTLINE The following outline organizes activities (including any existing discussion questions in PowerPoints or other supplements) and assessments by chapter (and therefore by topic), so that you can see how all the content relates to the topics covered in the text. I. Introduction (Chapter Objective: Explain the similarities and differences of health care from other types of businesses.) a. Healthcare facilities have accounting and financial management needs that are similar other businesses. b. Major differences from other businesses include a third-party payer system as well as services from a unique mix of providers such as governmental agencies, free-enterprise for-profit businesses, and not-for-profit corporations, each of which have different goals. c. Healthcare in the United States is heavily regulated. d. Knowledge Check Activity 1.1: < 5 minutes total (PPT Slides 14-15). In which of the following plans does the primary care physician coordinate patient care? (a) Capitation plan (b) Preferred provider plan (c) Health maintenance organization (HMO) plan (d) Fee-for-service plan  Answer: c. Health maintenance organization (HMO) plan  In an HMO, a primary care physician ―gatekeeper‖ coordinates patient care and directs patients to specialists when needed. II.

Financing Health Care in the United States (Chapter Objective: Discuss the background of financing health care in the United States.) a. Prior to 1900, individuals made their own decisions about health care services and paid from their own funds. b. Blue Cross was created in 1933 to insure against unexpected hospital expenses. c. Blue Shield later formed to cover physicians’ fees. d. Health insurance became a standard employer-provided benefit to employees in the 1950s. e. Federally backed Medicare and Medicaid arrived in 1965. f. After the passage of the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, Medicare began using a diagnosis-related group (DRG) system to establish payment rates.

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Instructor Manual: Chapter 1: The Environment of Healthcare Finance

g. Modern health insurance plans attempt to control costs through a variety of managed care approaches. i. Health maintenance organizations (HMOs) ii. Preferred provider networks iii. Capitation plans h. Knowledge Check Activity 1.2: < 5 minutes total (PPT Slides 20-21). A business entity where the business is separate and distinct from its ownership, providing limited liability to its stockholders is called a: (a) Proprietorship (b) Partnership (c) Corporation  Answer: c. Corporation  A corporation is a business entity where the business is separate and distinct from its ownership, providing limited liability to its stockholders. III.

Types of Medical Businesses (Chapter Objective: Describe the legal differences between proprietorships, partnerships, and corporations; Explain the use of professional corporations (PCs) and limited liability partnerships (LLPs) to control business liability; Discuss the differences in function and mission between for-profit, not-for-profit, and governmental healthcare organizations.) a. For-Profit Healthcare Organizations: Proprietorships and Professional Corporations (PCs) i. Proprietorships are easy to form, owned by one individual, and its profits are taxed as personal income to the owner. ii. Disadvantages of a proprietorship include the difficulty in selling the business concern and unlimited liability for any debts or legal settlements. iii. State statutes allow proprietorships to form a professional corporation (PC) to limit liability. b. Partnerships and Limited Liability Partnerships (LLPs) i. Partnerships are relatively easy to form, owned by two or more individuals, and profits are taxed as personal income to the owners. ii. Partnerships have the same disadvantages as proprietorships. iii. Limited liability partnerships (LLPs), available under a number of state statutes, retain unlimited liability to the partners for most debts, except for those resulting from malpractice settlements. c. Small For-Profit Corporations i. Organization as a corporation requires only a corporate charter and a set of bylaws. ii. Small corporations may function much like a proprietorship or partnership and can be privately held or public. iii. An S corporation format means profits are passed through to stockholders (usually few in number) and taxed as personal income. d. Large Publicly Held Corporations i. Because large public corporations raise funds by issuing stock, they may have thousands of shareholders. ii. Large corporations may continue to provide goods and services indefinitely because they have unlimited life.

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Solution Manual For Introduction to Health Care Finance and Accounting 2th Edition Carlene Harrison,

Published on Mar 3, 2026

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Solution Manual for Introduction to Health Care Finance and Accounting, 2nd Edition by Carlene Harrison, William P. Harrison, and Carol Taylor is a comprehensive academic resource designed to help students and professionals master finance and accounting principles in healthcare settings. This solution manual provides step-by-step solutions and detailed explanations aligned with textbook exercises, covering topics such as financial statements, budgeting, cost analysis, revenue management, performance evaluation, and decision-making in healthcare organizations. Ideal for homework support, assignments, case studies, and exam preparation, it strengthens analytical skills and practical understanding of healthcare finance. Instructors can also use it as a reliable reference for creating assessments efficiently. Preview this publication online and download the complete solution manual to access all solutions and enhance learning outcomes in healthcare finance and accounting.