HFMA's CSAF 2021, Certified Specialist Accounting and
Finance
Contribution Margin
Difference between marginal revenue and marginal cost.
Break-even point
Level of sales volume of a product producing the exact amount of contribution margin
needed to cover fixed costs.
Overhead
Indirect Costs
Activity-based costing (ABC)
Method of determining product costs using cost drivers or activity measures, which
cause indirect costs to be incurred.
Three main types of Cost standards.
Predetermined (Synthetic), Negotiated (Historical), and Customized (Engineered)
Four Types of Individual Cost behaviors
Variable, Fixed Cost Pattern, Semi-Variable Cost Pattern, Semi-Fixed or Stepped
Variable
Three Principal Types of expense variances
Price, Volume, and Efficiency
The 4 Primary payment methods used in managed care
Fee-for-Service, Per Diem Rate, Case Rate, Capitation
Healthcare providers should develop different modeling tools depending on
the reimbursement method proposed in the contract
The general categories of provider excess loss insurance are
per-person, aggregate, and carve-out.
A Strategic Plan allows organizations to
have a clear plan as to why they are in business and how they can stay in business in
the future.
The main types of control budgets include
operating, capital, and cash.
A budgeting process develops assumptions for the following:
Admissions, ALOS, Expense per visit, Inflation on expense, FTE per visit, Productivity
on FTE per visit, Labor cost per FTE, Net Rev per visit
Operating budget's statistical factors include
Historical statistics, Historical relationship of department volume, anticipated effects of
new programs, clinical practice patters, covered lives in global payment risk programs,
changes in regulatory environment, technical developments, process improvements,
marketing efforts, demographic trends
The primary purpose of measuring productivity is
for management to determine if resources are being used efficiently
Budget types include
fixed and flexible
The four budget variances used to explain by cause are
Volume, rate (charged), price (of a supply), and efficiency (cost per procedure).
,Three common Capital Evaluation techniques
Payback, Net Present Value Method, Return on Investment
Users of ratio analysis
Board of Directors, Management, Health Systems Agencies, Creditors, Employee
Unions, Rate Regulators
The categories of ratios used
Profitability Ratios, Liquidity Ratios, Activity Ratios, Capital Structure Ratios
Two common types of long-term debt
Revenue bonds and General Obligation Bonds
Undertake debt restructuring by either retiring or reacquiring existing debt for 4
reasons
Take advantage of lower interest rates, change collateral restrictions, allow acquisition
of other assets, better fit debt service requriements
Healthcare bond issues place legal obligations on
the borrower intended to protect the lender against default by the borrower.
In order to use the discounted cash flow method
you need to know the payment flow or payment pattern and the interest rate
Every capital investment proposal requires 4 quantifiable factors
Cash Outflow, Cash Inflow, Economic Life, Opportunity Cost of funds
Three significant Investment valuation methods
Discounted cash flow method, Replacement cost method, Market comparison
Two types of equity financing
Internal and External
In a capital lease, all of the benefits and risks of owner except title or ending
(salvage value)
get transferred to the lessee. The lessor recovers full price and interest during the lease.
An operating lease is
when the hospital is liable for the leasing cost; renewal options are determined by the
fair market value
Advantages of leasing
working capital is conserved, budgetary control, tax benefits may be realized, project
may be financed 100%, lessee has greater flexibility in replacing equipment
Disadvantages of leasing
Cost of extending the lease may be more than the actual purchase price, Interest costs
are higher than debt, third parties will recognize a full lease payment as allowable only if
a true operating lease, the leasing company frequently passes the cost of property tax
to the lessors
When issuing a rating on a specific organization, a rating agency will commonly
consider the following
Provisions or structure of the financing, competitive environment and market position,
medical staff characteristics, management capability, financial
Methods of a Cash budget:
Cash receipts and disbursements Method, Adjusted Net Income Method, Working
Capital Differential Method
Primary purposes of a cash budget:
,Identify cash requirements and sources for a certain period of time, control the flow of
cash funds
Healthcare organizations use commercial banking services for:
Controlled Disbursement Account, Depository Account, Concentration Account and
Zero Balance Account, Sweep Account
The components incorporated in a cash budget:
Ability of the organization to manage overall revenue cycle, projection of costs,
variability in activities that impact both revenues and expenses, regularly recurring or
periodic expenses, timing of capital purchases
An investment policy
Establishes a framework to make investment decisions and evaluate results
The returns, risks, and correlation are the primary inputs for
asset allocation models
Different types of asset allocation risks are as follows:
maturity (liquidity) risk, interest rate risk, credit risk, political (legal) risk, market (price)
risk
Three Internal control objectives:
Effectiveness and efficiency of operations, Reliability of financial reporting (external and
internal), compliance with applicable laws and regulations
Sarbanes-Oxley established:
Enhanced standards for accountability and penalties for wrongdoing.
Sarbanes-Oxley makes it so that CEOs and CFOs are responsible for:
Disclosure controls, ensuring specified information (controls) is made known to them,
regular evaluations of controls with quarterly certifications
PCAOB does:
Register public accounting firms, establish audit standards, inspect accounting firms,
disciplinary proceedings and appropriate sanctions, PCAOB budget.
Components of auditor's attestation report:
Objective, Date, Evaluation
Operational auditing is one technique available to
management to ensure objectives and organizational policies are effectively carried out.
Current liabilities
are satisfied within a year of the balance sheet date
Examples of current liabilities:
Notes payable to banks, current portions of long-term debt, accounts payable, advances
from and accounts payable to third-party payers for reimbursement settlements,
refunds, deferred revenue, accrued salaries, current portion of malpractice costs
Exemption requirements for nongovernmental not-for-profit healthcare:
No inures to private shareholder, no influencing legislation, no political campaign
IRS form 990 - Return of Organization Exempt from Income Tax
form for income tax under IRS section 501(a) and for non-exempt charitable trusts
Most healthcare organizations are dependent
on financing long-term debt
Advance refunding enables providers:
to restructure their long-term liabilities, reduce interest rates, or terminate restrictive
bond covenants
, Revenue usually is recorded when:
an enrollee or the service is provided to a patient or resident.
Donations of noncash assets that are not long-lived assets are recognized as
revenue
in the period received.
Donations received with no restrictions attached are reported as unrestricted
support in
the statement of activities.
Donor-restricted contributions may be reported as unrestricted support if
the organization reports consistently from period to period and discloses its accounting
policy
Donations of long-lived assets are reported as revenue in
the period received at fair value. (long-lived)
Donations of Cash used to acquire long-lived assets are reported as
temporary restricted support in the period received.
The equity method should be used when investment in voting stock gives
an investor the ability to exercise significant influence over operating and financial
policies of an investee. (method)
Reporting and disclosure requirements of nongovernmental healthcare
organizations:
Majority of a for-profit voting stock (consolidated statements), sole corporate member of
a not-for-profit entity (consolidated statements), entity controls another entity through a
majority voting interest (consolidated statements), 50% or less common voting stock
(Equity Method FASB ASC 323-10)
Financial Statements consist of:
Balance Sheet, Statement of Operations, Statement of Changes in Net Assets,
Statement of Cash Flows, Notes of the Financial Statement
Charity Care
Inability to pay
Bad Debt
Unwillingness to pay
HHS defines income:
Wages, Self-Employment, Social Security, Unemployment compensation, Worker's
compensation, Veteran's payments, public assistance, alimony and child support
Income does not include:
Capital gains, assets drawn down as withdrawals from a bank, sale of property house or
car, refunds gifts loans lump-sum inheritances, one-time insurance payments, or
compensation for injury
Realizable amounts determined by:
Contractual agreement, legislation (worker's comp), provider policy updates
Prospective rate setting is used to set payment rates in advance of
delivery of healthcare services, determine amount third parties will pay during the rate
year.
Retrospective rates setting determines
an interim rate and then a final settlement is made after the rate year.
First functions of CMS:
