It summarizes the anticipated major purchases for the year
What are net charges?
The amount that an organization bills its patients after accounting for discounts and allowances. See gross charges
What is the operating budget?
It is comprised of the revenue budget and the expense budget. The bottom line for this budget is net income
What are relative value units (RVUs)?
A standardized weighting applied to services which reflects the amount of resource consumption to provide that service. A service assigned two RVUs consumes twice the resources as does a service assigned one RVU
What is statistics budget?
The first budget to be
prepared. One of the four major types of budgets. It identifies the amount of
services that will be provided, typically categorized by payer type.
What are administrative cost centers?
Cost centers that support clinical cost
centers and the organization as a whole. They are often considered the
infrastructure of the organization.
What is a flexible budget?
A budget that accommodates a range or multiple levels of activities
What is a responsibility center?
An organizational unit that has been
formally given the duty to carry out one or more tasks and/or achieve one or
Define service centers
Organizational units that are primarily responsible for ensuring that health care–related services are provided to a population in a manner that meets the volume and quality requirements of the organization.
They have no direct budgetary control.
What is a transfer price?
The price for products or services which are charged internally to other organizational units
What is the function of working capital?
It is through its working capital that a health care organization collects its funds, pays its employees, buys its supplies and pays
Compare aggressive and conservative asset risk strategies
In the aggressive approach the health care
organization attempts to maximize its returns by investing its funds in
non-liquid assets such as buildings and equipment. Conversely, in the
conservative approach, a health care organization accepts lower returns with
higher liquidity so as to minimize its risk of not having sufficient funds to
pay current obligations.
What is the difference between temporary and permanent working capital needs?
Temporary working capital needs result
from seasonal changes, while permanent working capital needs arise from more
ongoing factors, such as a permanent increase in patient volume.
List three reasons a healthcare facility holds cash
Daily operations refers to holding
cash so that day-to-day bills may be paid. Precautionary purposes refers
to holding cash to meet unexpected demands.
Speculative reasons refers
to holding cash to take advantage of unexpected opportunities.
What is an unsecured loan?
An unsecured loan is one which is not backed by collateral
What does 1.5/15 net 25 mean?
1.5/15 net 25” means that a 1.5% discount will
be given if payment is made within 15 days. “Net 25” means that if the discount
is not taken, then the full amount is due within 25 days.
What are the objectives of billing, credit, and collection policies?
The objectives of billing, credit, and collection
policies are to accelerate cash receipts and to maximize the ultimate
collectable amount of the accounts receivable.
Identify two problems that can delay the billing process?
• Address changes
• Lack of clarity as to who is
responsible to pay the bill
• Specific requirements demanded by
various third-party payors, such as retrospective review
What is the critical step toward capturing charges and identifying billing items?
Correctly identifying the diagnostic and procedural codes
Identify the alternatives for investing cash on a short-term basis