Understanding Medicare & Medicaid: Orgs, Reimbursement & Accounting, Exams of Marketing Business-to-business (B2B)

Download Understanding Medicare & Medicaid: Orgs, Reimbursement & Accounting and more Exams Marketing Business-to-business (B2B) in PDF only on Docsity!

Proprietorships & Partnerships: Pros & Cons ANSPros: Ease of Information, Subject to a few regulations, no corporation income taxes. Cons: Limited life, difficult to transfer, unlimited life, difficult to raise capital.

Corporations: Pros & Cons ANSPros: Unlimited life, easy transfer of ownership, limited liability, ease of raising capital. Cons: Cost of formation and reporting, double or triple taxes must be paid.

Non-profit Organization ANSExempt from taxes. Goal is to improve community.

For-profit Organizations ANS(Investor Owned) Goal is to maximize shareholder return. Owe taxes.

Agency Problem ANSthe possibility of conflict of interest between the stockholders and management of a firm.

Example: Hire someone to carry out a job function, but they go out of their interests instead of best interests of company/organization.

Third-party payor system in the US (i.e. private vs public) ANSPrivate: Blue Cross Blue Shield, Commercial Insurers, Self-Insurers. (AETNA)

Public: Medicare and Medicaid-both offer services to different levels. "Safety net" Lowest reimbursement rates.

Reimbursement methods (fee-for-service vs. capitation) ANSFee for Service: payment is tied to amount of services provided. (Decades ago) Dental industry

Capitation: payment is tied to the size of the covered population (number of enrollees) Payment is based on per # per month. Decreasing utilization Population is healthier.

Medicare reimbursement for different types of providers ANSMedicare parts A, B & C.

Medicare Part A (aka Hospital Insurance or HI) ANSProvides hospital insurance automatically at age 65 (if FICA qualified) at no fee but may have deductible & co-pay.

Medicare Part B ANSThe part of the Medicare program that pays for physician services, outpatient hospital services, durable medical equipment, and other services and supplies.

Medicare Part C (Medicare Advantage) ANS•Replaces and covers expenses found in Part A and B •Medicare private fee-for-service plans (PFFS) •Medicare managed care plans (HMOs and PPOs) •Medicare specialty plans

Medicare—Part D Prescription Drug Coverage ANSa United States federal-government program to subsidize the costs of prescription drugs and prescription drug insurance premiums for Medicare beneficiaries.

Impact of the Affordable Care Act (what the bill changed about the healthcare environment) ANSCreated new standards, individual mandates, exchanges, and Medicaid expansion. Focused on quality through clinical compensation, bundled payment, value-based purchasing.

Regulations and standards of financial accounting (e.g. SEC, GAAP, FASB) ANS-Securities and Exchange Commission (SEC): has the legal authority to regulate the form and content of financial statements. -Financial Accounting Standards Board (FASB) -Generally Accepted Accounting Principles (GAAP): the conventions that have evolved from the pronouncements and rulings of the implementing organizations constitute a set of guidelines for the preparation of financial accounting statements. -ONLY applies only to financial accounting statements. Does NOT remain STATIC.

GAAP (Generally Accepted Accounting Principles) ANSSplit into 3 categories: Assumptions, Principles, & Constraints

Assumptions of GAAP ANSeconomic entity, monetary unit, periodicity, going concern

Principles of GAAP ANShistorical cost, revenue recognition, expense recognition (matching), full disclosure

Constraints of GAAP ANSMateriality & Cost-benefit

Accrual Accounting ANSAccounting that records the impact of a business event as it occurs, regardless of whether the transaction affected cash.

*More complicated, provides a better picture of true economic status of a business, is required by GAAP. Record revenue at the point of time

Cash Accounting ANSaccounting that recognizes business transactions only when cash is received or disbursed.

*Simple and easy and mimics tax statements. Record when I get paid for a service.

Income statement components ANSRevenues, expenses, non-operating income, taxes (if for profit), & net income.

Revenues ANSrepresent both cash received and payer obligations.

Test Question- ANSProvision for bad debt would be item on income statement.

Expenses ANSresource expenditures required to produce the revenues. (Both cash and noncash expenses are recognized.)

Non-operating Income ANSreports income from activities not related to the provision of patient services.

Example: philanthropic gift, 1 time gift

Taxes ANSFor profit=taxes, not-for-profit= no taxes.

Net Income ANSthe difference between total revenue and total expenses when total revenue is greater.

Net income measures overall (total) economic profitability as defined by GAAP

The time frame of an income statement ANSFor a specific period, usually annually.

Income statement for not-for-profit entities ANSYou can tell by looking to see if the statement has taxes or not, if not, it is not-for-profit.

Accounting Equation ANSAssets = Liabilities + Equity

Balance Sheet Components ANSassets, liabilities, equity

Assets ANSmoney and other valuables belonging to an individual or business

Liabilities ANSdebts that you owe

Equities ANSFinancial rights to the assets of a business

The time frame of a balance sheet ANSAt a current point of time, differs from income statement because in an income statement it is yearly (annually), or at a specific time.

Short-term investments (marketable securities) ANSInvestments in highly liquid, typically, low- risk, securities having a maturity of less than one year.

Example: T-Bills (treasury bills)

Long-term investments ANSInvestments in securities (financial assets) as opposed to buildings and equipment (real assets). Have maturities greater than one year.

Gross Assets ANSThe total value of the assets someone owns.

When purchased, fixed assets are posted on the balance sheet at their original (gross) cost.

Net Fixed Assets ANSgross fixed assets less accumulated depreciation.

Real assets (as opposed to financial assets) and are often called fixed assets. Have useful lives greater than one year, include land, buildings, and equipment.

Real Assets vs Financial Assets ANSReal: Assets used to produce goods and services. Financial: Claims on real assets or the income generated by them.

Accumulated Depreciation ANSA contra asset account representing the total depreciation taken to date.

Accounts Payable ANSAmounts to be paid in the future for goods or services already acquired.

stems from buying goods (typically medical supplies) from vendors on credit called trade credit.

Notes Payable ANSA written promise made by the business to pay a debt, usually involving interest, in the future.

Example: Bank loans

accured expenses ANSare payment obligations of the business, primarily: Salaries to employees, Taxes to government authorities, and Interest payments to debt suppliers.

Equity account in a for-profit firm vs. not-for-profit ANSFor-profit: equity is the amount of owner-supplied financing, or the shares that are owned by stockholders. Retained earnings- investor payments in the form of dividends.

Not-for-profit: the equity account is called net assets—it is the dollar value of assets net of liabilities.

Fund Accounting System ANSunrestricted, temporarily restricted, permanently restricted

Unrestricted: ANSno endowment restrictions-you can use money whenever.

Temporarily restricted ANSdonor may have specified some temporary restrictions such as number of years. You can use funds after a year.

Permanently Restricted ANSwhere only the earnings from endowment fund can be used. You can't touch principal amount. (Universities, academic medical centers)

Capital Structure ANSthe business's mix of debt and equity financing

Statement of Cash Flows ANSA financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.

Components of Statement of Cash Flows ANSoperating activities, investing activities, financing activities

Free-Cash Flow Calculation ANSnet cash provided by operating activities - capital expenditures

• cash dividends

Depreciation is a non-cash expense= acts as a tax shield Just add depreciation expense to net income, and that will give you free cash flow.

Net Working Capital (NWC) ANScurrent assets - current liabilities

Depreciation Calculation ANS(cost - salvage value) / useful life

Financial Ratio Categories ANSprofitability, liquidity, debt management, and asset management

Profitability ANSIs the business generating sufficient profits?

Liquidity ANSCan the business meet its cash obligations?

Debt Management ANSRight mix of debt and equity?

Asset Management ANSDoes the business have the right amount of assets for its patient volume?

If you were a vendor -what type of ratios would you be most interested in? ANSliquidity-do you have enough money to pay me?

Return on Assets Ratio (ROA) ANSnet income/average total assets

total margin ratio ANSnet income/total revenue

Return on Equity (ROE) ANSNet Income/Total Equity

Current Ratio ANScurrent assets/current liabilities

Days Cash on Hand Ratio ANS(Cash + Short-Term Investments)/(Expenses - Depreciation)/

Debt Ratio ANSTotal Debt/Total Assets

Debt to Equity Ratio ANSTotal Debt/Total Equity

Debt to Capitalization Ratio ANSLong-term debt/Long-Term debt - Equity

times interest earned ratio ANSEBIT/Interest

Fixed Asset Turnover Ratio ANStotal revenue/ net fixed assets

Days in Patient Accounts Receivable ANSNet patient accounts receivable/(net patient service revenue/365)

Average Age of Plant ANSaccumulated depreciation / depreciation expense

Contribution Margin ANSSales - Variable Costs

break even volume ANSfixed cost/(price-variable cost)

variable costs ANScosts that vary directly with the level of production

fixed costs ANScosts that remain constant as output changes

definition of healthcare finance depends on the context of: ANS1) policymaker or manager

2. type of healthcare organization

Health care finance ANSthe practice of finance, including both accounting & financial management, within health services (provider) organizations

Accounting ANSThe process of planning, recording, analyzing, and interpreting financial information.

Are accounting & financial mgmt independent? ANSNo, both capture, measure, & use data, but with different purpose

characteristics of business: ANS1) obtains financing from marketplace

2. uses funds to buy assets
3. operates the assets to provide goods or services
4. sells goods or services to create revenue

primary role of finance ANSto plan for, acquire, & utilize resources to maximize the efficiency (& hence value) of the enterprise

finance activities ANS1) planning & budgeting

2. financial reporting
3. capital investment decisions
4. financing decisions
5. working capital management
6. contract management
7. financial risk management

Four C's (summarize finance activities) ANS1) Cost minimization

2. Cash sufficiency

3. Capital access
4. Control of financial resources

finance dept usually organized as follows: ANSCFO (VP-Finance) Comptroller Treasurer

Comptroller ANShandles budgeting & reporting & payables & receivables mgmt

Treasurer ANShandles acquisition & employment of capital, debt mgmt, & financial risk mgmt

__________________________ decreases possibility of stealing ANSsegregation of duties

health service settings ANShospital (inpatient) ambulatory (outpatient) long-term care integrated delivery systems

Mgmt challenges - ACHE ANSfinancial concerns medicaid medicare indigent care & bad debt losses

ACHE ANSAmerican College of Healthcare Executives

HFMA ANSHealthcare Financial Management Association

Mgmt challenges - HFMA ANSbalancing financial & quality issues revenue cycle improvement access to capital (financing)

hybrid forms of organization ANSLimited liability partnership (LLP) Limited liability company (LLC) Professional corporation (PC) or professional association (PA)

stockholders have: ANSright of control, claim on residual earnings and residual liquidation proceeds

investor-owned corporations must pay (triple taxation): ANS1) property taxes

2. income taxes
3. sales taxes

if business meets stringent set of requirements, it can qualify as not-for-profit also called ANS1) tax-exempt

2. 501(c)(3)
3. 501(c)(4)

primary goal of not-for-profit corporations is given by a ____________________ ANSmission statement

all businesses have _________________ ANSstakeholders

ACA major provisions ANS1) access to health insurance

2. Medicaid expansion for low income individuals
3. banning of preexisting condition coverage limitations
4. extended coverage for young adults (up to 25 yrs) under parents insurance
5. mental health, maternity care, & emergency care
6. free preventative care
7. value-based payments, accountable care organizations, & medical homes

ACA value-based reimbursement ANSshift from volume-based care; reimbursement ties payments to quality of care provided

ACA/value-based care supposed to promote: ANS1) population health

2. clinical integration
3. data analytics
4. industry consolidation

Accountable Care Organization (ACO) ANSnetwork of physicians, other clinicians, hospitals & clinics share responsibility for providing coordinated care; ties payments to quality metrics & cost of care