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Process of Financial Management

answer

process of ensureing materials and other resources are bought and used efficiently and economically; attain goals.

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Value of Financial Management

answer

Administrator has informatio to make decision and manage facility. Control device - measure performance against original plans.

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Administrator's role in Financial Mangement

answer

owners hold administrator responsible for proper financial management of facility. Varies according to type of ownership. chain organizations may do budgeting, payroll, group purchasing - administrator may have little input. Smaller organizations usually have CPA to supervise accounting, make financial reports, handle payroll, etc.

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asset

answer

a thing of value, things owned, such as cash, equipment, real estate.

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current asset

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cash or other short-lived asset, i.e. A/R and CDs that are used up usually within 1 year.

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fixed or non-current assets

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will not be used up within a year||i.e. building, equipment, etc.

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tangible assets

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have physical characteristics, they can be SEEN and TOUCHED

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Intangible assets

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are non-physical, such as COPYRIGHTS, patents and GOODWILL

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book value

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is cost of a depreciable asset less accumulation depreciation ||depreciable asset - depreciation

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capital

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is a term meaning funds to be used in business. Real esate, buildings and certain equipment can be included under certain conditions. |

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investment capital

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cash used to purchase real estate and equipment, and to build - used to produce operational revenues.

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working capital

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excess of CURRENT ASSETS/CURRENT LIABILITES. |A measure of company's ability to pay bills.

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capital expenditure

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expenses of increasing book value of facility assets.

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contract for personal services

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involves the offer of money, consideration, acceptance. Spell out duties, authority, time, remuneration, ESCAPE CLAUSE, other terms

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earnings

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refers to generated revenues, or income. Gross erarnings are total revenues or income

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gross profit

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net sales - cost of goods

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operating profit

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gross profit - operating expenses

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net earnings (net profit)

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revenues - expenses

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dividends

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earnings distributed to owners

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retained earnings

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earnings not distributed to stockholders, limited, or IRS will tax.

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equities

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interest in or claims upon assets by the owners ||capital stock + retained earnings

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fixed expense

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fixed expense remains constant without regard to volume of business||i.e. mortgage payments, leases, taxes

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variable expense

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change with volume of business||i.e. food, medical supplies, utilities, etc. Often shown graphically.

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semi-variable expense.

answer

Dr. Allen uses this term in reference to CNA wages. For example, if a facility census drops by 5 from one day to the nest, the administrator may send an aide home to keep within budgeted HPPD numbers, thus that employee's wage may be described as a semi-variable expense.

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gross income

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total income from all services. Also, capital gains, interest on bonds, workers' compensation insurance benfits

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operating expense

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those incurred in normal operations of business - salaries, benefits, utilities, materials, rents, etc.

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liabilities

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debts or obligations owed.

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current liabilities

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are debts usually due within one year,such as FICA taxes, FWT, notes payable and dividends

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Long-term liabilities

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debts not due for a period usually more than one year, such mortgages, bonds, and property liens.

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lien

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claim or charge on property for payment of obligations

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liquidity

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denotes how quickly an asset can be converted to cash without appreciable loss

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marginal return

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point at which revenues equal expenses, the break-even point

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mortgage

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conditional transfer of title on property by a borrower to a lender to secure payment of a debt or loan

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net worth

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total assets - total liabilities

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note

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written promise to pay definite sum of money on a certain date usually with interest

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sole proprietorship

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legally liable for business debts

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partnership

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legally liable for business debts

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corporation

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not generally liable for business debts, except payroll taxes. best for owner's protection against liabilities of business.|

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S corporation

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no corporate tax, except some long-term capital gains. profits or losses claimed on individual tax returns

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limited liability corporation ( LLC)

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combines characteristics of CORPORATIONS AND PARTNERHSIPS. more flexible management. profit and losses can be allocated regardless of how stockholders are invest in the company.||IRS will attach owners assets when corporation does not remit payroll taxes.

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fiscal year and budgeting

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corporations choose any 12 months. partnerships generally use calendar year. sole proprietorships use calendar year.

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budget

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plan expressed in numerical terms that is a forecast of revenues/expenditures for fiscal year. also budget other resrouces - allocating staff, space, equipment, supplies

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master budget

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includes cash budget, capital budget, liquidity ratios, pro forma finanical statement

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CAPITAL BUDGET

answer

INCLUDES REAL ESTATE, BUILDINGS, QUIPMENT, USALLY LIMITING FACTOR AS RE-COVERAGE FROM EXPENES TAKES LONG TIME, ||MEDICARE COUNTS $5000 OR MORE AS CAPITAL IF ITEM HAS USEFUL LIF IN RXCESS OF 1 YEAR (PREVIOUSLY $500 OR MORE)

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CASH BUDGET

answer

FORECAST OF ALL CASH RECEIPTS AND DISBURSEMENTS. CONSIDERS SCHEDULE OF CASH INFLOWS AND PAYMENTS OF OBLIGATIONS. SHOWS AVAILABILITY OF CASH.

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value

answer

makes possible plans to invest surplus and for periods when expenses exceed income

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OPERATING BUDGET

answer

INCLUDES DETAILS OF ATINICPATED REVENUES (INCOME) BY SERVICE, AND ANTICIPATED EXPENDITURES BY CATEGORY. ||HELPS TO CONINUOUSLY STUDY AND CONTROL FINANCES|||(ROAD MAP TO FUTURE)

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INTEGRATED BUDGET

answer

a document that projects all capital and operating costs, as well as all revenues, and consolidates this information

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methods

answer

most chain organizations have computerized financial management. local facility computers linked with MAINFRAME COMPUTER IN CENTRAL OFFICE

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advantages of methods:

answer

easier to access computer data, makes comparisons, etc. ||most budgets now prepared by central office in chain organizations, may ask for administrator input. some have administrator develop budget, send to central office, which negotiates with administrator. family owned facilities still depend on administrator to develop budget.

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timing of budget

answer

begin well before beginning of fiscal year- biggest error is waiting too late.

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basis of budgeting

answer

on past years' experience, historical trends, and future expectations

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forecasting budgets

answer

begin with overall facility utilization forecasts-average daily census, resident days by payer, anticipated changes in needs, trends in economy, employment rates.

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reason for budgets

answer

to determine reasonable costs and plan cost control

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departments in budgets

answer

involve department heads in budgeting for own units. promotes cooperation.

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keep revenue cost in balance

answer

no deficit budgeting

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zero-based

answer

evaluated costs and benefits of all activities in comparison to alternative expenditures, rank and chose from alternatives in term s of how they fit overall priorities

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value of budget

answer

a. it expresses in financial terms the goals and programs|b. it provides criteria for evaluation of performance|c. it serves as a control device

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Accounting

answer

standards established by accountants and boards - GAAP. Nearly all facilities now use computerized.

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define accounting

answer

includes bookkeeping, budgeting, reports, specials studies, auditing, designing systems

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bookkeeping

answer

very mechanical, recording of business transactions.

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double-entry accounting

answer

each transaction has equal debits, equal credits

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cash basis

answer

revenues/expenditures recorded when actually received or paid out, except for depreciation expense.

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accrual basis

answer

revenue/expenses recorded when incurred. Medicare REQUIRES

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Accounting records: account

answer

summary of changes in assets, liabilities, stockholders equity, revenue, expense. each account given titles that describes nature of item included (equipment; utilities, auto expense...)|

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Chart of Accounts

answer

completel list of all categories in the ledger - may include number - receivables and payables - like table of contents.

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journal

answer

book of original ENTRY. CONTAINS al financial transactions in chronological order. tells where to post debits and credits.

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ledger

answer

complete listing of all accounts and their balances, payable and receivable

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Financial Statements: trial balance

answer

list of all accounts and their balances, except account with zero balance. made at an y time, used in preparing other statements

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balance sheet

answer

summarizes assets, liabilities, and stock holders' equity. reflects SOLVENCY. made up at ANY TIME

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earning statement

answer

compares revenues with expenses incurred to produce income. reflects PROFITABILITY. ALSO CALLED PROFIT AND LOSS STATEMENT. |

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retained earnings

answer

explains changes in retained earning tha occur between balance sheet dates

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statement of changes in financial position

answer

shows flows of funds into and out of the business. derived from and ties together b, c, and d in single report.

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bank statement

answer

lists balances at beginning of month, deposits, checks paid, bank charges, interest, daily balances, and ending balance. RECONCILE immediately upon receipt monthly

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cash-flow statement

answer

sometimes used to show cash receipts and disbursements leading to net change in cash in a given period. provides information to plan for short range, cash needs or able to pay obligations promptly

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three basic steps in accounting

answer

Entries- transactions recorded as they occur in the journal. tells where to post.||posting - transfer of debits and credits from journal to ledger which is charts of accounts - payables and receivables||tabulate - account balances periodically.

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amortization

answer

allocation of costs of non-current, intangible assets over a specified period of time. also, of debt-monthly payments

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depreciation

answer

all assets costing $5000 or more and used more than one year are depreciated. allocation of costs of tangible assets over a specified period of time. cause of depreciation is decrease in value due to use, obsolescence, action of elements...

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straight-line depreciation method

answer

distributes the same dollar amount of depreciation to expenses each year during the asset's assigned life. (required by medicare)||cost - salvage value|________________||assigned life

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accelerated depreciation

answer

allocates larger amounts of depreciation in the early years of an asset's assigned life. DOUBLE-DECLINING is the type that allows applying the doubled rate each year. SUM-OF-THE-YEAR'S_DIGITS is another accelerated method that has high depreciation charges in the early years of an asset's life. PRODUCTION -UNIT, SERVICE-HOURS and others are not often used.

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accumulated depreciation

answer

the total depreciated take to date on a depreciable assets

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salvage value

answer

if there is a salvage value, subtract from cost before depreciating.

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adjusting entries

answer

done by accountant if administration is concerned with PROFITABILITY. also done for discounts on purchasing, for uncollectable bills,and at the end of the year. | a. adjustment in basic bookkeeping is done in journal| b. error notedin audit is adjusted in ledger

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break-even analysis

answer

determining break even point when income equals expenses- marginal return. |analyze variable and fixed expenses.

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value of break-even analysis

answer

dcan study volume of service and expenses in integrated manner; expenses more closely controlled; decision on expansion can be carefully considered; easy-to-read report summarizing date contained in various income statements

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lower break-even: do 3 things -

answer

1. reduce fixed costs, (mortgage)|2. increase prices where possible,|3. lower variable cost

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percent occupancy

answer

determined by dividing the number of possible patient days into the number of actual patient days, multiplied by 100|||actual days |_________||possible days|||(possible days = # of bed x days in month)

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payback period for capital investments

answer

original cost|__________||savings per year

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auditing

answer

checking accounting records for accuracy. can have compliance audit

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nursing costs

answer

cost of drugs $0.60 ppd. 100 beds with 90% occupancy. how much do you expect to spend in a 20 day month||100 beds x 90% occupancy = 90 pts|90pts x $0.60 cost ppd = $54.00 total cost/day|$54.00 total cost/day x 30 days = $1620.00

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ratio analysis

answer

analyzes strength and profitability, and efficiency of operations. done by determining relationships between certain items in balance sheet and earnings statement, and pairs of items of different statements

question

ratio analysis: current or working capital

answer

shows excess of current assets over current liabilities. expressed as 1.5:2. creditors interest in this ratio.||i.e. 25k/50k = 1.2

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quick or acid test relates quick assets (cash, AR) to current liabilities (creditors and owners interest in this.)||acid test ratio = quick assets| __________| | current liabilites

answer

...

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note on ratio analysis:

answer

a current ratio of 1:1 indicates the facility can pay its debts and perhaps have a surplus. at first glade a ratio of 2:1 appears much better. however, there may be too much money tied up in current assets that are not liquid. in this case, a quick or acid test may be better. a quick ratio of 2:1 means the facility has adequate assets to meet its obligations with a surplus that can be possibly invested until needed.

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Accounts Receivable: reimbursement sources

answer

medicaid|medicare|private pay|managed care|long-term care|||83% of residents pay in part or in whole by Medicaid/Medicare

question

numbers to know for AR

answer

question

AR audited

answer

must show that made an effort to collect money before putting on bad debt

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Medicaid -

answer

Title 19 program for medical assistance to the medically indigent - based on medical need.

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eligibility for Medicaid

answer

possess no more than a home, car, and other resources up to an amount set by the state and approved by CMS.|

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CMS and Medicaid

answer

State has official state Medicaid agency that administers program with CMS approval.

question

Medicaid Services

answer

include in-patient and outpatient hospital care, lab, x-ray, SNF and NF, home health, private duty nursing, dental, PT and OT, prescribed generic drugs and some other. Varies by state.

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medicaid - not covered

answer

materials for personal care - tooth paste, tooth brushes, OTCs, etc. State provides full lsit of what NH must furnish residents on Medicaid.

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Medicaid billing

answer

NH bills a fiscal intermediary chosen by the state. Nursing homes bill electronically on Form UB04 (failure to bill timely may result in forfeiture of that payment.

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Medicare Insurance Program

answer

PPS

question

Medicare Eligibility

answer

Anyone over 65 who is eligible for social security is eligible for Part A. Others over 65 may join and pay a premium. Certain disabled also eligible without regard to age. Everyone pays premium for Part B.

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Medicare Services PPS for SNF

answer

Part A covers in hospital in-patient, SNF, patient teaching (self-administration of medications, ostomy care, diabetic management, and rehab - PT, OT, ST. It does not cover respiratory therapy.

question

Medicare Therapies

answer

must be given 5 times weekly ; can be a comination of the therapy

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Length of stay (LOS)

answer

in SNF up to 100 days - as long as making progress. Must have had three day hospital stay within 30 days of discharged if it is continued care for condition that arose in original stay.

question

Medicare re-qualify

answer

for another 100 days if there is a 60 day break in skilled services. this does not mean the person has to be discharged from nursing home, nor does it mean just because they were discharged from the nursing home that the spell of service has been broken.

question

medicare payment

answer

in SNF Part A pays 100% of charges during 1st 20 days; resident pays co-payment from day 21-100 day. co-payment amount adjusted each january

question

medicare consolidated billing

answer

SNFs bills a fiscal intermediary selected by CMS. SNF bills for all ordered services given to residents, except for MD, respiratoy therapy, and emergency medical transportation. Billing includes all routine, ancillary, and capital-related cost- PT, OT, ST, lab, and x-ray test, drugs, supplies, non-emergency transpiration,etc. All these are included in th Medicare payment.|The nursing facility must pay the providers for these charges, as the nursing home is reimbursed through PPS

question

demand billing

answer

resident has the right to have facility bill Medicare for services even though the facility has determined he/she is not qualified. CANNOT BILL OTHER SOURCES UNTIL DETERMINATION OF CLAIM IS MADE BY THE INTERMEDIARY.||

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Denial Letter

answer

new regulations mandate that a 2-day notice is given to the resident/legal representative prior to discharging from Medicare Part A

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Electronic billing

answer

required. can bill at any time - usually monthly as must have invoices from vendors such as the therapies, labs, etc.

question

reimbursement rate

answer

is set by CMS based on the 53 RUGs (case mix). 2 sets of rates: metropolitan and rural

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provider's bill

answer

they bill the SNF for any covered service. ||ADVANTAGE - helps to reduce fraud as SNF will only pay for services actually rendered

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Other billing

answer

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late fees

answer

nursing homes may charge reasonable fee

question

Vendor's statement

answer

is basically a history of account - balance of last billing, added bills for service, payments made, current balance, and age of account. DO NOT pay by statement - pay only by invoice

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aging account

answer

value of aging account is two fold:||1. reminds resident his account is an arrears and needs attention, and|2. it helps you estimate actual amounts you can expect to collect.

question

Accountant collection rate by days delinquent

answer

1-30 days lose 5% 30,000 uncollectable|31-60 lose 10% 20,000 |61-90 lose 25% 15,000|91-100 lose 50% 5,000

question

delinquent accounts

answer

NHA should take active role||letters, phone calls, personal visits. The longer it takes, the less you will collect. when all else fails, may need to turn account over to collection agency or an attorney. before you do, suggest family take out loan and pay you - pay loan monthly

question

NPI numbers

answer

National Provider Identifier||in addition to facility's NPI, physicians providing services must be included on the UB04

question

receipts

answer

all funds received should be receipted and immediately recorded in proper accounts - first opportunity to lose money.

question

deposits

answer

all funds received should be deposited the same day they are received. Person receiving funds should not make up bank deposit slip - second chance to lose funds

question

statement

answer

bank statement should be reconciled immediately after receipt - 3rd chance to lose funds. do not allow person who makes deposit to reconcile statement - another makes deposit

question

savings

answer

keep as much money in savings as possible - make your money work for you. maintain only enough in checking to cover day- to-day cost. this is usually determined by corporate financial persons.

question

investment

answer

funds not used for as much as 20 to 30 days may earn most by keeping them in money market funds - they are still liquid

question

False Claims Act (Civil Ware - time law) to prevent false claims for services not rendered, double-billed, and not necessary.

answer

...

question

penalties

answer

FCA includes mandatory penalties from $5000 to $10,000 ore false or fraudulent claim, plus triple the amount of false claim and the cost of investigating and prosecuting for the claim

question

Health Care Fraud and Abuse COntrol (HCFAC)

answer

created as part of HIPAA in 1996. the office of Inspector General (OIG) and Department of Justice (DOJ) authorized to fight fraud. Resulted in significant saving already.

question

Safe Harbor Rules

answer

Get regulations from OIG. Governs reimbursement under Medicare/Medicaid. Not violate Anti-kickback Statute. involves investors, space and equipment rentals, personal services, management contracts, referral sources.

question

internal financial controls

answer

whatever is spent must be tightly controlled, the same as for funds you receive.

question

purpose of internal financial controls

answer

a. protect assets agaisnt theft and waste (safeguarding assets) - (main purpose)|b. ensure compliance with policy and procedure and Fed. Laws|c. Evaluate performance and efficiency.|d. ensure accurate, reliable data and accounting reports.

question

purchasing

answer

consolidate purchasing by |a. standardize both products and vendors well before purchasing,|b. centralize purchasing so all department heads do not purchase, |c. minimizing number of staff who can purchase. have strict purchasing procedures, and negotiate with vendors

question

billed

answer

billed to you by invoice; know a contact person

question

AP statement

answer

contains balance from last statement date, dates and amounts of payments, dates and amounts of new purchases, and new balance. Also contains age of amounts due. Do not pay by statement.

question

Payment

answer

by numbered invoice. Every check should be backed by invoices

question

use discounts

answer

and full credit period-helps with cash flow

question

INVENTORY CONTROL

answer

maintain proper levels to reduce working capital needs

question

economic order quantity (EOQ)

answer

method helps on when and how much to order. balances cost of reordering and carrying cost, and risk of running out. Must consider shrinkage, spoilage, and theft.

question

frequent reports

answer

to administrator on amounts on hand

question

perpetual inventory

answer

BEST. know amount on hand and cost based on use at all times. tighter control.

question

End of Year

answer

All inventories are valued. Supposed to use cost when purchased or current cost, whichever is less.

question

turn-over rate

answer

number of times an item is replaced during the year.

question

FIFO-

answer

older stock used first. inflation results in older stock being of higher value. also reduces spoilage.

question

LIFO

answer

New stock used first. Inflation makes value of remaining goods less than those just used.

question

storage

answer

freezers and storage rooms locked

question

spoilage

answer

-milk and others-make sure to rotate-FIFO

question

sudden increase in cost

answer

compare to same dates in prior years, see if cyclical.

question

energy

answer

cost appear too high, best to hire maintenance engineer to do energy audit, set up program for ONE person to audit - save enough first year to cover fees

question

cost mangement

answer

involves sensitivity analysis-purpose is to ancticipate changes in variable costs and to plan containment.||Due to increased competition, changes in reimbursement, more regulation

question

employees biggest problem in cost management. Only solution

answer

1. do not buy miracles items|2. request free trial on new items.|3. consider what you CAN AFFORD|4. analyze cost effectiveness - product may be good, but too expensive for what you get|5. teach staff cost control starting with budgeting|6. manage cash flow-use discounts, full credit period, work resident accounts (best way to increase cash flow), keep inventories down, sale of stock. |7. Lag-time- if receipts late, use line of credit, pledge accounts receivable, borrow from retained earnings, bank loan|8. regularly compare expenditures to see if within budget.

question

payroll accounting: records

answer

attendance and payroll. |Wage & Hour says keep at least 3 years.|May keep employee earning record.|

question

check stubs

answer

show gross pay, medicare, SS, FWT (other authorized withholding), amount of check, totals year-to-date.

question

remitting withholdings

answer

to IRS Medicare, SS, FWT via bank deposits

question

look back period

answer

4 quarter previous year - if paid 50k or more, MUST deposit via ELECTRONIC TAX DEPSOIT SYSTEM (EFTDS). advantage of EFTDS: reduces errors, makes corrections easier, acknowledges recipt in 48 hours.

question

Deposit less than 50k

answer

must deposit in bank by the 15th of next month, unless total is less than $2500, then can remit to IRS quarterly. may use electronic or hardcopy depositing.

question

FUTA

answer

depositing quarterly with state workers' comp. agency & with IRS at end of year. if amount exceeds $500 for year, Federal part must deposit quarterly.|

question

basis of worker's comp premium

answer

total payroll, claims experience, risk class, & some other legal requirements

question

garnishments

answer

do not fire unless it meets federal standards

question

overtime

answer

make sure you have employees properly classified - exempt vs. non-exempt. if in doubt, contact DOL

question

Resident funds

answer

keep all who request it (in writing)

question

clerk

answer

only one person should handle. have policies and procedures to provide financial controls.

question

documentation

answer

all received, all withdrawn documented with receipts and/or signatures

question

charges

answer

no charges to personal account for items paid by medicare/medicaid

question

deposits under $50

answer

may keep in petty cash, interest earning account, or non-interest earning account. |1. over $50 in interest earning accout, interest to each individual.|2. total funds within $200 of SSI (may be refered to as resource limit) notify resident in writing. |||NOTE: for med A recipients in the nursing home the regulations states for those patients the dollar amount to the interest bearing account is $100. It does give the facility the leverage to use the "$50 rule" however.

question

surety bond

answer

facility bond or assurance approved by DHHS, at least to cover all resident funds. may have alter nature assurance.

question

conveyance at death within 30 days -

answer

funds and accounting to person or probate administrating estate.

question

co-mingling

answer

(cannot do) resident's funds must never be included with or in any way.

question

procedures for residents funds

answer

carefully followed and documented for funds and personal valuables; otherwise facility may be responsible.

question

petty cash fund

answer

1. established on imprest basis when is periodically reimbursed from general cash.|2. reconcile when run out of cash, group receipts and post to correct account, total groups of receipts and write check for that amount|3. value-conveience on things lik e postage due and small purchasse, and reduces check writing.

question

Auditing

answer

the checking, reviewing, testing, and verging, the accuracy of accounting records, usually by a CPA||1. annual audits are required|2. compliance audit - is one that includes accuracy and that determines whether all business procedures were followed|3. annual cost report is required of every medicaid agency.

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