Nursing 860: Health Operations & Financial Management for Nurse Leaders – Flashcards
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2. An IOM definition of quality is "...the degree to which health care services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge
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True
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7. Managerial accounting:
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c. Provides information that can be used to better manage the organization.
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Identify and discuss the steps necessary for the development of a health care related business plan.
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A business plan is detailed plan for a proposed program, project, or service. It will include financial information for financial feasibility. The steps necessary to develop a business plan include: project proposal, product definition, market analysis, rough financial plan, detailed operations plan, and detailed financial plan.
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8. In today's health care organization, communication between nurse managers and financial managers is essential. Financial managers need to help nurse managers learn how to develop a business case for investments in staff, equipment, and programs. Nurse managers need to: a. Provide clear explanation about clinical processes and patient safety concerns to financial managers.
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Provide clear explanation about clinical processes and patient safety concerns to financial managers
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a) project proposal:
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describes the project, product, or service.
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Product definition:
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the mission of business should be presented along with the goals and strategies to achieve it. What is the specific product? how can it be provided? what resources are needed? Unique benefits? How long will it take to get it up and running? Economic or technologic trends that could impact patient demand in the future? Environmental impacts? Who will be management?
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market analysis:
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Should address the 4 p's - product, place, pricing, and promotion. Address questions such as is there a demand for it and are they willing to pay for it? Can the organization create a market? Who else offers this product/service? What market share can the organization get? Also consider change in the future and how this will affect it. What about competition as well. Consider who the patients and payors will be. This will affect revenue. Pricing? What specialized knowledge does the person presenting this bring?
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Rough financial plan
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this is created after the market analysis shows the demand exists. The purpose of this is to determine if the project warrants further attention. This should revolve around an operating budget. This should include preliminary estimates of revenues and expenses. This should help conclude: is the cost of the program going to exceed the revenues? Is it going to be profitable? Is it unclear if it will be profitable? Depending on the answer to these questions, helps determine if the project should proceed or may need a more detailed analysis.
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Detailed operations plan
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If planning is still continuing after evaluating the rough financial plan then this is the next step. This part of the plan should include detailed information on the physical location, structure, and size required for the project and the specific human resources, equipment, and supplies needed.
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Detailed financial plan:
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This incorporates all the information from the operations plan and should include the financial impact of the resources to be used. Three critical elements- a break even analysis, a cash flow analysis, and development of a set of pro forma financial statements. Break even analysis will determine the minimal amount of pts needed to not lose money and gives sense of how long it will take before the project stops losing money. Cash flow analysis determines how much money the project will spend each year and how much cash will be received. Pro forma financial statements are predictions of what the financial statement will look like. This presents a comprehensive summary of the financial implications
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Describe the essential components of an information strategy that would support business and patient care operations of a healthcare organization.
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Strategic planning involves: The mission statement or philosophy - this defines what the organization does Statement of long term goals - sets the direction of itself Statement of competitive strategy - the plan for achieving its goals Statement of organizational policies - specifies what practices are and are not acceptable for the organization Statement of needed resources - resources needed for the plan Statement of key assumptions - set of common guidelines Information strategy should provide specifics on how the principles for information use will help the organization meet its intended goals. These can include acquisition, management, accessibility, sharing, and disposition.
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Illustrate the significance of informed financial statement analysis in relationship to resource allocation.
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Financial statements discuss the organizations financial position and results of the activity. Resource allocation is used to determine which resources should be used where and how much. The financial statement will help determine where the resources should be allocated for the most benefit to the organization. Page 262
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Discuss relevant methodologies nurse leaders would utilize to evaluate the costs and benefits of various nursing care delivery models, quality initiatives, and capital projects.
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Cost-benefit analysis - compares the costs and benefits of an action or program. Determine if the benefits outweigh the costs. To do this one must determine the project goals, estimate project benefits and costs, discount cost and benefit flows and complete the decision analysis. Cost-effectiveness analysis - determines if an approach that achieves the specific desired outcome for the least possible cost. Determine if the new approach costs less than the old approach. Many managed care programs are looking at CEA as a guide for deciding what treatments will be covered. CEAs help with these decisions to determine which route would be the most cost effective.
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Identify and describe appropriate strategies that would enhance productivity and profitability of healthcare organizations.
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Productivity - Work smarter, not harder. Do this by looking at processes and changing processes if needed. Benchmarking, adopting best practice, and looking at why resources are consumed and what is necessary and what can be changed. Health care organizations need to work constantly on reducing the resources needed to provide high quality patient care. Profitability - look at the operating margin, profit margin, and return on net assets
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Outline the role quality initiatives take to improve clinical outcomes, market position, and financial performance in healthcare organizations.
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Clinical outcomes- helps improve outcomes because the high standards are set that need to be met in order to get reimbursement. Facilities will then focus on improving and meeting the quality initiatives in order to get the reimbursement and this in turn will improve pt outcomes by meeting the quality initiatives. Market position- a market position is a ranking of a company/individual compared to others in the same entity. Quality initiatives are reported and available for public view and for comparison of other health care facilities that offer the same services. i.e. how many post op infections for totals knees does hospital A have compared to hospital B Financial performance- additional reimbursement is obtained if the quality initiatives are met or it can be lost or not additional obtained if they are not met
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1. Why is it important for nurse managers and executives to study financial management?
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Nurse managers must be able to determine what resources are available and how to allocate these resources appropriately. Nurse managers may also be responsible for revenue generation (Finkler, Jones, & Kovner, 2013).
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What report requires 80% of nurses to have baccalaureate degrees by 2020 and to remove barrires and increase scope of practice for nursing
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The Future of Nursing: Leading Change, Advancing Health (2011):
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8. Pay-for-performance is a system for paying hospitals and health care providers that: a. Bases reimbursements on quality performance.
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a. Bases reimbursements on quality performance
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T/F: 1. Nurse managers are usually considered line managers, whereas financial managers are usually considered staff managers
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True
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T/F: 2. For integrated health systems, informal lines of authority are not as important as formal lines of authority
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False
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T/F: 3. The level of decentralization will determine the level of financial management knowledge and skills needed by first-line managers
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True
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T/F: 4. Because staff nurses focus primarily on patient care, they need not possess knowledge of financial management at their employing organization.
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False
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5. A characteristic of a centralized organizational structure is:
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d. Competent and experienced front-line managers cannot relieve the Chief Executive Officer of the need to be highly knowledgeable about point-of-service processes.
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6. The financial accounting function of an organization is concerned primarily with:
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c. Collecting and translating financial information into reports for interested parties outside the organization.
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9. Responsibility accounting is a means by which an organization can:
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c. Measure financial outcomes and assign those outcomes to the individual or department responsible for them.
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10. Attributes of a patient-centered care environment would include all of the following EXCEPT: a. The incorporation of practice-based learning. b. Care coordination. c. Feedback from patients about their care. d. Public availability of information about patients. e. Care delivered by an integrated care team.
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d. Public availability of information about patients.
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1. Consider the demand-and-supply curves shown below for home health care registered nurse visits. Assume that no poor individuals receive visits because the price is higher than they are willing or able to pay.a. Suppose that the government decides to pay for the visits of poor people, and all other people pay directly for their own visits. The government is willing to pay the market price. Will the number of visits by poor people go up or down or stay the same? Why? Will the price go up or down or stay the same? Will the number of visits by people who are not poor go up or down or stay the same? What are the implications of the government action?
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Visits by poor people will go up because these people were unable or unwilling to pay for the service before. The price will go up because suppliers calculate the amount of product or services they can provide at a given price. When demand increases the price also increase to the point where suppliers can meet the demand. Now, because the price for the service increased, there are even more people who paid for their own visits at the lower price but now cannot afford a visit. The government may pay for more people than originally calculated. The result is more people having access to health care but also an increased expenditure per capita with healthcare suppliers increasing revenues.
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b. Would your answers to part (a) change at all if the demand for home visits were more or less elastic?
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If the demand is less elastic than the effect of increased cost would be less dramatic for the population paying for their own visits.
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What is the cost per patient day if your unit has 75% occupancy? What is the cost per patient day if unit occupancy is 85%? Why is there a difference? What are the implications of the difference?
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The cost per patient day decreases as the occupancy increases because the fixed cost remains the same and is able to be distributed over the additional patients.
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3. Health care, like other services, is an economic commodity. A basic assumption of economics is that:
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b. There are limited resources in every system.
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4. Suppose that preventive health care could lower the incidence of hospitalization. What is the best incentive that insurance companies could provide to their insured population to improve their preventive health care?
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b. Free exercise classes
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5. From a financial viewpoint, a high volume of services within the relevant range is desirable in nursing homes, because:
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d. The nursing home's fixed costs are spread more widely.
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7. Even in a relatively efficient market, some government redistribution of resources can provide collective action that makes everyone better off. An example of a service provided by government redistribution of resources that most people would agree makes everyone better off is: a. Telephone service. b. Fire protection. c. Medicaid. d. Internet access.
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Fire Protection
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8. The rationale underlying the provision of health insurance to consumers is that:
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a. There is a shared risk for an event that everyone wants to avoid.
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T/F: 1. The 2001 IOM report, Crossing the Quality Chasm, stated that health care provided in the United States should be safe, effective, patient-centered, timely, efficient, and affordable.
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False (not affordable - equitable)
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T/F: 4. There are incentives in our health care finance system that deter quality, but none that promote quality.
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False
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T/F:5. Nurse managers may be called upon to make decisions regarding investments or budget cuts that they think will affect quality of care, either positively or negatively. Making such decisions will likely involve: cost considerations; resource allocation; accrual of returns to patients, the organization, and community; and moral and ethical considerations
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True
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6. Much of the today's framework for quality is based on the work of Donabedian, who defined quality as a function of:
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c. Structures, processes, and outcomes of care.
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8. Value in health care can be described by the following general relationship:
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Quality/Cost
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9. Hospitalized patients die from a variety of causes. Among the causes of hospital deaths are: a. Poor hospital construction. b. Medical errors. c. Needlestick injuries. d. Poor hospital food.
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Medical errors
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10. An error is: a. Failure of a planned action to be completed as intended or the use of the wrong plan to achieve this aim. b. An unintentional action that causes injury. c. Almost always accidental and not the responsibility of the provider. d. An action that may or may not be intentional and that causes an adverse event.
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Failure of a planned action to be completed as intended or the use of the wrong plan to achieve this aim.
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11. Compared with other industries, such as aviation, the error rate of health care providers is: a. About the same. b. Lower. c. Higher.
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Higher
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12. The State of New York (NYS) Department of Health (DOH) would like to develop a system to decrease nursing errors in hospitals in the state. The best approach would be to: a. Increase the penalties for errors that NYS DOH surveyors find when they visit hospitals. b. Provide a "hot line" for the public to use to report hospital errors. c. Notify the State Education Department (the professional licensing department in NYS) whenever someone reports that a nurse has committed an error. d. Develop a voluntary, confidential reporting system.
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Develop a voluntary, confidential reporting system.
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13. Government has a responsibility to ensure patient safety. One approach that the government could pursue to ensure that hospitals implement meaningful patient safety programs is to: a. Communicate concerns about patient safety to accrediting bodies. b. Mandate that accrediting bodies have minimum patient safety standards. c. Ask the American Nurses Association to mandate safety levels. d. Institute a TQI program for state government
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Mandate that accrediting bodies have minimum patient safety standards.
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14. Magnet® hospitals are organizations recognized as providing excellent, high-quality nursing care, and excelling in all of the following areas EXCEPT: a. Transformational leadership. b. Structural empowerment. c. Exemplary professional practice. d. Empirical (quality outcomes). e. New knowledge, innovations, and improvements. f. Theoretical quality outcomes.
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Theoretical quality outcomes
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1. Assume that a nursing home balance sheet shows total assets of $20 million and total liabilities of $17 million. Can the fund balance be determined with any degree of certainty? Why or why not? If so, what is it?
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Fluid Balance represent net assets from one specific fund and results from the idea that when liabilities of each fund are subtracted from its assets , the remaining amount is the balance owned by the organization. The information given is sufficient to establish the fund balance with 20 million - 17 million = $3 million.
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2. On June 30, payroll of $10,000 was paid to the organization's employees. What accounts would probably be affected by the journal entry on that date? On July 5, it was noted that $2000 of labor was charged to the nursing department in error and should have been charged to radiology. Should the organization bother making a journal entry to correct the error? Why or why not?
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Wages paid on June 30th would be recorded in wages. The organization should correct the mistake otherwise fund balances will be inaccurate and this may impact forecasting for future expenses and need in each of the affected departments.
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3. For-profit organizations hope to earn a profit each year. Not-for-profit organizations: a. Hope to break even each year. b. Anticipate losing money about half the time. c. Are indifferent regarding whether or not they earn a profit. d. Hope to earn a profit each year.
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Hope to earn a profit each year.
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4. The GAAP of objective evidence: a. Ensures that assets are reported on financial statements based on their current value. b. Ensures that only reliable estimates are used when reporting values. c. Ensures that no estimates are used in financial reporting. d. Causes us to record assets based on their cost.
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Causes us to record assets based on their cost
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5. If a donor gives a not-for-profit organization a gift but indicates that the money can only be used for a new building, until the building is built, the donation would only impact: a. Depreciation. b. Unrestricted net assets. c. Temporarily restricted net assets. d. Permanently restricted net assets.
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Temporarily restricted net assets
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6. When you look at a Balance Sheet, the plant and equipment, adjusted for accumulated depreciation, are valued based on which one of these measurements? a. Historical costs b. Replacement value c. Future profits d. Net realizable value
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Historical costs
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7. Which of the following statements is true? a. Straight-line depreciation results in less total depreciation over an asset's life than accelerated depreciation methods. b. Double-declining balance allows the organization to depreciate twice the total cost of an asset over its lifetime. c. In a specific year, a firm may report a higher depreciation expense to the Internal Revenue Service than it reports to its owners on its income statement. d. The purpose of depreciation is to ensure that each year the balance sheet accurately reports the value of the organization's building and equipment.
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The purpose of depreciation is to ensure that each year the balance sheet accurately reports the value of the organization's building and equipment
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8. Which of the following statements is true? a. Allowance for uncollectible or doubtful accounts appears on the income or operating statement, and bad debts appear on the balance sheet or statement of financial position. b. Bad debts for the year will generally be equal to the allowance for uncollectible accounts. c. Bad debt expense is a cumulative number, reflecting all of the organization's current accounts receivable that it does not expect to be able to collect. d. Allowance for uncollectible accounts is a cumulative number, reflecting all of the organization's current accounts receivable that it does not expect to be able to collect.
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Allowance for uncollectible accounts is a cumulative number, reflecting all of the organization's current accounts receivable that it does not expect to be able to collect.
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9. Marketable securities are generally reported by organizations at: a. Their cost. b. Their fair market value. c. The lower of cost or fair market value. d. Their first-in, first-out value.
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Their fair market value.
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10. The cash flow statement has three main sections: cash from operating activities, cash from investing activities, and cash from financing activities. Typically, which of the following situations would be most likely to indicate a healthy financial situation? a. Cash from operations is a negative amount, cash from investing is negative, and cash from financing is negative. b. Cash from operations is a positive amount, cash from investing is positive, and cash from financing is positive. c. Cash from operations is a positive amount, cash from investing is positive, and cash from financing is negative. d. Cash from operations is a positive amount, cash from investing is negative, and cash from financing is negative.
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Cash from operations is a positive amount, cash from investing is negative, and cash from financing is negative.
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11. On the cash flow statement, one of the first things that always appears is depreciation. Depreciation is always a positive amount on the cash flow statement. This is because: a. Depreciation generates cash for the organization. b. Depreciation causes cash to be consumed or used by the organization. c. Depreciation was subtracted on the operating or income statement, but it didn't use cash, so we must add it back. d. Depreciation was added on the operating statement, and we confirm that addition when we prepare the cash flow statement.
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d. Depreciation was added on the operating statement, and we confirm that addition when we prepare the cash flow statement.
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12. Health care organizations report net patient revenue on their income or operating statements. If we added up our official charge rate for the services provided to each of our patients, the total would differ from net patient revenue because of all of the following, EXCEPT: a. Medicare discounts. b. Bad debts. c. Charity care. d. Insurance.
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Insurance
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3. The profit margin for a medical practice is 6%. This is the same as saying that: a. Net Income divided by expenses is 6%. b. Net Income divided by total revenues is 6%. c. Revenue divided by assets is 94%. d. Net Income is 94% of profits.
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Net Income divided by total revenues is 6%.
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4. Suppose that the common size cash ratio is 5% for medical practice A and 10% for medical practice B. What do you know for sure about medical practice A? a. It has fewer dollars of cash than practice B. b. It has more dollars of cash than practice B. c. It has less total assets than practice B. d. Cash makes up a smaller portion of total assets than is the case for practice B.
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Cash makes up a smaller portion of total assets than is the case for practice B.
