ASHE Financial Stewardship in Healthcare 3 — Questions and Answers
Question 1: Which procurement method requires a healthcare facility to solicit competitive bids and is typically mandatory above a certain dollar threshold for public institutions?
- Sole-source procurement
- Formal competitive bidding (IFB/RFP) (Correct answer)
- Group purchasing organization (GPO) contract
- Emergency procurement
Correct answer: Formal competitive bidding (IFB/RFP)
Formal competitive bidding through Invitation for Bid (IFB) or Request for Proposal (RFP) is legally required above set thresholds at most public healthcare institutions.
Question 2: A healthcare facility manager is comparing two HVAC systems. System A costs $200,000 with $10,000/year operating costs. System B costs $150,000 with $18,000/year operating costs. Using a 10-year life cycle, which is more cost-effective?
- System A ($300,000 total) (Correct answer)
- System B ($330,000 total)
- Both are equal in total cost
- Cannot be determined without discount rate
Correct answer: System A ($300,000 total)
System A totals $200,000 + ($10,000 × 10) = $300,000; System B totals $150,000 + ($18,000 × 10) = $330,000, making System A less expensive over 10 years.
Question 3: What does the term 'capitalization threshold' mean in healthcare facility asset management?
- The maximum budget a department can spend without CFO approval
- The minimum cost at which an expenditure is recorded as a capital asset rather than an expense (Correct answer)
- The percentage of revenue allocated to capital projects annually
- The interest rate used to finance capital equipment purchases
Correct answer: The minimum cost at which an expenditure is recorded as a capital asset rather than an expense
The capitalization threshold is the minimum dollar amount at which a purchase is classified as a capital asset and depreciated over its useful life rather than expensed immediately.
Question 4: Which regulatory requirement significantly impacts the financial planning of healthcare facility engineers related to environmental compliance?
- OSHA 29 CFR 1910.147 (Lockout/Tagout)
- EPA Resource Conservation and Recovery Act (RCRA) for hazardous waste management (Correct answer)
- NFPA 72 Fire Alarm Code
- ASHRAE Standard 90.1 Energy Standard
Correct answer: EPA Resource Conservation and Recovery Act (RCRA) for hazardous waste management
RCRA governs hazardous waste disposal and imposes significant costs and liabilities on healthcare facilities for proper handling and disposal of medical and chemical waste.
Question 5: A healthcare facility's utility costs represent 30% of total operating expenses. The facility manager implements an energy conservation program projected to reduce utility costs by 15%. What percentage of total operating expenses will be saved?
- 15%
- 4.5% (Correct answer)
- 45%
- 2.25%
Correct answer: 4.5%
Savings = 30% (utility share) × 15% (reduction) = 4.5% of total operating expenses.
Question 6: In the context of healthcare facility financing, what is an Energy Savings Performance Contract (ESPC)?
- A utility rate agreement that locks in fixed energy prices for 10 years
- A contract where an ESCO guarantees energy savings that pay for the improvements over time (Correct answer)
- A government grant for renewable energy installation in hospitals
- A lease agreement for energy-efficient medical equipment
Correct answer: A contract where an ESCO guarantees energy savings that pay for the improvements over time
An ESPC allows a facility to implement energy improvements with no upfront capital; an Energy Service Company (ESCO) guarantees savings sufficient to repay project costs.
Question 7: Which financial document provides a snapshot of a healthcare organization's assets, liabilities, and net assets at a specific point in time?
- Income Statement
- Balance Sheet (Statement of Financial Position) (Correct answer)
- Cash Flow Statement
- Capital Budget
Correct answer: Balance Sheet (Statement of Financial Position)
The Balance Sheet (or Statement of Financial Position for nonprofits) shows assets, liabilities, and net assets/equity at a specific date.
ASHE Financial Stewardship in Healthcare 3
Which procurement method requires a healthcare facility to solicit competitive bids and is typically mandatory above a certain dollar threshold for public institutions?