CHAP Financial Management & Budgeting Flashcards

What is a capital budget in healthcare administration?

Answer: A plan for purchasing major assets such as equipment and facilities

A capital budget plans for major long-term investments in assets such as medical equipment, building renovations, or new facilities that exceed a defined cost threshold.

Which metric measures the percentage of billed charges that are actually collected by a healthcare organization?

Answer: Net collection rate

The net collection rate measures the percentage of collectible charges actually received after contractual adjustments, indicating the effectiveness of collections efforts.

In healthcare billing, what is a 'write-off'?

Answer: An uncollectible amount removed from accounts receivable

A write-off is an amount deemed uncollectible that is removed from accounts receivable, such as bad debt or amounts exceeding contractual agreements.

What is the primary purpose of a cash flow statement in healthcare financial management?

Answer: To track the inflows and outflows of cash over a period

A cash flow statement tracks actual cash inflows (receipts) and outflows (payments) during a period, showing whether the organization has adequate liquidity.

Which budgeting method starts from zero each period and requires justification for every expense?

Answer: Zero-based budgeting

Zero-based budgeting requires managers to justify every line item from scratch each budget cycle rather than simply adjusting prior-year figures.

In healthcare finance, what does 'payer mix' refer to?

Answer: The proportion of patients covered by different insurance types

Payer mix describes the proportion of a facility's patients covered by Medicare, Medicaid, private insurance, self-pay, and other payers, which directly affects reimbursement rates and revenue.