CHAP CHAP Financial Management & Budgeting 2 — Questions and Answers
Question 1: What is a capital budget in healthcare administration?
- A budget for employee training programs
- A plan for purchasing major assets such as equipment and facilities (Correct answer)
- The annual salary budget for all staff
- A budget reserved for emergency expenses
Correct 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.
Question 2: Which metric measures the percentage of billed charges that are actually collected by a healthcare organization?
- Gross collection rate
- Net collection rate (Correct answer)
- Denial rate
- Write-off rate
Correct 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.
Question 3: In healthcare billing, what is a 'write-off'?
- An amount added to a patient's bill
- An uncollectible amount removed from accounts receivable (Correct answer)
- A discount given to employees
- The cost of purchasing new software
Correct 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.
Question 4: What is the primary purpose of a cash flow statement in healthcare financial management?
- To show total organizational assets
- To track the inflows and outflows of cash over a period (Correct answer)
- To report net income for tax purposes
- To document patient billing cycles
Correct 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.
Question 5: Which budgeting method starts from zero each period and requires justification for every expense?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Activity-based budgeting
- Rolling budget
Correct 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.
Question 6: In healthcare finance, what does 'payer mix' refer to?
- The variety of services offered by a facility
- The proportion of patients covered by different insurance types (Correct answer)
- The mix of clinical staff specialties
- The ratio of inpatient to outpatient services
Correct 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.
CHAP CHAP Financial Management & Budgeting 2
What is a capital budget in healthcare administration?