CMAS Financial Management & Accounting Flashcards

Which IRS form is used by a medical practice to report wages paid and taxes withheld for each employee?

Answer: Form W-2

Form W-2 is issued annually by employers to report employee wages, tips, and tax withholdings to the IRS and the employee.

What does 'contractual adjustment' mean on a patient's statement?

Answer: The difference between the practice's standard fee and the amount agreed upon with a payer

A contractual adjustment is the amount written off because the payer contract sets an allowed amount lower than the practice's standard charge.

A medical office wants to reduce overhead costs. Which expense is typically classified as a fixed cost?

Answer: Monthly office lease payment

Fixed costs like rent remain constant regardless of patient volume, unlike variable costs that fluctuate with activity levels.

What is the role of an internal audit in a medical practice's financial management?

Answer: To independently review financial records and processes to detect errors or fraud

Internal audits provide an independent assessment of financial controls, identifying errors, compliance gaps, or potential fraud before external audits occur.

Which term describes the process of verifying a patient's insurance coverage and benefits before a scheduled appointment?

Answer: Eligibility verification

Eligibility verification confirms active coverage, copay/deductible amounts, and covered benefits so the practice can collect accurately at the time of service.

What is the difference between gross revenue and net revenue in a medical practice?

Answer: Gross revenue is total charges billed; net revenue is what the practice actually collects after adjustments

Gross revenue is the total amount charged before adjustments; net revenue is the actual amount collected after contractual write-offs and bad debt.