CMC Financial Management & Budgeting 2 — Questions and Answers
Question 1: A cardiac catheterization lab is evaluating whether to purchase a new imaging system. Which financial metric best measures the time required to recover the initial investment from net cash flows?
- Net present value (NPV)
- Payback period (Correct answer)
- Internal rate of return (IRR)
- Return on equity (ROE)
Correct answer: Payback period
The payback period measures how long it takes for cumulative net cash inflows to equal the initial capital outlay.
Question 2: A cardiac unit's supply budget shows a 12% unfavorable variance at mid-year. The FIRST step the manager should take is to:
- Request a budget amendment from administration
- Identify the specific supply categories driving the variance (Correct answer)
- Freeze all discretionary supply purchases immediately
- Transfer funds from the labor budget
Correct answer: Identify the specific supply categories driving the variance
Root-cause analysis of the variance by supply category is required before any corrective action can be targeted effectively.
Question 3: Which reimbursement model pays a fixed amount per cardiac patient discharge regardless of length of stay or resources consumed?
- Fee-for-service
- Per diem payment
- Diagnosis-related group (DRG) (Correct answer)
- Capitation
Correct answer: Diagnosis-related group (DRG)
DRG-based payment bundles reimbursement into a single prospective amount determined by the patient's discharge diagnosis and procedure.
Question 4: A cardiac program wishes to add a structural heart disease service line. Which document projects anticipated revenues, expenses, and volumes over a multi-year horizon for the new program?
- Capital budget
- Operating budget
- Pro forma financial statement (Correct answer)
- Cash flow statement
Correct answer: Pro forma financial statement
A pro forma financial statement projects future financial performance under assumed conditions for a proposed program or venture.
Question 5: When negotiating a managed care contract for cardiac services, which metric directly reflects the hospital's cost efficiency and is most critical to review before setting contracted rates?
- Average revenue per discharge
- Cost-to-charge ratio (Correct answer)
- Days in accounts receivable
- Medicare case mix index
Correct answer: Cost-to-charge ratio
The cost-to-charge ratio translates billed charges into actual costs, revealing whether contracted rates will cover expenses.
Question 6: A cardiac ICU manager notes that RN overtime costs have increased 20% this quarter. This expense would MOST likely appear in which budget category?
- Supply and materials budget
- Capital budget
- Salary and wages budget (Correct answer)
- Revenue budget
Correct answer: Salary and wages budget
Overtime pay is a component of the salary and wages (labor) budget, which tracks all personnel-related costs.
Question 7: Under value-based purchasing (VBP) for cardiac care, hospitals can earn or lose Medicare reimbursement based on performance in which domains?
- Volume of procedures performed and market share
- Clinical outcomes, patient experience, efficiency, and safety (Correct answer)
- Physician credentialing and malpractice history
- Geographic location and teaching hospital status
Correct answer: Clinical outcomes, patient experience, efficiency, and safety
CMS VBP adjusts payments based on a composite score across clinical outcomes, patient experience (HCAHPS), care efficiency, and safety domains.
CMC Financial Management & Budgeting 2
A cardiac catheterization lab is evaluating whether to purchase a new imaging system.
Which financial metric best measures the time required to recover the initial investment from net cash flows?