CMD Financial Management & Budgeting in Healthcare 3 — Questions and Answers
Question 1: A skilled nursing facility has a contribution margin of $45 per patient day and fixed costs of $900,000 annually. What is the break-even volume in patient days?
- 10,000 patient days
- 20,000 patient days (Correct answer)
- 15,000 patient days
- 25,000 patient days
Correct answer: 20,000 patient days
Break-even volume = Fixed costs / Contribution margin = $900,000 / $45 = 20,000 patient days.
Question 2: Which financial statement summarizes a healthcare organization's revenues, expenses, and net income over a specific time period?
- Balance sheet
- Statement of cash flows
- Income statement (statement of operations) (Correct answer)
- Statement of changes in equity
Correct answer: Income statement (statement of operations)
The income statement (or statement of operations) reports revenues and expenses over an accounting period, showing net income or loss.
Question 3: A medical director is reviewing payer mix data. The facility has seen a 10% shift from commercial to Medicaid patients. The MOST likely financial impact is:
- Increased net revenue per case
- Decreased net revenue per case due to lower Medicaid reimbursement rates (Correct answer)
- No change since volume offsets the rate difference
- Improved operating margin due to shorter Medicaid lengths of stay
Correct answer: Decreased net revenue per case due to lower Medicaid reimbursement rates
Medicaid typically reimburses at lower rates than commercial payers, so a shift toward Medicaid reduces net revenue per case.
Question 4: Cost-shifting in healthcare occurs when a provider:
- Allocates overhead costs to specific departments
- Charges higher rates to one payer group to compensate for lower reimbursement from another (Correct answer)
- Shifts from inpatient to outpatient service delivery
- Transfers financial risk to a capitated managed care plan
Correct answer: Charges higher rates to one payer group to compensate for lower reimbursement from another
Cost-shifting means recovering losses from underpaying payers (like Medicaid) by charging higher rates to other payers (like commercial insurers).
Question 5: In a capitated payment model, the provider receives:
- A fee for each service rendered
- A fixed payment per member per month regardless of services used (Correct answer)
- A bundled payment for an episode of care
- A per diem rate based on actual patient days
Correct answer: A fixed payment per member per month regardless of services used
Capitation pays a fixed per-member-per-month (PMPM) rate, transferring utilization risk to the provider.
Question 6: A medical director wants to compare the facility's financial performance against similar organizations. Which data source is MOST appropriate for this benchmarking?
- Internal general ledger reports only
- The facility's prior-year budget
- Industry databases such as CMS cost reports or HFMA benchmarks (Correct answer)
- Patient satisfaction survey scores
Correct answer: Industry databases such as CMS cost reports or HFMA benchmarks
Industry databases and CMS cost reports provide standardized data enabling meaningful peer comparison for financial benchmarking.
Question 7: Which of the following BEST describes a responsibility center in healthcare financial management?
- A regulatory body that oversees Medicare billing compliance
- An organizational unit whose manager is accountable for specific financial outcomes (Correct answer)
- The hospital's finance committee that reviews capital requests
- A cost-sharing arrangement between two hospital systems
Correct answer: An organizational unit whose manager is accountable for specific financial outcomes
A responsibility center is an organizational unit (department, service line) where a manager is held accountable for revenues, costs, or both.
CMD Financial Management & Budgeting in Healthcare 3
A skilled nursing facility has a contribution margin of $45 per patient day and fixed costs of $900,000 annually.
What is the break-even volume in patient days?