Financial Management Flashcards

A medical practice is considering leasing versus purchasing a new ultrasound machine. Which factor MOST favors leasing?

Answer: The technology is rapidly changing and may become obsolete quickly

Leasing is advantageous when technology evolves rapidly, allowing the practice to upgrade at lease end without being stuck with obsolete owned equipment.

Which variance signals that actual costs exceeded budgeted costs and is generally unfavorable?

Answer: Adverse (unfavorable) variance

An adverse or unfavorable variance occurs when actual costs are higher than budgeted, reducing expected profit.

What does 'days in accounts payable' (DAP) measure in a medical practice?

Answer: The average time the practice takes to pay its vendors

Days in accounts payable measures how long on average a practice takes to pay its suppliers and vendors after receiving goods or services.

Which financial statement directly tracks the inflows and outflows of cash from operations, investing, and financing activities?

Answer: Statement of cash flows

The statement of cash flows reports cash generated and used in operating, investing, and financing activities, revealing the practice's true liquidity position.

A medical manager notices that supply costs increased 15% while patient volume increased only 5%. What type of analysis should be performed first?

Answer: Cost variance and utilization analysis

A cost variance and utilization analysis will identify whether the supply cost increase reflects waste, price increases, or inappropriate utilization exceeding volume growth.

Which of the following best defines 'contractual adjustment' in medical practice revenue accounting?

Answer: The difference between billed charges and the negotiated payer rate

A contractual adjustment is the difference between what the practice charges and the lower rate it has contractually agreed to accept from a payer.

In practice financial management, what does the term 'net collection rate' measure?

Answer: Payments collected as a percentage of net charges after contractual adjustments

The net collection rate measures how effectively a practice collects what it is actually owed (net charges after contractual adjustments), excluding write-offs within the practice's control.