COE Financial Management Questions and Answers — Questions and Answers
Question 1: An ophthalmic practice is reviewing its Profit & Loss (P&L) statement. Which of the following items would be categorized under Operating Expenses?
- Revenue from cataract surgeries
- Salaries for administrative staff and technicians (Correct answer)
- Purchase of a new femtosecond laser
- Income from the optical dispensary
Correct answer: Salaries for administrative staff and technicians
Operating expenses on a P&L statement represent the costs incurred to run the day-to-day activities of the business. Staff salaries are a primary operating expense. Revenue from surgeries and the dispensary are income streams, while the purchase of a major piece of equipment like a laser is a capital expenditure, not a routine operating expense.
Question 2: A practice manager is tasked with improving the Revenue Cycle Management (RCM) process. The first step in a typical RCM workflow begins with:
- Claim submission to the payer
- Charge capture and coding
- Patient registration and insurance verification (Correct answer)
- Denial management and appeals
Correct answer: Patient registration and insurance verification
The Revenue Cycle Management (RCM) process starts when the patient first contacts the practice. Accurate patient demographic and insurance information must be captured and verified during registration to ensure a 'clean claim' can be submitted later, which is foundational to the entire cycle.
Question 3: To safeguard the practice's assets and prevent fraud, a crucial internal control is the segregation of duties. Which of the following scenarios best exemplifies this principle?
- The front desk employee collects copays and also posts the payments to patient accounts.
- The same person who orders office supplies is also responsible for receiving the shipment and paying the invoice.
- One employee is responsible for opening mail and preparing bank deposits, while a different employee posts payments to the practice management system. (Correct answer)
- The lead technician is given full authority to manage petty cash, including disbursing funds and reconciling the box.
Correct answer: One employee is responsible for opening mail and preparing bank deposits, while a different employee posts payments to the practice management system.
Segregation of duties is an internal control designed to prevent fraud and errors by ensuring that no single individual has control over all aspects of a financial transaction. Having one person handle the physical payment (opening mail, preparing deposits) and another handle the recording of that payment (posting to accounts) creates a system of checks and balances.
Question 4: The Certified Ophthalmic Executive is analyzing practice efficiency using key performance indicators (KPIs). Which KPI is calculated by dividing total operating expenses by net collections to measure how effectively the practice converts revenue into physician compensation?
- Net Operating Income Ratio
- Staff Payroll Ratio
- Revenue per Encounter
- Operating Expense Ratio (Correct answer)
Correct answer: Operating Expense Ratio
The Operating Expense Ratio is a key financial metric used to assess the cost of running the practice in relation to the revenue it generates. The formula is Total Operating Expenses / Net Collections. It specifically measures how efficiently a practice manages its costs to generate income.
Question 5: When an ophthalmic practice compares its financial and operational metrics, such as overhead ratio or revenue per provider, against industry averages or data from similar practices, this process is known as:
- Financial forecasting
- Benchmarking (Correct answer)
- Auditing
- Asset allocation
Correct answer: Benchmarking
Benchmarking is the process of comparing a practice's performance metrics against an established standard, such as the average performance of peer organizations. This helps identify areas of strength and opportunities for improvement in financial and operational efficiency.
Question 6: An ophthalmic practice manager notices a high rate of claim denials. Upon investigation, it is found that many claims for procedures like intravitreal injections are being rejected because prior approval was not obtained from the insurance company. This issue represents a failure in which part of the revenue cycle?
- Charge Capture
- Patient Collections
- Prior Authorization (Correct answer)
- Payment Posting
Correct answer: Prior Authorization
Prior authorization, or pre-authorization, is a critical step in the revenue cycle where approval must be obtained from a payer before a specific procedure or service is rendered. Failing to secure prior authorization for services that require it is a common reason for claim denials in ophthalmology.
COE Financial Management Questions and Answers
An ophthalmic practice is reviewing its Profit & Loss (P&L) statement.
Which of the following items would be categorized under Operating Expenses?