CPE Financial Management and Business Strategy 3

Question 1

A health system's operating margin has declined from 4.2% to 1.8% over two years. The most appropriate first step for the physician executive is to:

Accepted Answer

Conduct a detailed variance analysis comparing budget to actuals

Answer

Variance analysis identifies where actual performance deviates from budget, pinpointing the root causes of margin decline before interventions are made.

Question 2

Porter's Five Forces model applied to a regional hospital system would include analysis of:

Accepted Answer

Threat of substitute services such as urgent care centers

Answer

Porter's Five Forces examines competitive forces including threat of substitutes, which in healthcare includes alternative care settings.

Question 3

Which financial statement would a physician executive review to assess whether a hospital can meet its short-term obligations?

Accepted Answer

Balance sheet

Answer

The balance sheet shows current assets and current liabilities, from which liquidity ratios like the current ratio can be calculated.

Question 4

A hospital's days cash on hand drops to 18 days. This is most concerning because:

Accepted Answer

It suggests the hospital may struggle to cover near-term operating expenses

Answer

Days cash on hand below 30 days is generally considered a warning sign that the organization may be unable to sustain operations if revenue is disrupted.

Question 5

In a zero-based budgeting process, department managers are required to:

Accepted Answer

Justify every line item from scratch each budget cycle

Answer

Zero-based budgeting requires departments to build their budgets from zero each year, justifying every expenditure regardless of prior-year spending.

(CPE) Certified Physician Executive Practice Test

(CPE) Certified Physician Executive Practice Test

CPE Financial Management and Business Strategy 3