Healthcare Accounting Certification (HAC) — Questions and Answers

Question 1: Which of the following is an example of a 'clean claim' in healthcare billing?

A claim submitted with all required data elements, no errors, and within the timely filing period (Correct answer)
A claim appealed after an initial denial
A claim with a pending prior authorization review
A claim missing the attending physician's NPI

Correct answer: A claim submitted with all required data elements, no errors, and within the timely filing period

A clean claim contains all required data elements, is free of errors or omissions, has valid codes, and is submitted within the payer's timely filing window.

Question 2: Under Medicare's Advance Beneficiary Notice (ABN) rules, an ABN must be given to the patient:

Before a service that Medicare may deny as not medically necessary (Correct answer)
Only when the patient requests one
After the service is rendered
Only for inpatient hospital services

Correct answer: Before a service that Medicare may deny as not medically necessary

An ABN must be issued before providing a service that Medicare might deny, giving the patient an informed choice about whether to receive and pay for the service.

Question 3: A hospital's inventory turnover ratio is 18 times per year. The average inventory balance is $2 million. What is the annual cost of supplies used?

$2 million
$9 million
$36 million (Correct answer)
$18 million

Correct answer: $36 million

Inventory turnover = Cost of supplies ÷ Average inventory; rearranging: $2M × 18 = $36 million in annual supply cost.

Question 4: Which financial statement provides an overview of an organization’s financial position at a given time?

Budget report
Income statement
Balance sheet (Correct answer)
Cash flow statement

Correct answer: Balance sheet

The balance sheet is a fundamental financial statement that provides a snapshot of an organization's financial position at a specific point in time. It details assets (what the organization owns), liabilities (what it owes), and equity (the residual value to owners). This statement adheres to the accounting equation: Assets = Liabilities + Equity.

Question 5: In a healthcare organization, 'contribution margin' is calculated as:

Gross revenue minus contractual adjustments
Operating income minus depreciation
Net revenue minus total variable costs (Correct answer)
Net revenue minus total fixed costs

Correct answer: Net revenue minus total variable costs

Contribution margin = Net revenue − Variable costs; it represents the amount available to cover fixed costs and generate profit.

Question 6: A healthcare organization's accounts receivable (A/R) days is 65. What does this metric indicate?

65% of claims are paid within 30 days
The organization has 65 days of cash reserves
The organization submits claims within 65 days of service
It takes an average of 65 days to collect payment after services are rendered (Correct answer)

Correct answer: It takes an average of 65 days to collect payment after services are rendered

Days in A/R measures the average number of days it takes a healthcare organization to collect payments after services are provided; lower is generally better.

Question 7: Which Medicare program was established to pay hospitals for treating a disproportionate share of low-income patients?

Merit-based Incentive Payment System (MIPS)
Medicare Advantage (MA)
Critical Access Hospital (CAH) Program
Disproportionate Share Hospital (DSH) Adjustment (Correct answer)

Correct answer: Disproportionate Share Hospital (DSH) Adjustment

The DSH adjustment provides additional Medicare payments to hospitals that serve a high percentage of Medicaid and low-income Medicare patients.

Question 8: Which OIG exclusion authority permanently excludes individuals convicted of patient abuse or neglect from participating in federal healthcare programs?

Stark Law exclusion under 42 U.S.C. § 1395nn
Civil monetary penalty authority under 42 U.S.C. § 1320a-7a
Mandatory exclusion under 42 U.S.C. § 1320a-7(a) (Correct answer)
Permissive exclusion under 42 U.S.C. § 1320a-7(b)

Correct answer: Mandatory exclusion under 42 U.S.C. § 1320a-7(a)

Mandatory exclusion under 42 U.S.C. § 1320a-7(a) requires OIG to exclude individuals convicted of patient abuse, neglect, or mistreatment with a minimum 5-year exclusion.

Question 9: In the context of the Revenue Cycle, what does 'cash posting' refer to?

Recording payments received from payers and patients into the accounting system (Correct answer)
Submitting electronic claims to insurance companies
Verifying patient insurance eligibility before the visit
Sending statements to patients for outstanding balances

Correct answer: Recording payments received from payers and patients into the accounting system

Cash posting is the process of recording all payments, adjustments, and denials from payers and patients into the practice management system.

Question 10: Which Medicare cost report worksheet captures a hospital's capital-related costs for PPS reimbursement purposes?

Worksheet B
Worksheet B-1 (Correct answer)
Worksheet C
Worksheet A

Correct answer: Worksheet B-1

Worksheet B-1 of the Medicare Cost Report (Form CMS-2552) captures capital-related costs including depreciation, interest, and lease costs for cost apportionment purposes.

Question 11: Which type of supply cost in a hospital is BEST classified as a direct supply cost rather than overhead?

Surgical implants used in a specific patient procedure (Correct answer)
Central sterile processing labor
General housekeeping cleaning chemicals
IT department printer paper

Correct answer: Surgical implants used in a specific patient procedure

Surgical implants traceable to a specific patient procedure are direct supply costs because they are directly attributable to patient care delivery.

Question 12: Which cost behavior pattern describes costs that remain fixed within a certain range of activity but jump to a higher fixed level when activity exceeds that range?

Variable costs
Sunk costs
Step-fixed costs (Correct answer)
Mixed costs

Correct answer: Step-fixed costs

Step-fixed (step costs) remain constant within relevant ranges but increase in steps as activity levels cross thresholds, like hiring an additional nurse when census rises.

Question 13: A healthcare system is considering replacing aging CT equipment. Which analysis best captures the financial impact of NOT replacing the equipment (opportunity cost)?

Differential (incremental) cost analysis (Correct answer)
Standard cost variance analysis
Replacement cost analysis
Historical cost analysis

Correct answer: Differential (incremental) cost analysis

Differential analysis compares the costs and revenues of keeping old equipment versus replacing it, capturing all incremental changes.

Question 14: Which GAAP principle requires a hospital to recognize physician bonus expense in the period the bonus was earned, even if it is paid in the next fiscal year?

Revenue recognition principle
Historical cost principle
Conservatism principle
Matching principle (Correct answer)

Correct answer: Matching principle

The matching principle requires expenses to be recorded in the same period as the related revenue, so bonuses earned in the current year must be accrued regardless of the payment date.

Question 15: In a healthcare merger, the acquirer identifies a Certificate of Need (CON) as an acquired intangible asset. How should it be classified?

As property, plant, and equipment
As a finite-lived intangible if the CON has an expiration date (Correct answer)
As goodwill, since it cannot be sold separately
As a liability due to ongoing regulatory requirements

Correct answer: As a finite-lived intangible if the CON has an expiration date

A CON with an expiration or renewal date is classified as a finite-lived intangible and amortized over its remaining useful life.

Question 16: Which federal law governs fraud prevention and financial reporting in healthcare?

FDA Regulations
Sarbanes-Oxley Act (Correct answer)
HIPAA
OSHA Standards

Correct answer: Sarbanes-Oxley Act

The Sarbanes-Oxley Act (SOX) of 2002 is a federal law that established stringent standards for all U.S. public company boards, management, and public accounting firms. While not exclusive to healthcare, SOX significantly impacts financial reporting and fraud prevention across all industries, including healthcare, by mandating stronger internal controls and greater accountability for financial statements to protect investors.

Question 17: What is the primary purpose of a paid time off (PTO) liability account on a hospital's balance sheet?

To record future capital expenditures for staff workstations
To represent the estimated cost of earned but unused employee leave (Correct answer)
To track overtime premiums owed to staff
To record payroll tax deposits made in advance

Correct answer: To represent the estimated cost of earned but unused employee leave

The PTO liability reflects the obligation to compensate employees for leave they have earned but not yet taken, requiring ongoing accrual as PTO is earned.

Question 18: A hospital adopts vendor-managed inventory (VMI) for surgical supplies. Under this model, who bears the inventory risk until supplies are consumed?

The vendor retains ownership and risk until supplies are used (Correct answer)
Both parties share risk 50/50 by contractual default
The hospital bears all risk upon receipt at the dock
A third-party GPO assumes ownership during the contract period

Correct answer: The vendor retains ownership and risk until supplies are used

In a true VMI or consignment arrangement, the vendor retains title and inventory risk until the hospital pulls items for patient use, reducing the hospital's working capital requirements.

Question 19: Which modifier would a physician append to a CPT code to indicate a service was performed bilaterally?

Modifier -50 (Correct answer)
Modifier -76
Modifier -59
Modifier -25

Correct answer: Modifier -50

Modifier -50 indicates that a procedure was performed on both sides of the body during the same operative session.

Question 20: Under the Medicare Inpatient Prospective Payment System (IPPS), what primarily determines the payment a hospital receives for a stay?

The number of days the patient is hospitalized
The Diagnosis-Related Group (DRG) assigned to the discharge (Correct answer)
The number of procedures performed during the stay
The actual cost of services rendered

Correct answer: The Diagnosis-Related Group (DRG) assigned to the discharge

IPPS pays hospitals a fixed amount based on the DRG assigned at discharge, not actual costs or length of stay.

Question 21: A tax-exempt hospital provides $2 million in charity care. For Form 990 Schedule H reporting, charity care is measured at:

Cost of providing the care (Correct answer)
Charges (list prices) forgiven
Medicaid reimbursement rates
Medicare reimbursement rates

Correct answer: Cost of providing the care

For Schedule H community benefit reporting, charity care is measured at the cost of providing care, not the forgiven charges.

Question 22: For Medicare cost reporting, purchased services related to supply chain management are generally classified under which cost center?

Administrative and general (A&G) overhead cost center (Correct answer)
Capital-related costs — equipment
Employee benefit costs center
Patient care services — direct cost centers

Correct answer: Administrative and general (A&G) overhead cost center

Supply chain management is an administrative support function and its purchased services are reported under the Administrative and General overhead cost center on the Medicare cost report.

Question 23: What is the role of documentation in Medicare & Medicaid Billing for Healthcare Accounting Certification?

Optional paperwork
Only for tax season
Management reports only
Creating an auditable trail of all transactions and decisions (Correct answer)

Correct answer: Creating an auditable trail of all transactions and decisions

Thorough documentation creates an auditable trail essential for compliance and transparency.

Question 24: A healthcare supply chain manager uses an economic order quantity (EOQ) model. Which two costs does EOQ balance to minimize total inventory cost?

Ordering cost and carrying (holding) cost (Correct answer)
Stockout cost and spoilage cost
Shrinkage cost and obsolescence cost
Purchase price and freight cost

Correct answer: Ordering cost and carrying (holding) cost

EOQ minimizes total inventory cost by finding the order quantity where the sum of ordering costs (per order placed) and carrying costs (cost to hold inventory) is lowest.

Question 25: Which of the following transaction costs must be expensed as incurred in a healthcare M&A deal under ASC 805?

Legal and advisory fees paid to investment bankers (Correct answer)
Neither A nor B — both are capitalized as part of purchase price
Both A and B
Debt issuance costs for acquisition financing

Correct answer: Legal and advisory fees paid to investment bankers

Under ASC 805, legal, advisory, and due diligence fees are expensed as incurred; debt issuance costs follow ASC 835-30 and are capitalized separately.

Question 26: A healthcare system pays sign-on bonuses with a repayment clause if the employee leaves within two years. How should the employee recognize this bonus for tax purposes?

Report only 50% of the bonus in the year of receipt
Exclude the bonus as a nontaxable employee benefit
Include the full bonus in gross income in the year received (Correct answer)
Defer income recognition until the two-year obligation expires

Correct answer: Include the full bonus in gross income in the year received

Sign-on bonuses are taxable compensation in the year received, even if subject to a clawback; the employee may claim a deduction in the year any repayment is actually made.

Question 27: Which statement is true regarding the filing threshold for Form 990-N (e-Postcard) versus Form 990-EZ for small tax-exempt healthcare organizations?

Form 990-EZ is required for organizations with assets over $500,000
Organizations with gross receipts ≤ $50,000 may file Form 990-N (Correct answer)
Organizations with gross receipts ≤ $500,000 may file Form 990-N
All tax-exempt hospitals must file the full Form 990 regardless of size

Correct answer: Organizations with gross receipts ≤ $50,000 may file Form 990-N

Tax-exempt organizations with gross receipts normally $50,000 or less may satisfy their annual filing requirement with the simple Form 990-N e-Postcard.

Question 28: In healthcare M&A, a 'tuck-in' acquisition refers to:

A leveraged buyout of a hospital by a private equity firm
A joint venture between two competing health systems
An acquisition where the target is absorbed into an existing business unit with no separate reporting (Correct answer)
A merger requiring CON approval from state regulators

Correct answer: An acquisition where the target is absorbed into an existing business unit with no separate reporting

A tuck-in acquisition integrates the target into an existing reporting unit, which can affect goodwill impairment testing by blending the acquired goodwill with existing goodwill.

Question 29: What happens when errors are discovered in Healthcare Mergers & Acquisitions Accounting for Healthcare Accounting Certification?

Blame others
Investigate, correct, document, and implement preventive measures (Correct answer)
Wait until audit
Ignore them

Correct answer: Investigate, correct, document, and implement preventive measures

Errors must be promptly investigated, corrected, documented, and followed by measures to prevent recurrence.

Question 30: Under the Medicare Outpatient Prospective Payment System (OPPS), payments are determined by which grouping system?

Ambulatory Payment Classifications (APCs) (Correct answer)
Resource-Based Relative Value Scale (RBRVS)
Diagnosis-Related Groups (DRGs)
Case Mix Index (CMI)

Correct answer: Ambulatory Payment Classifications (APCs)

OPPS uses Ambulatory Payment Classifications (APCs) to bundle and pay for outpatient hospital services.

Question 31: A healthcare entity self-discloses an overpayment to CMS outside the 60-day repayment window. Under the ACA, this creates liability under the:

HIPAA Privacy Rule
Stark Law
False Claims Act (Correct answer)
Anti-Kickback Statute

Correct answer: False Claims Act

The ACA's 60-day rule means that retaining an identified overpayment beyond 60 days constitutes a reverse false claim under the FCA.

Question 32: In value-based reimbursement, what is a 'shared savings' arrangement?

Splitting revenue equally between the hospital and physician group
An agreement to split the cost of expensive medical equipment
A pay-for-performance bonus distributed to all staff members
A model where providers and payers share in cost savings achieved when spending falls below a benchmark (Correct answer)

Correct answer: A model where providers and payers share in cost savings achieved when spending falls below a benchmark

In shared savings models, if total healthcare costs come in below a pre-set benchmark, the provider organization receives a percentage of the savings as a bonus payment.

Question 33: A hospital uses a cost-per-hour metric to manage staffing. If total productive labor hours are 120,000 and direct labor cost is $4,800,000, what is the cost per productive hour?

$35.00
$50.00
$40.00 (Correct answer)
$48.00

Correct answer: $40.00

$4,800,000 ÷ 120,000 hours = $40.00 per productive hour, a key benchmark for staffing efficiency analysis.

Question 34: What is the function of the Explanation of Benefits (EOB)?

A prescription refill notification
A breakdown of covered and non-covered expenses (Correct answer)
A medical diagnosis report
A patient’s lab test results

Correct answer: A breakdown of covered and non-covered expenses

The Explanation of Benefits (EOB) is a document sent by a health insurance company to a policyholder after a medical service has been rendered. Its function is to detail what medical services were covered, how much the insurer paid, and the remaining balance the patient is responsible for, providing a clear breakdown of expenses.

Question 35: Under IRS Section 409A, deferred compensation arrangements for healthcare executives that do not comply with distribution timing rules are subject to:

Forfeiture of the entire deferred amount
A 10% early withdrawal penalty only
A flat 30% withholding rate by the employer
Immediate income inclusion plus a 20% penalty tax and interest (Correct answer)

Correct answer: Immediate income inclusion plus a 20% penalty tax and interest

Non-compliance with Section 409A triggers immediate income recognition, a 20% excise tax, and premium interest charges on deferred amounts.

Question 36: Under GASB Statement No. 68, governmental hospitals must record:

Their proportionate share of the net pension liability for defined benefit plans (Correct answer)
Pension obligations as a note disclosure only
Pension costs only when benefits are paid to retirees
Pension expense based only on contributions made during the year

Correct answer: Their proportionate share of the net pension liability for defined benefit plans

GASB 68 requires governmental employers to recognize their proportionate share of the collective net pension liability on the statement of net position.

Question 37: A not-for-profit hospital merges with another NFP hospital in a transaction with no exchange of consideration. Under ASC 958-805, this is accounted for as:

A merger using the carryover basis method if there is no identified acquirer (Correct answer)
A contribution received equal to the fair value of net assets acquired
A business combination under ASC 805 with a zero purchase price
An equity method investment at the combining entity's book value

Correct answer: A merger using the carryover basis method if there is no identified acquirer

ASC 958-805 allows NFP combinations without consideration to use the carryover basis method when neither entity is identified as the acquiring entity.

Question 38: Which regulatory framework most impacts Medicare & Medicaid Billing in Healthcare Accounting Certification?

International standards only
Only internal policies
No regulations apply
Federal and state regulatory requirements specific to the industry (Correct answer)

Correct answer: Federal and state regulatory requirements specific to the industry

Medicare & Medicaid Billing is governed by federal and state regulations that must be followed for compliance.

Question 39: An endowment fund at a healthcare nonprofit has accumulated gains of $500,000 beyond the original gift amount. Under UPMIFA, these gains are:

Taxable as unrelated business income
Available for appropriation for the organization's programs if prudently managed (Correct answer)
Permanently restricted until released by the donor
Required to be reinvested in the endowment corpus

Correct answer: Available for appropriation for the organization's programs if prudently managed

Under UPMIFA (Uniform Prudent Management of Institutional Funds Act), accumulated endowment gains are available for appropriation based on prudent spending rate decisions by the governing board.

Question 40: Which regulatory framework most impacts Healthcare Mergers & Acquisitions Accounting in Healthcare Accounting Certification?

Only internal policies
No regulations apply
International standards only
Federal and state regulatory requirements specific to the industry (Correct answer)

Correct answer: Federal and state regulatory requirements specific to the industry

Healthcare Mergers & Acquisitions Accounting is governed by federal and state regulations that must be followed for compliance.

Question 41: What is the role of documentation in Tax-Exempt Organization Accounting for Healthcare Accounting Certification?

Management reports only
Optional paperwork
Creating an auditable trail of all transactions and decisions (Correct answer)
Only for tax season

Correct answer: Creating an auditable trail of all transactions and decisions

Thorough documentation creates an auditable trail essential for compliance and transparency.

Question 42: Which of the following is an example of a non-cash compensation benefit that must be included in an employee's W-2 gross income?

Employer-provided on-site gym access valued under de minimis rules
Personal use of a hospital-owned vehicle (Correct answer)
Health insurance premiums paid under a Section 125 plan
Employer contributions to a 401(k) up to IRS limits

Correct answer: Personal use of a hospital-owned vehicle

Personal use of a company vehicle is a taxable fringe benefit that must be valued using IRS methods and included in the employee's W-2 as compensation.

Question 43: When a healthcare organization acquires a rival clinic and the fair value of net assets exceeds the purchase price, the result is:

Deferred revenue equal to the excess amount
Additional goodwill recognized on the balance sheet
A bargain purchase gain recorded in earnings (Correct answer)
An immediate write-down of acquired assets

Correct answer: A bargain purchase gain recorded in earnings

When fair value of net identifiable assets exceeds purchase price, ASC 805 requires recognition of a bargain purchase gain in the income statement.

Question 44: When a Medicare MAC issues a demand letter for an overpayment, a provider must request a redetermination within how many days to initiate the appeals process?

120 days
180 days (Correct answer)
30 days
60 days

Correct answer: 180 days

Providers must file a redetermination request with the MAC within 120 days of receiving the initial determination to begin the five-level Medicare appeals process.

Question 45: Post-acquisition, a hospital discovers that the acquired entity had an unrecorded malpractice liability that existed at the acquisition date. During the measurement period, this should be:

Disclosed only; no financial statement adjustment is required
Treated as a post-acquisition liability with no effect on purchase accounting
Recorded as an adjustment to goodwill retrospectively to the acquisition date (Correct answer)
Expensed in the current period as a loss contingency

Correct answer: Recorded as an adjustment to goodwill retrospectively to the acquisition date

Pre-existing liabilities discovered during the measurement period are adjusted retrospectively by revising the purchase price allocation and adjusting goodwill.

Question 46: What is the significance of the 'global surgery period' in physician billing?

It is the maximum time frame allowed to submit a surgical claim
It defines the period a surgeon must be available for post-operative complications
It refers to the international billing standards for surgical procedures
It is the period following a surgery during which related follow-up care is bundled into the surgical payment and cannot be billed separately (Correct answer)

Correct answer: It is the period following a surgery during which related follow-up care is bundled into the surgical payment and cannot be billed separately

The global surgery package bundles pre-operative, intra-operative, and post-operative care into a single payment, meaning providers cannot separately bill for routine follow-up within the global period (typically 0, 10, or 90 days).

Question 47: A hospital uses a perpetual inventory system. Which is an advantage over a periodic system for high-value medical supplies?

Real-time tracking of inventory balances after each transaction (Correct answer)
Simplified year-end physical count procedures
No need for a chart of accounts for supply items
Lower administrative cost per transaction

Correct answer: Real-time tracking of inventory balances after each transaction

A perpetual system updates inventory records with every receipt and issuance, providing continuous visibility into stock levels critical for high-value medical supplies.

Question 48: A healthcare organization classifies travel nurse agency fees as which type of labor cost?

Contract or agency labor (non-employee) (Correct answer)
Productive direct labor
Fringe benefit expense
Indirect overhead

Correct answer: Contract or agency labor (non-employee)

Agency or contract labor is reported separately from employee wages because the facility pays a staffing agency rather than the individual worker, with no payroll tax obligation.

Question 49: What is the function of a 'lockbox' in the context of healthcare accounts receivable?

Holding denied claims for appeal
Securing PHI in the EHR
Encrypting EDI claim files
A bank service that captures and deposits patient payments and transmits remittance data (Correct answer)

Correct answer: A bank service that captures and deposits patient payments and transmits remittance data

A lockbox is a bank-operated service that receives, processes, and deposits payments, then sends remittance data electronically to the provider's AR system.

Question 50: When a claim is submitted with a Modifier -59, what does the provider attest?

The service was discontinued after the administration of anesthesia
The service was performed by a different physician than the one originally scheduled
The patient received the service in an emergency setting
The procedure represents a distinct procedural service not normally reported together with another code but appropriately billed separately on that day (Correct answer)

Correct answer: The procedure represents a distinct procedural service not normally reported together with another code but appropriately billed separately on that day

Modifier -59 is used to indicate that a procedure or service was distinct or independent from other services performed on the same day, overriding a bundling edit when appropriate.

Question 51: Under ASC 842, a hospital that enters a 10-year operating lease for medical imaging equipment must:

Expense lease payments as incurred with no balance sheet impact
Disclose the lease in footnotes only with no income statement impact
Capitalize the equipment and record depreciation only
Record a right-of-use asset and a lease liability on the balance sheet (Correct answer)

Correct answer: Record a right-of-use asset and a lease liability on the balance sheet

ASC 842 requires lessees to recognize a right-of-use asset and corresponding lease liability for all leases with terms greater than 12 months, bringing operating leases onto the balance sheet.

Question 52: In EHR financial reporting, what does 'net days revenue outstanding' (NDRO) measure differently from gross days in AR?

NDRO tracks only government payer balances
NDRO uses billed charges while gross AR uses net revenue
NDRO uses net AR after contractual adjustments while gross days in AR uses total billed charges (Correct answer)
NDRO is calculated quarterly rather than monthly

Correct answer: NDRO uses net AR after contractual adjustments while gross days in AR uses total billed charges

NDRO divides net accounts receivable (after contractual allowances) by average daily net patient revenue, providing a more accurate picture than gross AR metrics.

Healthcare Accounting Certification (HAC)

The HAC Healthcare Accounting Certification validates proficiency in healthcare-specific accounting practices including financial reporting, revenue cycle management, cost accounting operations, and strategic financial transactions within healthcare organizations.

Questions

60 min

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