Healthcare Accounting Financial Reporting & Analysis Flashcards

The Disproportionate Share Hospital (DSH) adjustment in Medicare compensates hospitals primarily for:

Answer: Serving a large proportion of low-income and Medicaid patients

DSH payments compensate hospitals that serve a disproportionately large share of low-income patients, particularly those covered by Medicaid and uninsured individuals.

Which accounting principle requires healthcare organizations to record expenses in the same period as the revenues they helped generate?

Answer: Matching principle

The matching principle requires that expenses be recognized in the same accounting period as the revenues they helped produce, ensuring proper period income measurement.

A hospital reports total assets of $200M and total liabilities of $120M. Its equity multiplier is approximately:

Answer: 2.5

Equity multiplier = Total assets / Total equity; equity = $200M - $120M = $80M; $200M / $80M = 2.5, indicating the hospital uses $2.50 in assets per $1 of equity.

In healthcare financial analysis, 'adjusted discharges' are used to:

Answer: Normalize inpatient volume to account for outpatient activity

Adjusted discharges convert outpatient visits into inpatient equivalents so that per-unit cost and revenue metrics reflect total patient volume including both inpatient and outpatient services.

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

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.

Which indicator signals that a hospital may be experiencing revenue cycle deterioration?

Answer: Increasing denial rates from payers

Rising payer denial rates indicate that claims are being rejected, leading to delayed or lost revenue and signaling revenue cycle process breakdowns.

A hospital's 'net collection rate' is calculated as:

Answer: Cash collected / (Gross charges minus contractual adjustments)

Net collection rate equals cash collected divided by net charges (gross charges minus contractual adjustments), measuring how effectively the hospital collects what it is contractually owed.