Healthcare Analyst Financial Management & Budgeting Flashcards

What is the formula for calculating the break-even point in healthcare services?

Answer: Fixed costs ÷ (Revenue per unit − Variable cost per unit)

Break-even is calculated by dividing fixed costs by the contribution margin (revenue minus variable cost per unit).

Under the Medicare Prospective Payment System (PPS), hospitals are reimbursed based on which classification system?

Answer: Diagnosis-Related Groups (DRGs)

Medicare PPS reimburses acute care hospitals using DRGs, which assign a fixed payment based on the patient's diagnosis and procedure.

Which cost behavior remains constant in total regardless of patient volume changes within a relevant range?

Answer: Fixed costs

Fixed costs, such as lease payments or administrative salaries, do not change in total as patient volume fluctuates within a relevant range.

A healthcare organization's net patient revenue is $10M and total operating expenses are $9.2M. What is the operating margin?

Answer: 8%

Operating margin = (Net revenue − Operating expenses) ÷ Net revenue = ($10M − $9.2M) ÷ $10M = 8%.

Which financial statement shows a healthcare organization's assets, liabilities, and net assets at a specific point in time?

Answer: Balance sheet (Statement of Financial Position)

The balance sheet presents the organization's financial position—what it owns (assets) and owes (liabilities)—at a single date.

What does the term 'payer mix' refer to in healthcare financial analysis?

Answer: The proportion of patients covered by each type of insurance or payment source

Payer mix describes the breakdown of patients by insurance type (Medicare, Medicaid, commercial, self-pay), which significantly affects revenue.