MHA Healthcare Finance and Budgeting 2 — Questions and Answers
Question 1: Which financial ratio measures a healthcare organization's ability to meet short-term obligations?
- Debt-to-equity ratio
- Current ratio (Correct answer)
- Return on assets
- Operating margin
Correct answer: Current ratio
The current ratio (current assets divided by current liabilities) measures an organization's ability to pay short-term obligations with its short-term assets.
Question 2: What is 'payer mix' in the context of hospital revenue?
- The variety of insurance products a hospital offers
- The proportion of revenue from different payer sources such as Medicare, Medicaid, and commercial insurance (Correct answer)
- A blend of fee-for-service and capitated contracts
- The ratio of inpatient to outpatient revenue
Correct answer: The proportion of revenue from different payer sources such as Medicare, Medicaid, and commercial insurance
Payer mix describes the distribution of patients or revenue across different payer categories, directly affecting a hospital's financial performance.
Question 3: Which cost classification changes in direct proportion to changes in patient volume?
- Fixed costs
- Sunk costs
- Variable costs (Correct answer)
- Overhead costs
Correct answer: Variable costs
Variable costs, such as medical supplies and medications, increase or decrease in proportion to the volume of services provided.
Question 4: What is 'net patient service revenue' in healthcare accounting?
- Gross charges minus contractual adjustments and bad debt (Correct answer)
- Total charges billed to all payers
- Revenue only from self-pay patients
- Donations and grants received by the hospital
Correct answer: Gross charges minus contractual adjustments and bad debt
Net patient service revenue is gross charges reduced by contractual allowances, charity care, and bad debt, representing actual collectible revenue.
Question 5: Under value-based purchasing (VBP), Medicare adjusts hospital payments based primarily on what?
- Total bed capacity
- Quality and patient experience scores (Correct answer)
- Geographic location
- Number of employed physicians
Correct answer: Quality and patient experience scores
Medicare's Hospital Value-Based Purchasing program ties a portion of inpatient payments to quality measures, patient experience, and outcomes rather than volume alone.
Question 6: What does 'operating margin' indicate about a healthcare organization?
- The percentage of revenue remaining after all operating expenses (Correct answer)
- The total debt load relative to equity
- The number of days cash on hand available
- The efficiency of outpatient scheduling
Correct answer: The percentage of revenue remaining after all operating expenses
Operating margin (operating income divided by total operating revenue) shows what percentage of revenue remains after covering all operating costs.
MHA Healthcare Finance and Budgeting 2
Which financial ratio measures a healthcare organization's ability to meet short-term obligations?