MHA Healthcare Finance and Budgeting 1 — Questions and Answers
Question 1: Which financial statement shows a healthcare organization's revenues, expenses, and net income over a specific period?
- Balance sheet
- Income statement (Correct answer)
- Cash flow statement
- Statement of equity
Correct answer: Income statement
The income statement (also called the profit and loss statement) reports revenues, expenses, and net income over a defined accounting period.
Question 2: What does the term 'case mix index' (CMI) measure in hospital finance?
- Patient satisfaction scores
- The relative weight and complexity of patients treated (Correct answer)
- Staff-to-patient ratios
- Average length of stay
Correct answer: The relative weight and complexity of patients treated
Case mix index measures the average relative weight of all cases treated, reflecting the complexity and resource intensity of the patient population.
Question 3: Under Medicare, what payment system reimburses hospitals a fixed amount per inpatient stay based on diagnosis?
- Fee-for-service
- Per diem payment
- Diagnosis-Related Group (DRG) (Correct answer)
- Capitation
Correct answer: Diagnosis-Related Group (DRG)
The Prospective Payment System (PPS) uses Diagnosis-Related Groups to pay hospitals a fixed predetermined amount per inpatient admission.
Question 4: What is 'accounts receivable days' (AR days) used to measure in healthcare finance?
- How quickly a hospital pays its vendors
- The average number of days to collect payment after a service is rendered (Correct answer)
- The total outstanding debt of the organization
- Monthly payroll processing time
Correct answer: The average number of days to collect payment after a service is rendered
AR days (days in accounts receivable) measures on average how many days it takes a healthcare organization to collect payment after providing a service.
Question 5: Which budgeting approach starts from a zero base each period, requiring all expenses to be justified anew?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Rolling budget
- Activity-based budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting requires managers to justify every expense from scratch each budget cycle, rather than simply adjusting prior-year figures.
Question 6: What is the primary purpose of a charity care policy in a nonprofit hospital?
- To reduce staff overtime
- To provide free or discounted care to patients who cannot afford to pay (Correct answer)
- To negotiate higher reimbursement rates
- To comply with HIPAA requirements
Correct answer: To provide free or discounted care to patients who cannot afford to pay
Charity care policies allow nonprofit hospitals to fulfill their community benefit obligations by providing free or reduced-cost care to financially eligible patients.
MHA Healthcare Finance and Budgeting 1
Which financial statement shows a healthcare organization's revenues, expenses, and net income over a specific period?