Nurse Executive Test Financial Management & Budgeting Flashcards

Which financial concept describes the principle that money available now is worth more than the same amount in the future?

Answer: Time value of money

The time value of money reflects money's earning potential and is foundational to healthcare capital investment and financial planning decisions.

A nurse executive is asked to justify a new nurse residency program to hospital administration. Which financial argument is MOST compelling?

Answer: Reduced RN turnover costs will offset the program investment within two years

Quantifying cost savings from reduced turnover provides a concrete, measurable financial justification that resonates most with executives.

What does 'days in accounts receivable' measure in hospital financial management?

Answer: The average time it takes to collect payment after services are rendered

Days in AR is a key cash flow metric that measures how efficiently the organization converts billed services into collected revenue.

Which of the following is an example of a fixed cost in a nursing unit budget?

Answer: Unit nurse manager annual salary

Fixed costs remain constant regardless of patient volume, such as a nurse manager's base salary which does not change with census.

What is the most important reason nurse executives should understand their organization's payer mix?

Answer: To project revenue accurately based on differing reimbursement rates from various payer types

Payer mix directly impacts revenue projections because Medicare, Medicaid, and commercial insurers all reimburse at different rates.

What is 'cost shifting' in the context of healthcare financial management?

Answer: Charging commercially insured patients higher rates to offset below-cost payments from government payers

Cost shifting occurs when providers charge privately insured patients more to compensate for government program payments that fall below actual costs.