TAGME Financial Management 3 — Questions and Answers
Question 1: A GME office is audited and discovers that direct GME payments were used to fund an administrative retreat unrelated to resident education. This is an example of:
- Appropriate discretionary spending within GME funds
- Misuse of restricted federal education funds (Correct answer)
- An allowable indirect cost under CMS guidelines
- A legitimate professional development expense
Correct answer: Misuse of restricted federal education funds
Direct GME funds are restricted to costs directly related to graduate medical training; using them for unrelated administrative events constitutes misuse.
Question 2: Which financial statement would a program administrator review to determine whether the GME department has sufficient cash to cover payroll at the end of the month?
- Income statement
- Balance sheet
- Cash flow statement (Correct answer)
- Statement of changes in equity
Correct answer: Cash flow statement
The cash flow statement shows actual cash inflows and outflows, making it the appropriate tool for assessing near-term payroll coverage.
Question 3: In GME financial planning, 'responsibility center budgeting' means:
- The GME office holds the entire institution's budget
- Individual program directors control and are accountable for their own budgets (Correct answer)
- A central committee approves all program-level expenditures
- Budget responsibility is shared equally among all department chairs
Correct answer: Individual program directors control and are accountable for their own budgets
Responsibility center budgeting assigns financial accountability to individual program directors who manage their own program budgets.
Question 4: A hospital system is considering consolidating GME administrative services across three programs to reduce overhead. This strategy is best described as seeking:
- Economies of scale (Correct answer)
- Revenue cycle optimization
- Activity-based costing efficiencies
- Zero-based budget reductions
Correct answer: Economies of scale
Consolidating services to reduce per-unit administrative costs across multiple programs is a classic example of achieving economies of scale.
Question 5: A program administrator receives a purchase order for $4,200 in medical textbooks but the approved budget line is $3,000. The correct compliance step is to:
- Approve the order and adjust next year's budget accordingly
- Split the order into two invoices to stay under individual approval thresholds
- Seek a budget amendment or supplemental approval before committing funds (Correct answer)
- Deny the order and inform faculty the line is exhausted
Correct answer: Seek a budget amendment or supplemental approval before committing funds
Spending in excess of an approved budget line requires prior authorization through a formal amendment process, not retroactive adjustment.
Question 6: Which of the following best describes the purpose of a 'teaching hospital cost report' submitted to CMS?
- To justify increases in resident stipend levels
- To document allowable costs for Medicare reimbursement including GME payments (Correct answer)
- To report ACGME accreditation outcomes to federal regulators
- To disclose all faculty compensation to the Department of Education
Correct answer: To document allowable costs for Medicare reimbursement including GME payments
The Medicare cost report is used to calculate and document allowable hospital costs, including direct and indirect GME payments from CMS.
Question 7: A GME administrator is evaluating whether to lease or purchase a new simulation lab. Which financial concept is MOST important in making this decision?
- Gross margin analysis
- Net present value (NPV) of each option's cash flows (Correct answer)
- Break-even analysis based on simulation hours per year
- Return on investment for the current simulation equipment
Correct answer: Net present value (NPV) of each option's cash flows
NPV analysis accounts for the time value of money across all future cash flows for both options, making it the most rigorous tool for lease-vs-buy decisions.
TAGME Financial Management 3
A GME office is audited and discovers that direct GME payments were used to fund an administrative retreat unrelated to resident education.
This is an example of: