HIM-ch. 18

Description:	Revenue cycle and financial management
Category:	Management
Created by:	singeanna on 2009-02-23

Question	Answer
Accounting rate of return	An evaluation method that uses averages. The annual net inflows or outflows are averaged over the project's life for each project, and the asset value or investment value is averaged over the life of the project as well.
Accounts receivable	The revenue(dollar amount) owed to the organization.
Accounts receviable turnover rate	A ratio that provides a measure of the average time that receivables are outstanding or the period for which a health care organization extends credit to its debtors.
Accrual basis accounting	Financial transaction processing method that uses the matching concept, enabling revenues to be matched with the actual expenses incurred to produce the revenue. Records the revenues expected as revenues although the cash has not yet been received.
Action steps	Define the dates when certain activities are to be completed, how much labor or funding will be required, how resources will be used, and the expected outcome of results.
Activity ratios/turnover ratios	Ratios that use data from the balance sheet and the statement of revenues and expenses to measure an organization's ability to generate net operating revenue in relation to its various assets.
Assets	Cash or cashlike items or resources that can be converted into cash. May be considered short or long-term assets.
Balance sheet	Financial report that displays an organization's assets, liabilities, and fund balance or equity at a fixed point in time.
Budgets	Detailed numerical documents that translate the goals, objectives and actual steps into forecasts of volume and montetary resources needed.
Business Plan	Formal written document that lists objectives that support the organizations goals The plan includes action steps, resource requirements, cash flow benefits, prediction of expected outcomes and programatic outline spanning a fiscal year or longer.
Capital Expenditure	Items usually having a high initial cost and a life of more than 1 year.
Capital expenditure committee	A committee that evaluates all capital requests so that cash resources are used to purchase the high-cost items
Capitalization ratios	Ratios that focus on balance sheet numbers to measure the ability of the health care organization to meet it's short and long term financial obligations.
Capitation	A form of reimbursement in which a fixed, prepaid amount is paid to the provider for each person served, regardless of how much or how often the patient receives health care services. Used in HMO's.
Cash basis accounting	A financial transaction processing method in which each transaction is recorded when cash is exchanged. Revenues are recognized when money is received for services provided and expenses are recognized when money is paid out for resources used.
Certificate of need	A regulatory process that requires certain health care providers to obtain state approval before offering certain new or expanded services.
Charge description master/charge master	A list used by HCO that reflects the charge for each item that may be used in the treatment of the patient and the charge for most services (respiratory therapy, PT, lab, etc). Usually automated and linked with billing system.
Chart of accounts	Used to assign transactions to designated accounts in the financial accounting process. The larger expense items are in the lower number account categories while the expenses categories with limited expenses are in higher number account groups.
Compounding effect	The result of applying an interest rate to the number of compounding periods in a year and the length of the term.
Controlling	The activites that mgt. typically pursues when what was planned does not occur financially.
Current ratio	Compares current assets with current liabilities to determine whether there are sufficient cash and cash like assets to cover the immediate liabilities/bills that will come due in the short term. One of the most common liquidity ratio.
Days of revenue in patient accounts receivable ratios	Measure of the average time that receivables are outstanding or the period that a HCO extends credit to its debtors.
Depreciation	Systematic allocation fo the cost of a capital asset over a predetermined time frame in a rational manner. Calculated by dividing the capital cost by the years of life.
Disclosure	An entity's financial statements provides a mechanism to communicate the economic activites of an organization. If supplemental data are available to better clariy information for decision makers it should be disclosed.
Discounting	The opposite of compounding. Used to determine how much one might invest today at a compound interested rate of x to receive a given amount at the end of n years.
Double distribution method	An allocation method that assumes that the allocation of costs can not be linear and that some indiret deptartments need to be allocated to less commonly dispersed statements before fully allocated.
Entity	Something that exists in its own right and not merely as part of a bigger thing. Separate financial statements should be prepared for each individual business entity.
Equity	The profits and losses resulting from the differences between revenues and expenses.
Fee schedule	The list that reflects the charge for each item that may be used in the treatment of a patient and the charge for most services.
Financial accounting/Financial Accountant	Recording past and current financial transactions (payments, orders, expenses, revenues, accruals, etc)
Financial analysis	The mgt. process of formulating judgements and decisions from the relationship between the numbers on two reports: the balance sheet and statement of revenues and expenses. Also known as ratio analysis.
Flexible budget	A type of budget predicted on volume. All supplies, labor, and other variable expenses are budgeted in proportion to the anticipated volume.
Fund balance	The profits and losses that result from the differences between revenues and expenses.
Goals	Statements of what the organization wants to do.
Liabilities	The debts or obligations an organization owes. May include wages accruing between paydays, mortgage payments dues to the bank, etc.
Liquidity ratios	Ratios that focus on balance sheet numbers to measure the ability of the HCO to meet its short term and long term financial obligations.
Long term debt/total assets ratio	A capitalization ratio that compares the amount of long term debot the organization has with the amount off assets it has to pay for those debts.
Managerial accountant	Helps record what is happening currently or previously (variance analyses) against what was anticipated and what is still anticipated to happen (budget).
Managerial finance officer	Plans for the future by working with financial organizations (banks, investors, etc.) to obtain funding and financing for an organization's plans. Also called CFO.
Master budget	A consolidation of all dept. operating budgets with each of the operating account's combining balances.
Master charge list	List used by a HCO that reflects the charge for each item that may be used in treatment and the charge for most services (lab, PT, etc.) Also known as CDM or fee schedule.
Matching concept	Any associated expenses such as labor, supplies, and travel would be recorded in the same accounting period and matched with revenue for that accounting period.
Medicare	Government subsidized health care program that provides health insurance for elerly people and certain other groups.
Mission	A broad-term statement of the organization's purpose. The mission statement defines the geographical environment and population that the organization serves.
Net	Income from revenue reduced by all relevant deductions.
Net operating revenue	The amount of revenue expected to be received or total charges less the deductions expected by third-party payors resulting in revenues net of deductions or net operating revenue.
Net present value	Discounted or present value of all cash inflows and outflows of a project as a given discount rate.
Objectives	Specific statements that define the expectations or outcomes given the goal direction. Provide clear guidelines for mgt. and supervisors to define the action steps to achieve the objective. Are usually measurable.
Objectivity	Objectivity concept states that historical cost is a more objective measure than its current value.
Operating budget	A budget that predicts the labor, supply, and other expenses required to support the work volume predicted.
Operating margin ratio	A common performance ratio that displays the relationship between the net revenues received and the expenses required to supply the revenues.
Opportunity costs	The benefits that would be received from the next best alternative use of the investment funds.
Participating provider	Agrees to provide services to covered plan members, or Medicare beneficiaries, and must abide by established pay rates.
Payback method	The payback period determines the number of years it will take for the cash inflows from each project to pay back the initial investment.
Per case	A fixed payment system
Per diem	Established payment for a day's worth of services.
Performance ratio	Ratios that evaluate the use of resources to achieve a goal based on data from the statement of revenues and expenses.
Productive time	The time during which a worker is present and working.
Profit	The amount of money actually received from the payer less the actual cost to do the service.
Prospective payment system	A reimbursement program where the amount of payment is determined in advance of services rendered. Rates are established annually by the Centers for Medicare and Medicaid Services.
Ratio analysis	The mgt. process of formulating judgements and decisions from the relationship between the numbers represented on two reports; the balance sheet and statement of revenues and expenses.
Revenue	Money earned from the service provided.
Rolling budget method	A budgeted method that requires mgt. to prepare a budget for a period of timeand add to the end of that period another month when a month is consumed.
Simultaneous equations method	An allocation method that permits multiple allocations to occur through sophisticated mathematical software and the use of simultaneoud mathematical equations.
Stable monetary unit	Acconting entities use a stable monetary unit of measure to record and report financial transactions. Represented by the U.S. dollar in the United States.
Statement of cash flow	A financial report that provides additional detailed information about the source and use of funds. It documents the change in cash balance for a given accounting period and is useful for HCO to determine ability to pay bills.
Statement of revenues and expenses/income statement	Reports expected or earned income and the associated expenses for an accounting period. Revenue - Expense = Net Income
Statistics budget	Budget based on historical data regarding the volume and type of health care services provided, data about the community and future projection of need for heatlh care services.
Step-down method	An allocation method in which the indirect department that receives the least amount of service from other indirect departments and provides the most service to other departments has its costs allocated first.
Third-party payor	Private insurance company's, MCO's and fiscal intermediaries that process clamins for Medicare and Medicaid.
Time value of money	A basic concept of money mgt. that says its more beneficial to receive a dollar today than to receive it 1 year from now. The dollar received today can be investsed for 1 year longer than a dollar received a year from now.
Turnover ratio	Ratios that use data from the balance sheet and the statement of revenues and expenses to measure an organizaiton's ability to generate net operating revenue in relation to its various assets.
Variance report	A document that reflects the budget that was prepared and approved and shows the actual results on at least a monthly basis.
Whole service	When facilities or indiciduals are paid for all service rendered at the rate the facility or individual charges with no discount applied.
Zero-based budget	A type of budgeting approach that requires mgt. to complete a program assessment and define conseqences if specific programs are terminated or reduced.