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Health Information

Chapter 18 - Assignment 1-2

REVENUE CYCLE AND FINANCIAL MANAGEMENT This chapter highlights the many different roles and responsiblities of health information managers.
Payment of Health Care Some forms are: private insurance, Medicare and Medicaid.
Prospective payment system A program formed to balance the payment made for the same services rendered by different providers on the same diagnosis at a fixed rate.
Third party payer When the insurance company pays for services provided (doctor, hosptial, etc.) to the insured.
Certificate of need A regulatory process that requires certain health care providers to obtain state approval before offering certain new or expanded services.
MANAGING THE REVENUE CYCLE High health care cost and corresponding financial pressures face most health care provider organization and individuals practioners alike, emphasis is placed on both generating revenue and maximizing potential souces of revenue.
Front-end Activities Health care is not cash and carry, but rather a network or group of operations and systems interwoven with multiple participantsand administrative processes.
Contracting The major source of revenue for most health care organizations comes from third party insurance companies - so it is important for providers to negotiate the best reimbursement contractterms.
Common methods of reimbursement Percnetage of billed changes - Percentage of Medicare - Per diem arrangements - DRG or case rate - Per unit - Perdefined fee schedule - capitation
Participating provider A provider that has come to terms with a payer and is under approved contratual agreement.
Charge-master fee-schedule Charges assigned so costs covered for various supplies and services used. The Master Charge List can also be called: Charge master - Charge description master (CDM) or Fee schedule.
Registration and Admitting- Access Management Patient registration, a collection of complete and accurate demographic, financial and insurance information.
Patient encounter Whether admission to the hospital, skilled nursing, lab test, x-ray, a surgical procedure or other patient treatment that is the actual service that generates revenue for the health care facility.
Coding- charge capture Because codes are required for proper billing, completely accurate codes are required for opimum reimbursement.
Back-end Activities Depending on the structure of the organization it can involve Patient accounting - Claims processing - Collection Follow-up and Cliam Denial Management - Payment processing - Reimbursement analysis - Case Mix Analysis
FINACIAL ASPECTS OF FRAUD AND ABUSE COMPLIANCE he Sarbanes-Oxley Act of 2002 was created to provide greater and much needed financial accountability. The federal government through the Centers for Medicare and Medicaid Services is focusing on eliminating fraud and abuse in health care program.
SETTING PRIORITIES FOR FINANCIAL DECISIONS Management Accounting Managerial accounting provides economic information and internal framework to enable health care leaders to make effective decision. Mission -statement of organization purpose. Goal-statement of what organization want to do. Objective -expected outcome.
THE BUDGET AND BUSINESS PLANBudget Budgets are detailed numerical documents that translate the goals, objectives, and action steps into forecasts of volume and monetry resources needed.
Statistics Budget The first of several budgets developed from the planning process.
Operating Budget This budget is built once the patients, physicians,and procedures volumnes are determined.
Master Budget After all departments develop their operating budget, the same catagories of expenses are consolidated into one master budget with all operating accounts combined.
Rolling Budget Method Requires management to prepare a budget for a period of time and add to the end of that period another month when the month is consumed
Flexible Budget Predicted on volume - all supplies, laboe and other variable expenses are budgeted in proportion to the anticipated volume.
Zero-Based Budget An approach that management must complete a program assessment and define comsequences if specific programs are terminated or reduced.
Budget as a Control Refers to the activities that management typically pursues when what was planned does not occur financially.
Variance Reports This document shows the budget that was prepared and approved and show the budget that was
PREPARING A BUSINESS PLAN The organization planning process links departmental objectives and budgets to over-arching goals.
Business Plan A formal written document that evolves from the input of others.
Program and Automation Assessment These assessments are similar to doing an internal environment assessment of the HIM department.
The Four M"S Manpower - Machinery - Materials - MoneyWhen preparing the business plan and the budget, all proposed expenditures msut balance the four M's.
COST ALLOCATIONS Cost analysis and being able to measuer the impact of various subunits within an organization
Step-down Method In this method the indirect department that receives the least amount of service from other indirect departments and provides the most serivce to other departments has its costs allocated first.
Double-Distribution Method Similar to step-down this method assumes that allocation of costs cannot be linear and some indirect departments need to be allocated to less commonly depresed departments before costs of these departments are full allocated.
Simultaneous-Equation Method Permits multiple allocations to occur through sophisticated mathematical software.
FINANCIAL ACCOUNTING Recording and reporting the financial transactions of an organization for both internal management and users outside of the organization.
Fundamental Accounting Principles and Concepts Entity - Going concern - Stable Monetary Unit - Matching Concept - Objectivity - Disclosure.
Financial Management Duties The professional that cover different aspects of financial management are: Financial Account - Managerial Account - Managerial Finance Officer.
Cash and Accrual Systems Financial transactions can be handled in one of two manners: Cash basis Accounting or Accural Basis Accounting. The preferred method today is Accrual - Profit represents amount of money received less actual cost
USING FINANCIAL REPORTS TO PROVIDE MANAGEMENT INFORMATION The balance sheet displays organization's assets, liabilities and fund balance or equity at a fixt point in time. The statement of revenue and expenses reports expected earned income and associated expense,and cash flow provides source and use of funds.
USING RATIOS TO EVALUATE FINANCIAL DATA Financial analysis or ratio analysis is the management process that help form the relaionship between the numbers represented on the balance sheet and statement of revenues and expense.
Liquidity Ratio Liquuidity ratio is the most common current ratio. The ratio comparescyrrebt assets wutg current liabilities.
Turnover Ratio or Activity Ratio Turnover ratio or activity ratio divides patient accounts receivable by the average daily patient revenue. The ratio most affected by the activities of health services departments is the days of revenue in patient acounts receivable ratio.
Performance Ratio Evaluates the use of resources to acheive a goal. An operating margin ratio displays the relationship between net revenues and expenses required to supply the revenues.
Capitalization Ratio There are several capitalizatiion ratios, one is the long term debt total assets ratio which compares the amount of long term debt the organizatiion has with the amount of assets.
CAPITAL EXPENSE AND INVESTMENT DECISIONS The overall capital planning function is part of the managerial finance role, but can vary in different organizations.
Capital Expenditures Capital expenditures committee are established to evaluate capital request so that cash resources are used to pruchase the high-cost itens that will yields the most benefits to the organization, opportunity costs would benefit next best investment.
Capital Request Evaluation Process Capital expenditure is uaually expenditures in excess of $500 for equipemnt or furniture, usually a high initial cost adn a "life" of more than 1 year.
Time Value of Money Time value of money is based on the length of time the money is invested and the degree of risk associated weith the investment. The great the risk the greater the rate of return and vice versa.
Compounding The value of the investment is determined by the length of time the investment is in place because of compounding effect.
Discounting Discounting is the opposite of compounding
Net Present Value A discounting factor must be used to determine the net present value due to annual depreciation oon the item each year.
Acounting Rate of Return An evualation of averages. The annaul net inflow or outflows are averaged ovef the projects life for each project.
Payback Method The payback period method determines the number of years it will take for the cash inflow to pay back the initial investment.
Created by: Carol K. Rose
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