[DOCUMENT TITLE]
HCA 285: Health Care AdministrationExam #2 Study Set – 180 Questions with
Explanations 2026___2027 well written
Domain 1: Health Care Finance & Reimbursement (Questions 1–30)
1. Under the prospective payment system (PPS), hospitals are reimbursed by Medicare based on:
a) The total number of days a patient stays in the hospital
b) The actual cost of supplies used during the procedure
c) The Diagnosis-Related Group (DRG) assigned to the patient's case
d) The patient’s ability to pay out-of-pocket
Explanation: DRGs are a classification system that groups patients with similar clinical diagnoses and resource utilization.
Medicare pays a predetermined fixed amount per discharge based on the DRG, regardless of the actual length of stay or
costs incurred. This shifts financial risk to the hospital, incentivizing efficiency.
2. What is the primary purpose of a capital budget in a healthcare organization?
a) To track daily operational expenses like salaries and supplies
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b) To plan for long-term investments in assets such as buildings and equipment
c) To manage cash flow for accounts receivable
d) To allocate funds for employee training programs
Explanation: The capital budget focuses on major investments with a useful life of more than one year, such as MRI
machines, hospital expansions, or IT infrastructure. These expenditures typically require significant capital outlay and are
subject to long-term depreciation and financing decisions.
3. What does "days in accounts receivable (A/R)" measure?
a) The average length of patient hospital stays
b) The average time between providing a service and collecting payment
c) The number of days inventory remains in storage
d) The frequency of insurance claim denials
Explanation: Days in A/R is a key metric calculated as (Total Accounts Receivable / Average Daily Charges). Lower
numbers indicate efficient billing and collection processes, while higher numbers suggest delays in reimbursement, which
can strain cash flow.
4. Which of the following best describes capitation?
a) A fee paid for each individual service provided
b) A fixed, pre-arranged monthly payment per patient to cover all services
c) A percentage of the hospital's total revenue
d) The maximum amount an insurer will pay per year
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Explanation: Capitation is a managed care payment model where providers receive a fixed monthly payment per enrolled
patient (per member per month, PMPM) regardless of how many services the patient uses. This transfers financial risk to
providers, incentivizing preventive care and efficient resource utilization.
5. In value-based purchasing (VBP), reimbursement is tied to:
a) The volume of patients treated
b) The number of beds in the facility
c) Clinical quality measures and patient experience scores
d) The seniority of the attending physician
Explanation: VBP is a Medicare program that withholds a percentage of hospital reimbursement and redistributes it
based on performance across domains such as clinical outcomes, safety, patient experience (HCAHPS), and efficiency.
High-performing hospitals receive bonuses; low performers face penalties.
6. What is the purpose of a charge master?
a) To list all medications approved for hospital use
b) To serve as a comprehensive list of billable items and services with associated charges
c) To track employee time and attendance
d) To document patient medical histories
Explanation: The charge master (or chargemaster) is the hospital's master price list containing all billable items—
procedures, supplies, medications, room rates—with corresponding charge codes. It serves as the foundation for claims
submission and revenue cycle management.
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, [DOCUMENT TITLE]
7. What is the "cost-to-charge ratio" used for?
a) Calculating employee bonuses
b) Estimating actual costs based on billed charges
c) Determining patient copayments
d) Setting physician salaries
Explanation: The cost-to-charge ratio is a statistical method used by CMS and internal analysts to approximate the actual
cost of services when only charge data is available. It is calculated as total operating costs divided by gross patient
charges.
8. Which of the following is a key component of the revenue cycle?
a) Root cause analysis
b) Patient registration and insurance verification
c) Peer review
d) Credentialing
Explanation: The revenue cycle encompasses all administrative and clinical functions that contribute to capturing,
managing, and collecting patient service revenue. It begins with patient registration, insurance verification, and eligibility
confirmation before services are rendered.
[DOCUMENT TITLE] EDU FINDRANTEZ
HCA 285: Health Care AdministrationExam #2 Study Set – 180 Questions with
Explanations 2026___2027 well written
Domain 1: Health Care Finance & Reimbursement (Questions 1–30)
1. Under the prospective payment system (PPS), hospitals are reimbursed by Medicare based on:
a) The total number of days a patient stays in the hospital
b) The actual cost of supplies used during the procedure
c) The Diagnosis-Related Group (DRG) assigned to the patient's case
d) The patient’s ability to pay out-of-pocket
Explanation: DRGs are a classification system that groups patients with similar clinical diagnoses and resource utilization.
Medicare pays a predetermined fixed amount per discharge based on the DRG, regardless of the actual length of stay or
costs incurred. This shifts financial risk to the hospital, incentivizing efficiency.
2. What is the primary purpose of a capital budget in a healthcare organization?
a) To track daily operational expenses like salaries and supplies
[DOCUMENT TITLE] EDU FINDRANTEZ
, [DOCUMENT TITLE]
b) To plan for long-term investments in assets such as buildings and equipment
c) To manage cash flow for accounts receivable
d) To allocate funds for employee training programs
Explanation: The capital budget focuses on major investments with a useful life of more than one year, such as MRI
machines, hospital expansions, or IT infrastructure. These expenditures typically require significant capital outlay and are
subject to long-term depreciation and financing decisions.
3. What does "days in accounts receivable (A/R)" measure?
a) The average length of patient hospital stays
b) The average time between providing a service and collecting payment
c) The number of days inventory remains in storage
d) The frequency of insurance claim denials
Explanation: Days in A/R is a key metric calculated as (Total Accounts Receivable / Average Daily Charges). Lower
numbers indicate efficient billing and collection processes, while higher numbers suggest delays in reimbursement, which
can strain cash flow.
4. Which of the following best describes capitation?
a) A fee paid for each individual service provided
b) A fixed, pre-arranged monthly payment per patient to cover all services
c) A percentage of the hospital's total revenue
d) The maximum amount an insurer will pay per year
[DOCUMENT TITLE] EDU FINDRANTEZ
, [DOCUMENT TITLE]
Explanation: Capitation is a managed care payment model where providers receive a fixed monthly payment per enrolled
patient (per member per month, PMPM) regardless of how many services the patient uses. This transfers financial risk to
providers, incentivizing preventive care and efficient resource utilization.
5. In value-based purchasing (VBP), reimbursement is tied to:
a) The volume of patients treated
b) The number of beds in the facility
c) Clinical quality measures and patient experience scores
d) The seniority of the attending physician
Explanation: VBP is a Medicare program that withholds a percentage of hospital reimbursement and redistributes it
based on performance across domains such as clinical outcomes, safety, patient experience (HCAHPS), and efficiency.
High-performing hospitals receive bonuses; low performers face penalties.
6. What is the purpose of a charge master?
a) To list all medications approved for hospital use
b) To serve as a comprehensive list of billable items and services with associated charges
c) To track employee time and attendance
d) To document patient medical histories
Explanation: The charge master (or chargemaster) is the hospital's master price list containing all billable items—
procedures, supplies, medications, room rates—with corresponding charge codes. It serves as the foundation for claims
submission and revenue cycle management.
[DOCUMENT TITLE] EDU FINDRANTEZ
, [DOCUMENT TITLE]
7. What is the "cost-to-charge ratio" used for?
a) Calculating employee bonuses
b) Estimating actual costs based on billed charges
c) Determining patient copayments
d) Setting physician salaries
Explanation: The cost-to-charge ratio is a statistical method used by CMS and internal analysts to approximate the actual
cost of services when only charge data is available. It is calculated as total operating costs divided by gross patient
charges.
8. Which of the following is a key component of the revenue cycle?
a) Root cause analysis
b) Patient registration and insurance verification
c) Peer review
d) Credentialing
Explanation: The revenue cycle encompasses all administrative and clinical functions that contribute to capturing,
managing, and collecting patient service revenue. It begins with patient registration, insurance verification, and eligibility
confirmation before services are rendered.
[DOCUMENT TITLE] EDU FINDRANTEZ
