HFMA
CERTIFIED SPECIALIST ACCOUNTING
AND FINANCE (CSAF)
Exam Elaborations Questions &
Answers
2026
,A hospital negotiates a per diem contract with a managed care payer for $2,500 per day. The
hospital's average cost per day for these patients is $2,100, but the average length of stay (ALOS)
is 5 days. If the payer switches to a bundled payment of $11,000 per episode regardless of length of
stay, what is the impact on the hospital's margin per episode?
A. Profit increases by $500.
B. Profit decreases by $1,500.
C. Profit decreases by $2,000.
D. Profit remains the same.
Answer: B.
Rationale: Under per diem, the hospital receives
12
,
500
(
12,500(
2,500 x 5 days) with a cost of
10
,
500
(
10,500(
2,100 x 5 days), resulting in a $2,000 profit. Under the bundle, the hospital receives $11,000 for the
same $10,500 cost, resulting in only a $500 profit. This is a $1,500 decrease.
True or False: In capital planning, a project with a Net Present Value (NPV) of zero should be
automatically rejected because it creates no financial value for the organization.
Answer: False.
Rationale: An NPV of zero means the project is expected to earn exactly its hurdle rate or cost of
capital. While it does not add "extra" value, it still meets the required rate of return and might be
pursued for strategic or clinical reasons.
Fill in the blank: The financial ratio that measures the number of days a hospital can meet its
average daily operating expenses using only its current unrestricted cash and investments is known
as ________.
Answer: Days Cash on Hand.
Rationale: Days Cash on Hand is a critical liquidity metric for bond rating agencies, indicating the
organization's ability to survive a revenue cycle disruption or clinical crisis.
A health system’s CFO notices a significant unfavorable labor variance. Upon investigation, the
volume of patients was 10 percent higher than budgeted, but total labor costs were 25 percent
higher than budgeted. This suggests that the primary driver of the variance was:
A. Volume Variance
B. Efficiency or Rate Variance
C. Revenue Cycle Delay
D. Capital Depreciation
Answer: B.
Rationale: If labor costs rose significantly faster than the volume of patients, it indicates that the
hospital either paid more per hour (Rate) or used more hours per patient (Efficiency) than the
budget allowed.
2
, Under the provisions of FASB ASC 606 regarding Revenue from Contracts with Customers, how
should a hospital report "Implicit Price Concessions" for uninsured patients?
A. As an operating expense labeled as Bad Debt.
B. As a direct reduction of the transaction price (Net Revenue).
C. As a non-operating loss.
D. As a liability on the balance sheet.
Answer: B.
Rationale: Current accounting standards require that the amount the hospital does not expect to
collect from a patient be treated as an implicit price concession, which reduces the reported Net
Revenue at the time of service rather than being recorded as bad debt expense later.
A hospital enters into a joint venture where it owns 40 percent of an outpatient surgery center but
does not have legal or operational control. According to accounting procedures for relationships,
which method should be used to report this investment?
A. Consolidation Method
B. Equity Method
C. Cost Method
D. Fair Value Method
Answer: B.
Rationale: The Equity Method is used when an investor has "significant influence" but not control,
typically defined as owning between 20 percent and 50 percent of the voting stock or interest.
True or False: Under Medicare's Inpatient Prospective Payment System (IPPS), the Wage Index
adjustment is designed to neutralize the impact of regional labor market costs on hospital
reimbursement.
Answer: True.
Rationale: The Wage Index is a geographic multiplier. It ensures that hospitals in high cost labor
markets receive higher base payments than those in lower cost areas, preventing the hospital's
location from being a financial disadvantage.
Fill in the blank: The federal law that prohibits physicians from referring Medicare or Medicaid
patients to an entity for "designated health services" if the physician has a financial relationship
with that entity is the ________ Law.
Answer: Stark.
Rationale: The Stark Law (Physician Self-Referral Law) is a strict liability statute, meaning that
intent does not have to be proven for a violation to occur if the financial relationship does not meet
a specific exception.
A hospital's malpractice insurance is structured as a "claims-made" policy. The finance department
must estimate and record a liability for incidents that have occurred but have not yet been reported
to the insurer. This reserve is known as:
A. Percurred Loss Reserve
B. IBNR (Incurred But Not Reported)
C. Reinsurance Premium
D. Prior Acts Coverage
Answer: B.
Rationale: IBNR represents the estimated cost of medical incidents that happened during the
reporting period but for which a claim has not been filed. Accounting for IBNR is essential for
accurate financial reporting of liabilities.
When evaluating a "lease vs. buy" decision for a new MRI machine, which factor would most
likely favor leasing the equipment?
A. A very high salvage value at the end of the term.
B. The rapid obsolescence of imaging technology.
C. A very low internal cost of capital for the hospital.
3
CERTIFIED SPECIALIST ACCOUNTING
AND FINANCE (CSAF)
Exam Elaborations Questions &
Answers
2026
,A hospital negotiates a per diem contract with a managed care payer for $2,500 per day. The
hospital's average cost per day for these patients is $2,100, but the average length of stay (ALOS)
is 5 days. If the payer switches to a bundled payment of $11,000 per episode regardless of length of
stay, what is the impact on the hospital's margin per episode?
A. Profit increases by $500.
B. Profit decreases by $1,500.
C. Profit decreases by $2,000.
D. Profit remains the same.
Answer: B.
Rationale: Under per diem, the hospital receives
12
,
500
(
12,500(
2,500 x 5 days) with a cost of
10
,
500
(
10,500(
2,100 x 5 days), resulting in a $2,000 profit. Under the bundle, the hospital receives $11,000 for the
same $10,500 cost, resulting in only a $500 profit. This is a $1,500 decrease.
True or False: In capital planning, a project with a Net Present Value (NPV) of zero should be
automatically rejected because it creates no financial value for the organization.
Answer: False.
Rationale: An NPV of zero means the project is expected to earn exactly its hurdle rate or cost of
capital. While it does not add "extra" value, it still meets the required rate of return and might be
pursued for strategic or clinical reasons.
Fill in the blank: The financial ratio that measures the number of days a hospital can meet its
average daily operating expenses using only its current unrestricted cash and investments is known
as ________.
Answer: Days Cash on Hand.
Rationale: Days Cash on Hand is a critical liquidity metric for bond rating agencies, indicating the
organization's ability to survive a revenue cycle disruption or clinical crisis.
A health system’s CFO notices a significant unfavorable labor variance. Upon investigation, the
volume of patients was 10 percent higher than budgeted, but total labor costs were 25 percent
higher than budgeted. This suggests that the primary driver of the variance was:
A. Volume Variance
B. Efficiency or Rate Variance
C. Revenue Cycle Delay
D. Capital Depreciation
Answer: B.
Rationale: If labor costs rose significantly faster than the volume of patients, it indicates that the
hospital either paid more per hour (Rate) or used more hours per patient (Efficiency) than the
budget allowed.
2
, Under the provisions of FASB ASC 606 regarding Revenue from Contracts with Customers, how
should a hospital report "Implicit Price Concessions" for uninsured patients?
A. As an operating expense labeled as Bad Debt.
B. As a direct reduction of the transaction price (Net Revenue).
C. As a non-operating loss.
D. As a liability on the balance sheet.
Answer: B.
Rationale: Current accounting standards require that the amount the hospital does not expect to
collect from a patient be treated as an implicit price concession, which reduces the reported Net
Revenue at the time of service rather than being recorded as bad debt expense later.
A hospital enters into a joint venture where it owns 40 percent of an outpatient surgery center but
does not have legal or operational control. According to accounting procedures for relationships,
which method should be used to report this investment?
A. Consolidation Method
B. Equity Method
C. Cost Method
D. Fair Value Method
Answer: B.
Rationale: The Equity Method is used when an investor has "significant influence" but not control,
typically defined as owning between 20 percent and 50 percent of the voting stock or interest.
True or False: Under Medicare's Inpatient Prospective Payment System (IPPS), the Wage Index
adjustment is designed to neutralize the impact of regional labor market costs on hospital
reimbursement.
Answer: True.
Rationale: The Wage Index is a geographic multiplier. It ensures that hospitals in high cost labor
markets receive higher base payments than those in lower cost areas, preventing the hospital's
location from being a financial disadvantage.
Fill in the blank: The federal law that prohibits physicians from referring Medicare or Medicaid
patients to an entity for "designated health services" if the physician has a financial relationship
with that entity is the ________ Law.
Answer: Stark.
Rationale: The Stark Law (Physician Self-Referral Law) is a strict liability statute, meaning that
intent does not have to be proven for a violation to occur if the financial relationship does not meet
a specific exception.
A hospital's malpractice insurance is structured as a "claims-made" policy. The finance department
must estimate and record a liability for incidents that have occurred but have not yet been reported
to the insurer. This reserve is known as:
A. Percurred Loss Reserve
B. IBNR (Incurred But Not Reported)
C. Reinsurance Premium
D. Prior Acts Coverage
Answer: B.
Rationale: IBNR represents the estimated cost of medical incidents that happened during the
reporting period but for which a claim has not been filed. Accounting for IBNR is essential for
accurate financial reporting of liabilities.
When evaluating a "lease vs. buy" decision for a new MRI machine, which factor would most
likely favor leasing the equipment?
A. A very high salvage value at the end of the term.
B. The rapid obsolescence of imaging technology.
C. A very low internal cost of capital for the hospital.
3
