Solution Manual for Financial Management for Public
Health, and Not-for-Profit Organizations 7th Edition by
Finkler, Calabrese & Smith
Explain the primary functions of finance. - ANSWER:providing financial analyses to
improve decisions that affect the wealth of the organization; borrowing funds and
investing excess cash resources of the firm
Explain the primary functions of accounting. - ANSWER:a system for providing
financial information; financial accounting records financial history and managerial
accounting looks forward; helps managers make ongoing decisions to help the
organization maintain both its profitability and viability
What are the primary goals of financial management for not-for-profit healthcare
organizations? - ANSWER:managers are concerned with maximization of salaries and
benefits; profits are necessary to achieve the goals related to providing high-quality
care
What are the uses of profit for health care organizations? - ANSWER:health care
organizations need profits to:
- invest in expansion of services so there is wider access to healthcare
- need to earn profits on some patients in order to subsidize those patients who are
unable to bear the costs of their services
- acquire new technologies to improve the quality of health care
- have money available should an emergency arise
Explain the relationship between financial risk and financial return. - ANSWER:the
lower the risk, the lower the return
The greater the risk we must incur, the greater the anticipated profit or return on
our money we demand.
What do accountants mean when they say "short-term" and "long-term"? -
ANSWER:short-term = 1 year or less
long-term = more than 1 year
Explain how an organization's liquidity and solvency are related. - ANSWER:Liquidity
refers to both an enterprise's ability to pay short-term bills and debts and a
company's capability to sell assets quickly to raise cash. Solvency refers to a
company's ability to meet long-term debts and continue operating into the future.
Why is the US health care system considered complex? - ANSWER:Unlike most
industries, third parties often pay health care service providers for services rendered
, How do healthcare organizations get paid? Do payers all pay the same rate for the
same service? - ANSWER:Usually, the bill is submitted by the health care provider
directly to the insurance company for payment. The insurance company adjusts the
charges on the bill for the contractual allowance and pays its share.
No, payers pay different rates depending on their insurance
What is a third-party payment system? How does this payment system affect the
financial management of health care organizations? - ANSWER:Someone other than
the individual receiving the medical care pays for the service
Changes, such as bundled payments and ACOs, require financial managers to hold
negotiations with other health providers to determine how to split the lump-sum
bundled payment, who will pay the administrative costs of the ACO, and how to
divide any
Medicare shared savings
What is a contractual allowance? - ANSWER:The difference between the provider's
charge and the negotiated rate
Why are some charges not reported as revenue for healthcare organizations? -
ANSWER:Because most health care organizations have no expectation of getting paid
full charges (because they have already negotiated discounts up front), the
organization is not allowed to claim the full charge as revenue when it reports the
financial results of its operations.
What were the major changes contained in the Patient Protection and Affordable
CareAct of 2010? - ANSWER:- The primary goal of this reform was to extend health
insurance coverage to uninsured Americans
- encouraged the creation of Accountable Care Organizations (ACOs), or cooperative
groupings of health care providers
- the law requires insurers to eliminate annual and lifetime coverage caps and
eliminate copays for services deemed "essential"
What is an accounting entity? - ANSWER:the unit for which we wish to account (ex: a
department, project, or organization)
What are the two most crucial aspects of this accounting entity concept? - ANSWER:
(1) once the entity is defined, the resources and obligations of the entity should not
be commingled with those of other entities
(2) all financial events should be viewed from the entity's point of view
Define asset - ANSWER:The resources owned by the organization
Define liability - ANSWER:Obligations of the organization to outside creditors
Define net asset (shareholders' equity) - ANSWER:The residual amount left over,
when liabilities are subtracted from assets
Health, and Not-for-Profit Organizations 7th Edition by
Finkler, Calabrese & Smith
Explain the primary functions of finance. - ANSWER:providing financial analyses to
improve decisions that affect the wealth of the organization; borrowing funds and
investing excess cash resources of the firm
Explain the primary functions of accounting. - ANSWER:a system for providing
financial information; financial accounting records financial history and managerial
accounting looks forward; helps managers make ongoing decisions to help the
organization maintain both its profitability and viability
What are the primary goals of financial management for not-for-profit healthcare
organizations? - ANSWER:managers are concerned with maximization of salaries and
benefits; profits are necessary to achieve the goals related to providing high-quality
care
What are the uses of profit for health care organizations? - ANSWER:health care
organizations need profits to:
- invest in expansion of services so there is wider access to healthcare
- need to earn profits on some patients in order to subsidize those patients who are
unable to bear the costs of their services
- acquire new technologies to improve the quality of health care
- have money available should an emergency arise
Explain the relationship between financial risk and financial return. - ANSWER:the
lower the risk, the lower the return
The greater the risk we must incur, the greater the anticipated profit or return on
our money we demand.
What do accountants mean when they say "short-term" and "long-term"? -
ANSWER:short-term = 1 year or less
long-term = more than 1 year
Explain how an organization's liquidity and solvency are related. - ANSWER:Liquidity
refers to both an enterprise's ability to pay short-term bills and debts and a
company's capability to sell assets quickly to raise cash. Solvency refers to a
company's ability to meet long-term debts and continue operating into the future.
Why is the US health care system considered complex? - ANSWER:Unlike most
industries, third parties often pay health care service providers for services rendered
, How do healthcare organizations get paid? Do payers all pay the same rate for the
same service? - ANSWER:Usually, the bill is submitted by the health care provider
directly to the insurance company for payment. The insurance company adjusts the
charges on the bill for the contractual allowance and pays its share.
No, payers pay different rates depending on their insurance
What is a third-party payment system? How does this payment system affect the
financial management of health care organizations? - ANSWER:Someone other than
the individual receiving the medical care pays for the service
Changes, such as bundled payments and ACOs, require financial managers to hold
negotiations with other health providers to determine how to split the lump-sum
bundled payment, who will pay the administrative costs of the ACO, and how to
divide any
Medicare shared savings
What is a contractual allowance? - ANSWER:The difference between the provider's
charge and the negotiated rate
Why are some charges not reported as revenue for healthcare organizations? -
ANSWER:Because most health care organizations have no expectation of getting paid
full charges (because they have already negotiated discounts up front), the
organization is not allowed to claim the full charge as revenue when it reports the
financial results of its operations.
What were the major changes contained in the Patient Protection and Affordable
CareAct of 2010? - ANSWER:- The primary goal of this reform was to extend health
insurance coverage to uninsured Americans
- encouraged the creation of Accountable Care Organizations (ACOs), or cooperative
groupings of health care providers
- the law requires insurers to eliminate annual and lifetime coverage caps and
eliminate copays for services deemed "essential"
What is an accounting entity? - ANSWER:the unit for which we wish to account (ex: a
department, project, or organization)
What are the two most crucial aspects of this accounting entity concept? - ANSWER:
(1) once the entity is defined, the resources and obligations of the entity should not
be commingled with those of other entities
(2) all financial events should be viewed from the entity's point of view
Define asset - ANSWER:The resources owned by the organization
Define liability - ANSWER:Obligations of the organization to outside creditors
Define net asset (shareholders' equity) - ANSWER:The residual amount left over,
when liabilities are subtracted from assets
