9780834212060

The author is the executive director of a private consulting firm in Dallas, TX. A practical financial management text for those who need basic knowledge and a better understanding of health care finance. Uses real examples from hospitals and other health care agencies. Includes some case studies. Softcover. Added to Brandon-Hill Medical List in April 2001.

Judith J. Baker, PhD, CPA, is Executive Director, Resource Group, Ltd., a Dallas based health care consulting firm. She is author of Activity-Based Costing and Activity-Based Management for Health Care Providers, a consulting editor for Aspen publications, and co-editor of Aspen's quarterly Journal of Health Care Finance. R. W. Baker, JD, is Managing Partner, Resource Group, Ltd. He is a health care consultant who focuses on health care management, training, and regulatory issues. He designs, directs, and administers long-term care Minimum Data Set (MDS) data collection and financial analysis. He is also a consulting editor for Aspen publications.

Preface

xi

Acknowledgments

xiii

PART I---HEALTH CARE FINANCE OVERVIEW

Background

3

(3)

Progress Notes

3

(1)

The History

3

(1)

The Concept

4

(1)

Viewpoints

4

(2)

Introduction to Health Care Finance

6

(5)

Progress Notes

6

(1)

Why Manage?

6

(1)

The Elements of Financial Management

6

(1)

The Organization's Structure

7

(3)

Two Types of Accounting

10

(1)

Information Checkpoint

10

(1)

Key Terms

10

(1)

Discussion Questions

10

(1)

What Does the Health Care Manager Need To Know?

11

(10)

Progress Notes

11

(1)

How the System Works in Health Care

11

(1)

The Information Flow

11

(2)

Basic System Elements

13

(5)

The Annual Management Cycle

18

(2)

Information Checkpoint

20

(1)

Key Terms

20

(1)

Discussion Questions

20

(1)

PART II---MANAGERIAL ACCOUNTING AND FINANCIAL ANALYSIS

21

(80)

Revenues (Inflow)

23

(9)

Progress Notes

23

(1)

Overview

23

(1)

Receiving Revenue for Services

23

(2)

Sources of Health Care Revenue

25

(2)

Grouping Revenue for Planning and Control

27

(3)

Information Checkpoint

30

(1)

Key Terms

30

(1)

Discussion Questions

31

(1)

Expenses (Outflow)

32

(8)

Progress Notes

32

(1)

Overview

32

(1)

Disbursements for Services

33

(1)

Grouping Expenses for Planning and Control

33

(4)

Cost Reports as Influencers of Expense Formats

37

(1)

Information Checkpoint

38

(1)

Key Terms

39

(1)

Discussion Questions

39

(1)

Cost Classifications

40

(8)

Progress Notes

40

(1)

Distinction between Direct and Indirect Costs

40

(1)

Examples of Direct Cost and Indirect Cost

41

(2)

Responsibility Centers

43

(3)

Distinction between Product and Period Costs

46

(1)

Information Checkpoint

47

(1)

Key Terms

47

(1)

Discussion Questions

47

(1)

Cost Behavior and Break-Even Analysis

48

(15)

Progress Notes

48

(1)

Distinction between Fixed, Variable, and Semivariable Costs

48

(2)

Examples of Variable and Fixed Costs

50

(4)

Analyzing Mixed Costs

54

(2)

Contribution Margin, CVP and PV Ratios

56

(5)

Information Checkpoint

61

(1)

Key Terms

61

(1)

Discussion Questions

62

(1)

Staffing: The Manager's Responsibility

63

(10)

Progress Notes

63

(1)

Staffing Requirements

63

(1)

FTEs for Annualizing Positions

63

(3)

Number of Employees Required To Fill a Position: Another Way to Calculate FTEs

66

(3)

Tying Cost to Staffing

69

(2)

Information Checkpoint

71

(1)

Key Terms

71

(1)

Discussion Questions

72

(1)

Comparative Data and Forecasts

73

(7)

Progress Notes

73

(1)

Comparative Data

73

(4)

Forecasts

77

(2)

Information Checkpoint

79

(1)

Key Terms

79

(1)

Discussion Questions

79

(1)

Budgeting and Variance Analysis

80

(9)

Progress Notes

80

(1)

Budgets

80

(3)

Variance Analysis

83

(5)

Information Checkpoint

88

(1)

Key Terms

88

(1)

Discussion Questions

88

(1)

The Time Value of Money

89

(12)

Progress Notes

89

(1)

Purpose

89

(1)

Unadjusted Rate of Return

89

(1)

Present-Value Analysis

89

(1)

Internal Rate of Return

90

(1)

Payback Period

91

(1)

Evaluations

92

(1)

Information Checkpoint

92

(1)

Key Terms

93

(1)

Discussion Questions

93

(1)

Appendix 11--A

94

(4)

Appendix 11--B

98

(3)

PART III---FINANCIAL MANAGEMENT TOOLS

101

(26)

Reporting

103

(8)

Progress Notes

103

(1)

Understanding the Major Reports

103

(1)

Balance Sheet

103

(2)

Statement of Revenue and Expense

105

(1)

Statement of Changes in Fund Balance/Net Worth

105

(1)

Statement of Cash Flows

106

(1)

Subsidiary Reports

107

(1)

Summary

107

(2)

Information Checkpoint

109

(1)

Key Terms

110

(1)

Discussion Questions

110

(1)

Financial and Operating Ratios as Performance Measures

111

(7)

Progress Notes

111

(1)

The Importance of Ratios

111

(1)

Liquidity Ratios

111

(2)

Solvency Ratios

113

(2)

Profitability Ratios

115

(2)

Information Checkpoint

117

(1)

Key Terms

117

(1)

Discussion Questions

117

(1)

Other Types of Performance Measures

118

(9)

Progress Notes

118

(1)

Importance of a Variety of Performance Measures

118

(1)

Adjusted Performance Measures over Time

118

(1)

Benchmarking

118

(4)

Economic Measures

122

(1)

Measurement Tools

122

(2)

Information Checkpoint

124

(1)

Key Terms

124

(1)

Discussion Questions

125

(2)

PART IV---CASE STUDY

127

(24)

Case Study: Metropolis Health System

129

(22)

Background

129

(11)

Meeting the Challenge of Cost Containment: A Case Study Using Variance Analysis

140

(11)

PART V---MINI-CASE STUDIES

151

(40)

Mini-Case Study 1: Using Financial Ratios and Interpreting Credit Analysis in Hospitals and Nursing Homes

153

(18)

Hospital Finance

154

(4)

Credit Analysis of a Skilled Nursing Facility

158

(4)

Credit Analysis of Nonprofit Continuing Care Retirement Communities

162

(9)

Mini-Case Study 2: Changing Economic Realities in the Health Care Setting: A Physician's Office Teaching Case That Includes Specifics on Changing Payment Levels

171

(13)

Improving Patient Care in a Changing Environment: A Teaching Case

172

(7)

RBRVS---1999 Update

179

(5)

Mini-Case Study 3: The Economic Significance of Resource Misallocation: A Finance and Operations Problem in the Women, Infants, and Children Public Health Program

184

(7)

Client Flow through the Women, Infants, and Children Public Health Program

185

(6)

Appendix A: Checklists

191

(3)

Appendix B: Web-Based Learning Tools

194

(1)

Notes

195

(2)

Glossary

197

(6)

Examples and Exercises, Supplemental Material, and Solutions

203

(52)

Index

255

(8)

About the Authors

263

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Health Care Finance : Basic Tools for Nonfinancial Managers

Health Care Finance : Basic Tools for Nonfinancial Managers

0834212064

Summary

Author Biography

Table of Contents

Supplemental Materials