HSM 340 Final Exam

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Introduction:
As a medical professor, it is essential to create assignments that provide comprehensive theoretical and practical knowledge to medical college students. This file presents a final exam that covers various aspects of healthcare management, including budgeting, mergers, Medicare regulations, accounting, annuity, working capital, and investment.

1. A flexible budget is more suitable when the actual results of an organization are expected to deviate significantly from the budget due to changes in production levels, sales volume, or other factors. A forecast budget, on the other hand, is based on assumptions that are not flexible and may not reflect the actual results. Hence, a flexible budget is more appropriate for organizations that experience fluctuations in their operations.

2. A horizontal merger occurs when two firms that operate in the same industry and at the same level of the value chain merge to form a single entity. In contrast, a vertical merger occurs when two firms that operate at different levels of the value chain, such as a producer and a distributor, merge to form a single entity. Horizontal mergers aim to increase market share and reduce competition, while vertical mergers aim to improve supply chain efficiency and reduce costs.

3. The Outpatient Code Editor (OCE) is a software program developed by the Centers for Medicare and Medicaid Services (CMS) to detect improper coding and billing of outpatient healthcare services. The OCE applies national and local coverage policies to claims data to identify any errors or anomalies that may result in incorrect payments or fraud.

4. The primary provision of the Emergency Medical Treatment and Active Labor Act (EMTALA) is to ensure that all patients receive appropriate medical treatment regardless of their ability to pay or their insurance status. EMTALA requires hospitals that participate in Medicare to provide emergency medical services to anyone who seeks care, regardless of their condition or ability to pay.

5. The variances can be calculated using the following formulas:

– Material variance = (actual quantity used x actual price) – (actual quantity used x standard price)
– Labor variance = (actual hours x actual rate) – (actual hours x standard rate)
– Variable overhead variance = (actual hours x actual variable overhead rate) – (actual hours x standard variable overhead rate)
– Fixed overhead variance = actual fixed overhead – (budgeted fixed overhead + (budgeted direct labor hours x fixed overhead rate))

6. Revenues and expenses under accrual accounting are recognized when they are earned or incurred, regardless of when they are received or paid. This method of accounting provides a more accurate depiction of a company’s financial performance by reflecting the revenue and expenses that are related to a specific period, even if the payments are made or received at a later date.

7. An accounting entity refers to a distinct economic activity or organization that has a separate set of financial records. It may include a sole proprietor, partnership, corporation, or other legal entity. The accounting entity is essential in accounting as it separates the financial activities of one business from another and provides unique financial information for each entity.

8. An annuity is a financial contract between an individual and an insurance company that pays a fixed sum of money at regular intervals for a specified period. It is a form of investment that guarantees a stream of income in the future.

9. For-profit healthcare providers can increase their equity position through various avenues, such as issuing common stock, selling assets, increasing retained earnings, or borrowing funds. These methods can provide additional capital that can be used to expand operations, invest in new technologies or facilities, and improve profitability.

10. The working capital cycle is the time between when a company pays for its raw materials or inventory and when it receives payment for the goods or services it has produced. It is important to manage the working capital cycle as it affects the company’s cash flow and liquidity. A shorter working capital cycle means that the company can convert its assets into cash more quickly, which improves its financial position.

11. Working capital refers to the current assets minus the current liabilities of a company. It represents the capital that is required to operate the business on a daily basis. Net working capital is the same as working capital but excludes the current portion of debt.

12. The value of an investment increases when the number of compounding periods increases because of the power of compounding. Compounding refers to the process of generating returns on an investment that includes both the principal amount and the previously accumulated interest or returns. As the number of compounding periods increases, the total amount of interest earned also increases, leading to a higher return on investment.

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