HAP 410 Mid-Term Exam / Spring



  1. (1) A. (1) What payer is used to benchmark (compare) all other rates for all managed care payers in a medical practice? Why?

The monitoring payer contracts are player contracts used to benchmark all other rates for all managed care payers in medical practice. This payer contract specifically the contracted reimbursement rates for each procedure is a vital part of maximizing your revenue.  This enables practices that keep the record of their data from losing an average of 4% reimbursement or evaluation and management. Trends are necessary to monitor since they are likely to display a parallel pattern in your revenue.


(1) b.(1) In addition to reimbursement rates, name three other items which should be negotiated.


Promotion and Titles


Maternity and paternity leave

Project placement



  1. (2) A. Define the “Captain of the Ship” concept as it relates to working with physicians in medical practices. Why can physicians be challenging for an administrator to work with?

Captain of the ship is a legal doctrine which states that in the operation room during an operation, a surgeon of record is liable for all the action taking place in the process of service. There has been friction between the physician and administration which has been as a result of fragmentation of physician independence and provider. Also, incentives and goals have not been aligned in a system that has been seen to reward volume instead of quality and coordination. The situation has led the physicians not to trust the hospitals and afraid of hospital control and economic power that seems concentrated.



  1. . Board of Directors in medical practice:


  1. (1) What do we mean by fiduciary responsibility for board members?

These are duties that are based in the concept of good faith and are owed to the company from the fact that directors practice over company’s assets, and the authority that is held by such directors to act on behalf of others. Fiduciary duties are characterized by being non-negotiable and cannot be waived in any form or manner.  

  1. (1)What do we mean by the “ex-officio” role of the practice administrator in working with the board?

An Ex-officio board member is an administrative position entitled with a specific set of privileges that are given to him or her by virtue of the status of serving on a particular board or committee.


  1. (1) In medical practice, who are the board members?

The board of directors in medical practice includes the chairman, president, secretary, and board trustees.


  1. (2). Name and describe four critical elements in a physician employment contract?

The first component is compensation which ensures that the settlement is equivalent to the experience and skills. The second component is the work schedule which requires call coverage to outline clearly. The third component compromise of benefits which state the scope and the effective date of the offered benefits. The last but not the least component is termination language that indicates all the conditions and procedures necessary for the termination of the contract.


  • (1) Define a buy/sell agreement

Buy/sell agreement is a legally binding contract that provides that is part-owner of the business wishes to sell his share he or she should sell it to the other partner.


  1. (1) Provider two examples of method/criteria in how medical practice is valued.

One method that can be used to value medical practice is the income approach. This method involves converting expected future economic benefits into one present amount. The second method is the market approach that involves comparison of similar businesses, securities, business ownership interests, intangible and tangible assets that have already been sold.   

  1. (12) . List and understand the six key financial reports in class which should be presented and explained to the physicians. Include a brief description and formula for each.

(i)Balance Sheet – It is a financial statement that provides precise information about a firm’s assets, liabilities and owners’ equity.

Assets= Owners equity + liabilities


ii)Income statement – It is a financial report that shows how much revenue a company earned as well as expenses incurred on the earned revenue over a specified period.

iii) Cashflow statement – It reports income that flows in and out of a company.

  1. iv) Statement of change in shareholders’ equity – It provides a piece of detailed information on all the changes in equity during the reporting period. The changes, in this case, are issuance or buying of shares, profits, and losses.

List and understand the six key financial reports in class which should be presented and explained to the physicians

  1. v) Financial statement ratios and calculations- This include
  2. a) Inventory Turnover Ratio = Cost of Sales / Average Inventory for the Period
  3. b) Operating Margin = Income from Operations / Net Revenues
  4. c) P/E Ratio = Price per share / Earnings per share



  1. (2)Explain the term Days in Accounts Receivable as it relates to the billing process

The term days in accounts receivable refers to the period that the accounts receivables will be recognized in the books of accounting.



  1. (1)Provide an explanation of the concept of a physician compensation plan.

Healthcare systems should examine their compensation plans to assess whether they are working within an adequate model, whether compensation is sufficient to attract raw talent or inadequate for the practice to survive. They should also examine whether the cost of operation is high than the income. This happens in a case where the group is private practice or is unemployed group owned by the healthcare system.


  1. (1 pts)   For the fiscal year ending 12/31/11;

Billed charges   $100,000

Insurance and patient collections/payments $60,000

Insurance Discounts     $30,000

Patient bad debts write off $5,000

Charity Care writes off    $5,000


Collection ratio =X_______26__________%.



  1. (1) Balance Sheet, Practice OB/GYN, March 31, 2013

Assets                 $140,000

Liabilities                              $80,000

                   Owners Equity              X _____60,000_________

  1. (1) Income Statement, Practice Internal Medicine, March 31, 2013

Net Collections          $400,000

Variable Expenses    $100,000

                    Fixed Expenses X___260,000_________

Net Income               $40,000



(1 pts)              
Cash Flow  Statement, cash accounting basis, Month-end  Feb. 29, 2016
  Beginning Cash Balance, Feb. 1       $100,000  
        DR CR      
  Deposit, Feb. 11   $30,000        
  Payment for supplies, Feb. 15   $20,000      
  Payment for Payroll, Feb 18   $70,000      
  Deposit, Feb. 28   $80,000        
  Ending Cash Balance, Feb. 29, 2016     X  120,000  



  1. (2) Calculate days in accounts receivable:

-Gross accounts receivable as of 12/31/17 = $600,000

-Gross billings for the year was $7,200,000


-Applying the formula, what is days in AR as of 12/31/17.  (Use the full year of 360 days in calculation average daily revenue needed to complete the calculation)



14.a. (1) What is the difference between volume- based vs. value-based reimbursement

A value-based reimbursement is a form of reimbursement that ties payments for care delivery and also rewards health service providers for their effectiveness as well as efficiency.


  1. (1) Provide an example of a clinical standard for valued based reimbursement


  1. (2) Explain the main difference between an HMO and PPO.

HMO gives the individual access to a particular hospital and doctors who are within its network while the PPO



  1. (1) Explain the difference between a deductible and co-insurance

The deductible is the amount is usually fixed which you pay every month before the health insurance fully kicks in while the co-insurance is where the individual pays a particular amount of the funds required and the health insurance pays the remaining part.

  1. (1) a. Define what an Accountable Care Organization (ACO) and what this their purpose?

ACO is a system of payment and care that is meant to tie healthcare that is quality with the level of providers’ payment reimbursement.
b. (1) what is with a hospital?


  1. (1) Define a line of credit, who issues it, and how it works

A line of credit is defined as a loan that allows the injection of a small number of funds. It works in a similar way with a credit card where one draws on credit when in need to buy something but the available cash is not enough. However, the interest rates on lines of credit are not as high as those of credit cards.


  1. (2) a. Define the elements of a well-written management objective

Well-Written management should be measurable, realistic, specific, attainable, and the period it will take. Starting with measurable, the objective should be in a position to be evaluated by the use of both qualitative and quantitative measures. A realistic objective implies that the objective is something that is possible to happen but not imagination. Specific means that the goal is well defined; hence one is sure where he or she is going.  Attainable implies that the objective will be reached using the available resources. Lastly, the objective should be estimated the time it is likely or expected to be achieved.

  • Provide an example of an objective in this format.

An example of an objective is the one that considers the requirements, deliverable, purpose, business goal and vision statement.


  1. (2) What are the four primary care specialties, and what is the role of a primary care physician in providing care in our healthcare system? Provide an example.

The four primary care special care specialties include gynecology, pediatrics, general internal medicine, and family medicine.  One of the main duties of a primary physician is to make referrals to specialties as the condition of the patient is identified. One example is that they interpret blood testing results and samples from the patient.

  1. (2) why would a company decide to self- insure instead of buying insurance directly from a health plan?

The main reason why the company may opt to insure itself rather than buying insurance directly from insurance firm is to ensure that the money that could be paid as premium stays in the company’s budget.

  1. (2) is it ever proper to walk aware from a negotiation? Why or why not?

One should not walk away from the negotiation. The answer to my argument is just because the other party may go home and rethink his or her decision. In case one walks away from negation, the other party is not likely to come back since it is a rude act.