Fundamentals of Health Care Financial Management

STEVEN BERGER, CPA, is founder and president of Healthcare Insights, LLC, which specializes in health care and financial management training and consulting. Healthcare Insights has also created INSIGHTS, the health care industry’s best practice decision support software. He has nearly 30 years’ experience in the field and recently served a three-year term of membership on the Healthcare Financial Management Association (HFMA’s) National Board of Examiners.

• Figures, Tables, and Exhibits viiPreface xvAcknowledgments xixThe Author xxiChapter 1: January 1What Is Health Care? 3What Is Management? 5What Is Financial Management? 6Why Is Financial Management Important? 8Ridgeland Heights Medical Center: The Primary Statistics 9Pro Forma Development 13Living with the Finance Committee and Board of Directors’ Calendar 19Year-End Closing 24Chapter 2: February 31Accounting Principles and Practices 32Objectives of Financial Reporting 34Basic Accounting Concepts 35Basic Financial Statements of a Health Care Organization 36Uses of Financial Information 37The Financial Statements 39Preparing for the Auditors 52Analysis of Sensitive Accounts 54February Finance Committee Special Reports 56Chapter 3: March 61Strategic Financial Planning: Five-Year Projections 63RHMC Strategic Financial Planning 67Ratio Analysis 74The Capital Plan and Its Relationship to the Strategic Plan 84Chapter 4: April 91Medicare and Medicaid Net Revenue Concepts 94Calculation of Medicare and Medicaid Contractual Adjustments 100Implications of the Balanced Budget Act of 1997 109Implications of the Medicare Modernization Act of 2003 115Implications of the Patient Protection and Affordable Care Act of 2010 (PPACA or ACA) 117Managed Care Net Revenue Concepts 131Preparation of the Medicare and Medicaid Cost Report 137Presentation of the Audited Financial Statements to the Finance Committee 140Chapter 5: May 145Fundamentals of Revenue Cycle Management (RCM) 146Calculation of the Allowance for Doubtful Accounts and Bad-Debt Expense 165Calculation of the Allowance for Contractual Adjustments 170Chapter 6: June 175Budget Preparation: The Beginning 177Budget Calendar 177Volume Issues 185Capital Budgeting: June 190Accounting and Finance Department Responsibilities 195June Finance Committee Special Agenda Items 198Chapter 7: July 203Budget Preparation: The Middle Months 204Capital Budgeting: July 221Regulatory and Legal Environment 223Other Regulatory and Business Compliance Issues 227Corporate Compliance 228Accreditation Issues 229Patient Satisfaction Issues 232Chapter 8: August 235Capital Budget: August 236Operating Budget 246Budget Variance Analysis 249Budget Variance Parameters 252Flexible Budgeting 252August Finance Committee Special Agenda Items 260Chapter 9: September 263Operating Budget 265Capital Budget: September 275Cash Budget 277Physician Practice Management Issues 280Current Physician Practice Issues—2013 292Additional Physician-Hospital Integration Issues 294Monthly Physician Reporting 295Chapter 10: October 299Information Systems Implications for Health Care Financial Management 301Information Technology Strategic Plan Initiatives 304HIPAA Implementation Issues 306Selection of a New Health Care Information System 310Budget Presentation to the Board Finance Committee 316October Finance Committee Special Agenda Items 328Chapter 11: November 331Preparation of the Budget Results and Delivery to the Department Managers 333Budgeting and Spreading Contractual Adjustments by Department 337Issues Involving RHMC’s Cost Structure 340How to Improve the Organization’s Cost Structure 344Supply Chain Management in Health Care 352Benefits of Tax Status for Health Care Organizations 356Preparation and Implications of the Annual IRS 990 Report 360Chapter 12: December 367Getting Ready for Year-End Reporting—Again 371Open-Heart Surgery Pro Forma 371December Finance Committee Special Agenda Items 380Looking into the Future of Health Care Finance 383Future Conclusions 397References 401Index 407

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