HARRISON, INTRODUCTION TO HEALTH CARE FINANCE AND ACCOUNTING, CY 2024, CORE ISBN

Solution and Answer Guide: Harrison, Introduction to Health Care Finance and Accounting, CY 2024, Core ISBN 9780357622049; Chapter 1: 1 © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Solution and Answer Guide

HARRISON, INTRODUCTION TO HEALTH CARE FINANCE AND ACCOUNTING, CY 2024, CORE ISBN

9780357622049; CHAPTER 1: The Environment of Healthcare Finance

TABLE OF CONTENTS

Comprehension Checks ............................................................... Error! Bookmark not defined.Comprehension Check 1.1 ...................................................... Error! Bookmark not defined.Comprehension Check 1.2 ..................................................................................................... 2 Comprehension Check 1.3 ..................................................................................................... 2 Knowledge Checks .................................................................................................................. 3 Knowledge Check 1.1 ............................................................................................................ 3 Knowledge Check 1.2 ............................................................................................................ 4

COMPREHENSION CHECK S

COMPREHENSION CHECK 1.1

In the following questions, identify if the insurance carrier is looking for a provider within an HMO or a PPO.

• Sarah Jones is researching pediatrists in her local area. She has Great Shield Insurance

through her work, and she is looking for pediatrists only within her provider network. When negotiating the contract with Great Shield Insurance, her insurance provider has agreed to only accept a certain payment in return clients. Sarah will be scheduling an appointment with which type of provider?

Answer:

Preferred Provider Organization

• Alonzo Lopez needs surgery for his displaced shoulder. He has Bristol Insurance through his

workplace. Before he can schedule his surgery, he must meet with his primary physician who will direct Alonzo to a specialist if the physician deems it is necessary. Alonzo will be scheduling an appointment with which type of provider?

Answer:

Health Maintenance Organization

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Solution and Answer Guide:

2 © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

COMPREHENSION CHECK 1.2

In the following questions, identify if the type of medical business is a proprietorship, partnership, or an LLP.

• Dr. Evans was working for a major dental organization after completing his externship and

passing the Dental National Board Examination, Florida Laws and Rules Examination, and ADEX Dental Licensing Examination. Dr. Evans decided to gain experience while working for a major dental organization for several years. Dr. Evans opened his own dental practice. Dr.Evans hired two dental assistants, a hygienist and an office manager. What type of medical business would this be?

Answer:

Proprietorship

• In January 2022, Dr. Evans and Dr. Briggs noticed an increase in business within the dental

practice that they have formed as a partnership. They both decide to form a partnership where they will both be individually responsible for any malpractice settlements. What type of medical business would this be?

Answer:

Limited liability partnership

• Dr. Evans’ business has doubled within the last two years. More staff have been hired. There

are now two additional dental assistants, one additional dental hygienist, and a biller and coder.In January 2021, Dr. Evans hires Dr. Briggs and decides to make her an equal partner. An agreement is signed between Dr. Evans and Dr. Briggs. What type of medical business would this be?

Answer:

Partnership

COMPREHENSION CHECK 1.3

• Dr. Harden just graduated from veterinary medicine school. With the increase of animal

abandonment, she decided to open a shelter for misplaced animals. Her focus is to educate the public on resources within the community to lessen animal abandonment rates. Through researching how to establish her shelter, she discovered that under the Internal Revenue Code Section 501© (3) her shelter would fall under a charitable organization. Is Dr. Harden operating a profit or nonprofit business?

Answer:

Non-profit organization

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Solution and Answer Guide:

3 © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

KNOWLEDGE CHECKS

KNOWLEDGE CHECK 1.1

• What are the major differences between financial management for healthcare facilities and

other types of free-enterprise businesses?

Answer:

A major difference is that the majority of customers of healthcare facilities do not pay the bills themselves and the facilities have to deal with third-party payers, such as Medicare and private insurance companies, for reimbursement. A second difference is that healthcare facilities are a unique mix of for-profit and not-for-profit organizations and a mix of private companies and governmental agencies.

• What types of skills do you think are necessary for an effective financial manager in

healthcare?

Answer:

The skill set required for success as a healthcare financial manager is the same as in other businesses. Accounting, budgeting, cash flow, and investment management are all required skills.

• Dr. Reginald Dustin is a licensed family practice physician. He has hired a staff of five to help

him in running the practice. He draws a monthly salary and leaves profits in the business for

capital purchases. This type of business is a:

• Proprietorship
• Partnership
• For-profit corporation
• Not-for-profit corporation

ANSWER:

• Proprietorship

• Dr. Towers has an established medical practice and wishes to expand the practice by

bringing in another physician. The two physicians agree to a document specifying how much the new physician will pay into the business over time to secure an equity position, their monthly

salary draws, and a division of profits. This type of business is a:

• Proprietorship
• Partnership
• For-profit corporation
• Not-for-profit corporation

ANSWER:

• Partnership 3 / 4

Solution and Answer Guide:

4 © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

• American Hospitals owns and operates 18 hospitals in 11 states. It is registered with the

Securities& Exchange Commission and has several thousand stockholders. This type of

business is a:

• Proprietorship
• Partnership
• For-profit corporation
• Not-for-profit corporation

ANSWER:

• For-profit corporation

• What is a professional corporation (PC), and why would this structure be an advantage to a

physician?

ANSWER:

In a proprietorship, the business owner has unlimited personal liability for debts or legal settlements of the business. Structuring the business as a professional corporation (PC) shields the personal assets of the business owner.

• What is a 501(c)(3) corporation?

ANSWER:

A 501(c)(3) corporation is designated by the Internal Revenue Service as a not-for-profit charitable organization exempt from property and income taxes.

KNOWLEDGE CHECK 1.2

• Describe the impact of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) on

hospital finances.

Answer:

TEFRA placed financial limitations on Medicare reimbursement. The former cost plus reimbursement system was replaced with standardized reimbursement schedules.

• What is the major difference between a general hospital and a specialty hospital? Provide

examples of specialty hospitals.

Answer:

General hospitals provide a wide variety of medical care procedures to patients in their geographic area. Specialty hospitals provide a higher level of care in a specific field referred to as tertiary medical care. Specialty hospitals will include pediatric hospitals, burn centers, and oncology centers for cancer treatment.

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