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HPA 14 Assignemnt Due November 30th

The document provides information about key concepts related to healthcare organization finances including the revenue cycle, receivables, aging schedules, float, marketable securities, just-in-time inventory systems, key performance indicators, and answers several chapter questions related to these topics. Specifically, it defines terms like revenue cycle, receivables, average collection period, defines types of suitable marketable securities for different situations, discusses advantages of just-in-time inventory systems, and provides calculations and interpretations for questions related to accounts receivable aging, hospital financial metrics, and inpatient occupancy rates.

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522 views

HPA 14 Assignemnt Due November 30th

The document provides information about key concepts related to healthcare organization finances including the revenue cycle, receivables, aging schedules, float, marketable securities, just-in-time inventory systems, key performance indicators, and answers several chapter questions related to these topics. Specifically, it defines terms like revenue cycle, receivables, average collection period, defines types of suitable marketable securities for different situations, discusses advantages of just-in-time inventory systems, and provides calculations and interpretations for questions related to accounts receivable aging, hospital financial metrics, and inpatient occupancy rates.

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© © All Rights Reserved
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You are on page 1/ 4

Christina Jud

HPA 14

Page 209 chapter question 7.1,7.2,7.3,7.4,7.6,7.8,7.9

7.1 What is the revenue cycle? Why is it important to healthcare organizations?

A revenue cycle can be described as the reoccurring activities and information relating, that is
necessary for billing. In addition, it is needed to collect revenue that is owed for services that
were provided.

7.2 What is a receivable? Explain how receivables are built up over time.

7.3 Define average collection period. How is it used to monitor a firm’s accounts
receivable?

7.4 What is an aging schedule? How is it used to monitor a firm’s accounts receivable?

7.6 Briefly describe float and why it is a useful cash management concept.

7.7 a. Give two reasons that businesses hold marketable securities (short-term investments).

One reason is to maintain liquidity. This liquidity can be converted into cash which is helpful.

Another reason would be to invest cash and earn a market rate of return.

b. Which types of securities are most suitable to hold as marketable securities?

Long term securities are most suitable to hold as marketable securities

c. Suppose Southwest Regional Medical Center has just raised $6 million in new capital
that it plans to use to build three freestanding clinics, one each year over the next three
years. (For the sake of simplicity, assume that equal payments have to be made at the end
of each of the next three years.) What securities should the firm buy for its firm’s
marketable securities portfolio, assuming that the firm has no other excess cash? (Hint:
Consider both the type and maturity of the securities.)

The firm should invest in both short term and medium-term securities. This is because they have
to match the maturity of the securities of their cash flow.

d. Now, consider the situation faced by the Huntsville Physical Therapy Group. It has
accumulated $20,000 in cash above its target cash balance, and it has no immediate needs
for this excess cash. However, the firm may at any time need some or all of the $20,000 to
meet unforeseen cash needs. What securities should be bought for the firm’s marketable
securities portfolio?
The firm should invest in liquid instruments. This is because these instruments can be traded in
the market if they have a high value.

7.8 a. What is a just-in-time inventory system?

b. What are the advantages and disadvantages of just-in-time systems?

c. Can just-in-time inventory systems be used by healthcare providers? Explain your


answer.

7.9 What are key performance indicators (KPIs)? What is a dashboard, and how is it used?

Chapter problems 7.1,7.5,7.6

7.1 On a typical day, Park Place Clinic writes $1,000 in checks. Generally, those checks
take four days to clear. Each day the clinic typically receives $1,000 in checks, which take
three days to clear. What is the clinic’s float?

Float = float generated from disbursements – float from collections


($1000 x 4) – ($1000 x 3) = $4000 - $3000 = $1000

7.5 Sacred Heart Hospital has the following receivables amounts, listed by age: Age of
Account (Days) Value of Account Percentage of Total Value 0–30 $ 5,450,000 31–60
3,666,000 61–90 1,278,000 91–120 867,000 Over 120 49,000 $11,310,000

a. Complete the aging schedule by filling in the percentage of total value column.

48.19%
32.41%
11.30%
7.67%
0.43%

b. Interpret your results.

My results show that the majority of people paid within the 30 days

c. Using these data, estimate the hospital’s ACP (days in patient accounts receivable).
(Hint: Assume that the average age in the first category is 15 days [the midpoint of the
range], the average age in the second category is 45 days, and so on. Ignore the receivables
older than 120 days.)
7.23
14.59
8.47
8.05
total =38.34

(multiplied percentage times midpoint)

7.6 Sacramento Memorial Hospital has the following annual financial data and operational
metrics: Number of beds 250 Total inpatient admissions 12,250 Total outpatient visits
90,754 Total patient revenues $111,900,050 Outpatient mix 16.2% Medicare payment
percentage (revenues) 28.0% Average length of stay 5.8 days Net price per discharge
$7,653 Cost per discharge $6,292 00_Reiter_Song (2354)

a. What is the hospital’s profit per discharge?

Net price per discharge – cost per charge


Hospital’s profit per discharge = 7653 – 6292
$1361

b. What is the hospital’s total inpatient and total outpatient revenue? (Hint: Apply patient
mix metrics to total revenues.)

Hospital’s total inpatient revenue = total revenue x (1-outpatient mix)


111900050 x (1-16.2%)
93,772,241.90

Total revenue x outpatient mix


111900050 x 16.2%
$18,127,808.10

c. Verify your part b answer for total inpatient revenue using volume and profitability
metrics.

Total inpatient revenue using volume and profitability metrics = net price per discharge x total
inpatient stays

7653 x 12250
$93,749,250

d. What are the hospital’s total revenues from Medicare patients?

Total revenue x Medicare payment percentage


111900050 x 28%
$31,332,014

e. What is the total number of inpatient days?

12250 x 5.8
71050

f. What is the hospital’s occupancy rate? (Hint: Start by calculating available bed days.)

365 x 250 = 91250


71050/91250
77.86%

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