FUNDAMENTALS LOUIS C. GAPENSKI WITH EDITORIAL REVIEWS BY ROD MCADAMS, KRISTIN REITER, AND DEBRA TENNYSON AUPHA

Transcription

1 FUNDAMENTALS of ft r ' LOUIS C. GAPENSKI WITH EDITORIAL REVIEWS BY ROD MCADAMS, KRISTIN REITER, AND DEBRA TENNYSON AUPHA Health Administration Press, Chicago Association of University Programs in Health Administration, VA GATEWAY* TO HEALTHCARE MANAGEMENT

2 vi ' >..* Preface How to Use This Book xiii xix Part I Foundation Concepts Chapter 1 Introduction to Healthcare Finance 3 Chapter 2 Healthcare Business Basics 26 Chapter 3 Paying for Health Services 52 Part II Planning, Managing, and Control Chapter 4 Estimating Costs 85 Chapter 5 Pricing Decisions and Profit Analysis 113 Chapter 6 Planning and Budgeting 146 Chapter 7 Managing Financial Operations 177 Part III Financing and Capital Investment Decisions Chapter 8 Business Financing and the Cost of Capital 209 Chapter 9 Capital Investment Decision Basics 241 Chapter 10 Project Cash Flow Estimation and Risk Analysis 275

3 v i Contents Part IV Reporting Results ;, Chapter 11 Reporting Profits 317 Chapter 12 Reporting Assets, Financing, and Cash Flows 349 Chapter 13 Analyzing Financial Condition 380 Index 407 V About the Author 417

4 t. Preface How to Use This Book xiii xix Part I Foundation Concepts Chapter 1 Introduction to Healthcare Finance 3 Theme Set-Up: Careers in Healthcare Management 3 Learning Objectives Introduction Defining Healthcare Finance Purpose of the Book The Role of Finance in Healthcare Organizations The Structure of the Finance Department Healthcare Settings Regulatory and Legal Issues Current Challenges 20 Theme Wrap-Up: Careers in Healthcare Management 21 Key Concepts 22 End-of-Chapter Questions 24

5 viii Contents Chapter 2 Healthcare Business Basics 26 Theme Set-Up: Business Goals 26 Learning Objectives Introduction Concept of a Business Legal Forms of Businesses Alternative Forms of Ownership Organizational Goals Tax Laws 41 Theme Wrap-Up: Business Goals 46 Key Concepts 47 End-of-Chapter Questions 49 End-of-Chapter Problems 50 Chapter 3 Paying for Health Services 52 Theme Set-Up: Revenue Sources 52 Learning Objectives Introduction Basic Insurance Concepts ' Third-Party Payers Managed Care Organizations Alternative Reimbursement Methods The Impact of Reimbursement on Financial Incentives and Risks Coding: The Foundation of Fee-for-Service Reimbursement 76 Theme Wrap-Up: Revenue Sources 78 Key Concepts 79 End-of-Chapter Questions 81 Part II Planning, Managing, and Control Chapter 4 Estimating Costs 85 Theme Set-Up: Cost Structure 85 Learning Objectives Introduction The Basics of Managerial Accounting Cost Classification I: Fixed Versus Variable Costs Cost Classification II: Direct Versus Indirect (Overhead) Costs Cost Allocation Activity-Based Costing 102 Theme Wrap-Up: Cost Structure 105

6 Contents ix Key Concepts,, 106 End-of-Chapter Questions 108 End-of-Chapter Problems 109 Chapter 5 Pricing Decisions and Profit Analysis 113 Theme Set-Up: Profit Analysis 113 Learning Objectives., Introduction Healthcare Providers and the Power to Set Prices Price Setting Strategies Target Costing Profit Analysis Breakeven Analysis Marginal Analysis Profit Analysis in a Capitated Environment The Impact of Cost Structure on Financial Risk 136 Theme Wrap-Up: Profit Analysis 137 Key Concepts 139 End-of-Chapter Questions End-of-Chapter Problems 141 Chapter 6 Planning and Budgeting r 146 Theme Set-Up: Actual Versus Expected Results 146 Learning Objectives Introduction Strategic Planning Operational Planning Introduction to Budgeting Budgeting Decisions Budget Types Variance Analysis 164 Theme Wrap-Up: Actual Versus Expected Results 170 Key Concepts 171 End-of-Chapter Questions 172 End-of-Chapter Problems 173 Chapter 7 Managing Financial Operations 177 Theme Set-Up: Revenue Cycle Management 177 Learning Objectives 178

7 Contents 7.1 Introduction.-: The Revenue Cycle and Receivables Management Cash Management Inventory Management Monitoring Operations 193 Theme Wrap-Up: Revenue Cycle Management 199 Key Concepts 200 End-of-Chapter Questions...T.' End-of-Chapter Problems 203 Part III Financing and Capital Investment Decisions Chapter 8 Business Financing and the Cost of Capital 209 Theme Set-Up: Starting a New Medical Practice 209 Learning Objectives Introduction Setting Interest Rates Debt Financing Debt Contracts Debt Ratings " Equity Financing The Choice Between Debt and Equity Financing The Choice Between Long-Term and Short-Term Debt Cost of Capital 229 Theme Wrap-Up: Starting a New Medical Practice 234 Key Concepts 235 End-of-Chapter Questions 237 End-of-Chapter Problems 238 Chapter 9 Capital Investment Decision Basics 241 Theme Set-Up: Evaluating a Capital Investment 241 Learning Objectives ' Introduction Project Classifications The Role of Financial Analysis in Capital Investment Decisions Overview of Capital Investment Financial Analysis Creating the Time Line Breakeven Analysis Discounted Cash Flow Analysis Return on Investment Project Scoring 266

8 Contents x i 9.10 The Post-Audit y 268 Theme Wrap-Up: Evaluating a Capital Investment 269 Key Concepts 269 End-of-Chapter Questions 271 End-of-Chapter Problems 271 Chapter 10 Project Cash Flow Estimation and Risk Analysis 275 Theme Set-Up: Estimating a Project's Cash Flows and Assessing Risk 275 Learning Objectives Introduction Cash Flow Estimation Estimating the Cash Flows for the Open MRI Project Risk Analysis Incorporating Risk into the Decision Process An Overview of the Capital Investment Decision Process Capital Rationing 298 Theme Wrap-Up: Estimating a Project's Cash Flows and Assessing Risk 299 Key Concepts 300 End-of-Chapter Questions 302 End-of-Chapter Problems?. 303 Part IV Reporting Results Chapter 11 Reporting Profits 309 Theme Set-Up: Constructing an Income Statement 309 Learning Objectives Introduction Financial Accounting Historical Foundation Financial Statement Regulation and Standards Reporting Methods Income Statement Basics : Revenues Expenses Operating Income Nonoperating Income Net Income Net Income Versus Cash Flow Income Statements of Investor-Owned Firms A Look Ahead: Financial Condition Analysis 333 Theme Wrap-Up: Constructing an Income Statement 334

9 Contents Key Concepts 335 End-of-Chapter Questions 337 End-of-Chapter Problems 337 Chapter 12 Reporting Assets, Financing, and Cash Flows 341 Theme Set-Up: Understanding the Balance Sheet and the Statement of Cash Flows ) 341 Learning Objectives Introduction Balance Sheet Basics Assets Liabilities Equity (Net Assets) Fund Accounting The Statement of Cash Flows A Look Ahead: Financial Statement Analysis 364 Theme Wrap-Up: Understanding the Balance Sheet and the Statement of Cash Flows 365 Key Concepts 365 End-of-Chapter Questions 367 End-of-Chapter Problems 368 Chapter 13 Analyzing Financial Condition 372 Theme Set-Up: Techniques for Evaluating Financial Statements 372 Learning Objectives Introduction Financial Statement Analysis Interpreting the Statement of Cash Flows Ratio Analysis Comparative and Trend Analysis Du Pont Analysis Other Analytical Techniques Limitations of Financial Statement Analysis 396 Theme Wrap-Up: Techniques for Evaluating Financial Statements 397 Key Concepts 397 End-of-Chapter Questions 399 End-of-Chapter Problems 400 Index 407 About the Author 417