Determine a key difference between a fee-for-service plan and an episode of care payment plan
Determine a key difference between a fee-for-service plan and an episode of care payment plan, and indicate the plan that you believe to be most advantageous for the majority of patients.
Home Sample Questions Homework Help “Inflows and Revenue Management” Please respond to the following: • Determine a key difference between a fee-for-service plan and an episode of care payment plan, and indicate the plan that you believe to be most advantageous for the majority of patients.
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“Inflows and Revenue Management” Please respond to the following: • Determine a key difference between a fee-for-service plan and an episode of care payment plan, and indicate the plan that you believe to be most advantageous for the majority of patients.
These are for the first part of this discussion. I don’t have the scenario yet, I will have it later on today.
HSA525 Week 2, Lecture 1 Script: Assets, Liabilities, and Net Worth
Professor Quan enters classroom and introduces the topics for today’s lesson and begins the lecture.
Prof Quan: Hello everyone….welcome back to class. Today, we are going to discuss assets, liabilities, and net worth with the context of health services organizations.
A principle goal of healthcare financial management is to generate a reasonable net income by investing in assets and putting the assets to work for the organization. Assets, liabilities, and net worth are part of the “language” of financial management; therefore, it is imperative that we consider their composition as well as how the concepts relate.
Assets are the economic resources that are owned by the organization in both the short and long term. Financial managers have the expectation that assets will provide positive future cash flows for the organization.
Liabilities, on the other hand, are economic obligations, or debt owed by the organization in both the short and long term.
Net worth represents the owner’s claim to the assets of the organization. Assets, liabilities, and net worth are reflected on the organization’s balance sheet.
Let’s first discuss the economic resources that a company may hold. What are some examples?
Sophia: Supplies, buildings, equipment, money to name a few…
Lauren: I would agree, but would also add claims to receive money. In terms of healthcare finance, a claim to receive money is perhaps the most basic asset that the healthcare organization owns, because it involves reimbursement from third party payers. This is evidence of a short-term asset.
Tyler: In addition to what has already been noted, I would say that inventory would be considered assets as well.
Prof. Quan: Absolutely… what are some of the liabilities of the healthcare organization?
Lauren: As you mentioned, professor, liabilities are the obligations of the organization. I would say that accounts payable and expense payables are two examples.
Prof. Quan: What are some examples of Owners’ Equity?
Sophia: Common stock and retained earnings which indicates the cumulative profit/losses of an organization.
Prof. Quan: Great job Sophia! Now let’s take a closer look at how each affects the basic accounting equation.
Check Your Understanding
Which of the following is an asset account?
A. Accounts Payable
B. Accounts Receivable
C. Unearned Revenue
B. Accounts receivable is correct. Accounts receivable equates to “claims to receive money”, usually from third party payers.
A. Accounts payable is a liability account.
C. Unearned revenue is a liability account.
Discussion between Prof Quan and students.
Prof. Quan: Financial managers classify assets in order to evaluate the health of the organization by examining the specific performance of each type of the organization’s assets.
Assets typically noted on the healthcare organization’s balance sheets are current assets, receivables, inventory, prepaid expenses which are short-term assets, investments, and plant and equipment which are long-term assets. Common liabilities include accounts payable, accrued expenses payablewhich are short-term liabilities, deferred revenue, and long-term liabilities.
In terms of net equity, stocks we previously mentioned are also included on the balance sheet. Cash and cash equivalents include coin, currency, savings accounts, CDs, and temporary marketable securities.
Accounts receivables for the healthcare organizations are a little different for the healthcare organization when compared to other types of organizations. Generally speaking, healthcare organizations actually receive substantially lower amounts than what is charged to its customers than other types of organizations.
The healthcare organization uses allowances to restate its receivables as a result of its low collected amounts versus its billed amounts. The allowances are categorized as charity allowances, courtesy allowances, doubtful account allowances, and contractual allowances. Health services managers are tasked to make sure that allowances are not so large that they do not cover the actual cost of the service provided.
Sophia: So, Professor Quan…can you explain the allowances?
Prof. Quan: Absolutely!The charity allowance applies the difference between established rates and the amount that is actually charged to a financially indigent patient. There are some healthcare facilities that adjust their fees for those who are considered to have incomes below a standard, such as the poverty level.
To determine the allowance, the discounted rate is deducted from the initial price. In terms of the courtesy allowance, providers may grant a special discount to other providers. The difference between the list price and the discounted amount is considered the courtesy allowance.
Tyler (interrupts): Just to be clear, a courtesy discount is given for other professionals?
Prof. Quan: Yes, we see it quite often where a doctor who is treating another doctor offers a professional courtesy discount. This is very common…sometimes employees are granted courtesy discounts as well.
The doubtful account allowance is interesting because the allowance is based on the provider’s belief that the billed amount, although discounted may never be recouped because a patient is medically indigent. Then there is the contractual allowance. This particular allowance is actually the most common. It is the difference between the list charge and the contract charge between the provider and the third party payer.
Lauren: I am still not quite clear on the doubtful account allowance. Can you provide an example?
Prof. Quan: Sure….Let’s assume that a medically indigent patient receives care that totals one-hundred dollars. The provider may recognize that the patient is medically indigent and may offer to charge the patient half of the total bill.
The provider will bill the patient, but may feel as though the patient may not pay the fifty-dollars because of his or her financial challenges, under this circumstance, the fifty-dollars will be entered as a doubtful account allowance. This basically means that there is no reasonable expectation of payment.
The allowance must be carefully reviewed as significant increases in the allowance may affect the reliability of the organization’s cash flow.
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