CH 10: Fiscal Planning and Health Care Reimbursement

A

Fiscal planning is a learned skill and must include nursing management input. It should be proactive, not reactive, and is not based on political or social forces. Economic forces are used in the planning process of management.

The nurse-manager at a long-term care facility is participating in fiscal planning. Which of the following describes the elements of fiscal planning?

a. Combination of evaluating costs while improving care services

b. A job role of the facility business manager

c. Part of the organizing phase of the management process

d. Reactive, based on political, social, and economic forces

A

Responsibility accounting requires that someone must be responsible for all revenue, expenses, assets, and liabilities. As a result, the leader-manager may be held accountable for the financial results of the operating unit. Collaboration and timeliness are characteristics of prudent budgeting, but these are not implications of the principle of responsibility accounting. For most organizations, the budgeting process is not revealed to the public.

A nurse-manager is responsible for a variety of revenue resources. What is an implication of responsibility accounting?

a. The manager is accountable for the way that resources are used on the unit.

b. The manager has a responsibility to submit the unit budget on time each year.

c. The organization's financial officer works with manager regarding budget approval.

d. The budgeting process must be transparent and data must be made publicly available.

B

The manager's responsibility is to monitor all aspects of the unit's budget in the unit under their leadership. However, the leader-manager does not have primary responsibility for budgeting, which usually lies with a chief financial officer. There is often minimal participation by subordinates in fiscal planning, and it is often not possible to control variations in the census.

The leader-manager of several inpatient units is participating in fiscal planning. During this process, the leader-manager should:

a. assume primary responsibility for the organization's budgetary planning goals.

b. monitor and evaluate all aspects of the unit's budget control.

c. encourage broad participation of subordinates in the budgetary process.

d. control unpredictable census variations that may undermine the personnel budget.

D

Leaders are visionary; the other roles of assessing needs, monitoring budget control, and documenting needs are management related.

When participating in fiscal planning, a leader should perform what role?

a. Monitoring aspects of budget control

b. Accurately assessing personnel needs using agreed-on standards or an established client classification system

c. Documenting the need for resources on a unit

d. Being visionary in identifying short- and long-term unit fiscal needs

C

Zero-based budgeting begins each year with zero and requires rejustification. This is not true of the other options.

A nurse-manager has been required to justify each item of the following year's proposed budget. The manager has been instructed that referring to the previous year's expenditures is not a sufficient justification. What type of budgeting is being used in this facility?

a. Incremental budgeting

b. Perpetual budgeting

c. Zero-based budgeting

d. Managed care

D

Noncontrollable costs include equipment depreciation, the number and type of supplies needed by clients, or overtime that occurs in response to an emergency. This would not be a fixed cost. Personnel costs are not capital expenditures.

A disease outbreak in the local community caused an unprecedented increase in staffing costs. In what category of expenses should the nurse-manager place these costs?

a. Controllable

b. Fixed

c. Capital budget

d. Noncontrollable

B

The term cost-effective does not necessarily imply the cheapest, but it requires that the expenditure be worth the cost. The other options are not characteristic of the term cost-effective.

During a recent staff meeting, a nurse manager reported that the recent switch to a new laundry provider at a long-term care facility has been described as "cost-effective." What does this imply about the change in laundry service?

a. It is the least expensive service available.

b. It is worth the cost.

c. It is reimbursable.

d. The cost was anticipated.

A

Health care is labor-intensive; therefore, the personnel budget makes up the largest expense. In most circumstances, the other options represent lower expenditures.

The nurse-manager of a community health clinic is participating in budget planning for the next year. The manager will most likely assign the most money to what expenditure category?

a. The personnel budget

b. Short-term capital acquisitions

c. The operating budget

d. Supplies and equipment

A

A total of 56 hours of nursing was worked in 24 hours (unit clerks are counted in NCH/PPD) and the census was 10 clients. Dividing the total number of nursing care hours by the census (56 divided by 10) yields an NCH/PPD calculation of 5.6 NCH/PPD.

Determine the nursing care hours per patient-day (NCH/PPD) if the following staffing existed for a 24-hour period (unit census = 10): 12 midnight to 12 noon, 1 registered nurse, 1 licensed vocational nurse 12 noon to 12 midnight, 1 registered nurse, 1 licensed vocational nurse, 1 unit clerk (8 hours only)

a. 5.6 NCH/PPD

b. 4.8 NCH/PPD

c. 5.0 NCH/PPD

d. 6.2 NCH/PPD

B, E

NCH/PPD is calculated by dividing the number of nursing care hours worked in 24 hours by the client census. It is not necessary to know the acuity level, the nurses' wages, or the complexity of care provided, even though these variables affect budgeting.

A unit manager is calculating the NCH/PPD for a 24-hour period. The manager will need what data to calculate this? Select all that apply.

a. The acuity level of the clients on the unit

b. The total number of hours worked by nursing personnel

c. The average hourly wage of the nurses on the unit

d. The complexity of nursing care that was provided on a particular unit in a 24-hour time span

e. The unit census

C

HMOs provide health care in an organized system to subscribing members in a geographical area with an agreed-on set of basic and preventive supplemental health maintenance and treatment services for a fixed, prepaid charge. A PPO provides financial incentives to consumers to use a select group of preferred providers and pay less for services. A third-party payer is an additional insurance. Diagnosis-related groupings are used to categorize inpatient hospital visits, severity of illness, risk of mortality, prognosis, treatment difficulty, need for intervention, and resource intensity.

A client is asking the nurse-manager about health care providers. The client mentions that they need to find a provider within the network to avoid extraneous charges. What type of insurance does the client have?

a. Preferred provider organizations (PPOs)

b. A traditional third-party payer indemnity plan

c. A health maintenance organization (HMO)

d. Diagnosis-related groupings (DRGs)

A

Prospective payment systems were the result of skyrocketing medical costs in the United States. They are not generally attributed to the Health Maintenance Act, the Health Security Act, or a coalition of insurers.

What was the primary reason for the development of the prospective payment system?

a. Skyrocketing health care costs following the advent of Medicare and Medicaid

b. The passage of the Health Maintenance Act of 1973

c. The introduction of the Health Security Act to Congress

d. A coalition held by the three largest private insurers in 1975

D

Capitation is a predetermined, negotiated payment to providers, per client, regardless of whether services are used. Providers earn more if clients use fewer services, but this is not characterized in the form of a "bonus." Capitation does not denote the payment of a fixed percentage of health care costs. Many forms of managed care involve a gatekeeper of sorts, but this is not particular to capitation.

A client has a managed care program that is organized on the basis of capitation. What is a characteristic of this client's health care?

a. Health care providers earn a bonus if the client remains free of disease for a predetermined length of time.

b. The client pays a fixed percentage of the cost of any health care, usually between 10% and 20%.

c. The program uses a "gatekeeper" to ensure appropriate utilization of services.

d. The client's providers are paid the same amount each month, regardless of the client's use of services.

A

Low income is the primary criterion for Medicaid. Veterans do not automatically qualify, nor do Native American clients. Some individuals with long-term disabilities qualify, but recovery from acute injuries would not normally cause an individual to qualify.

Which client would be most likely to qualify for Medicaid?

a. An adult client who earns $750.00 per month

b. A veteran who sustained injuries in combat

c. A Native American client who lives on a reservation

d. A child who requires physical therapy to recover from traumatic injuries

D

Critical pathways are one means of standardizing care for clients with similar diagnoses. Pathways do not necessarily reduce the client's costs. Care is standardized, but this does not mean that administrative costs and documentation are always reduced.

An older adult client has been admitted to the hospital with pneumonia and has been placed on a critical pathway. This tool will allow the care team to:

a. minimize the client's out-of-pocket expenses for care.

b. decrease the amount of paperwork required for reimbursement.

c. minimize administrative costs.

d. standardize the client's care.

D

Managers must rejustify their program or needs every budgeting cycle in zero-based budgeting. Using a decision package to set funding priorities is a key feature of only zero-based budgeting, not flexible, operating, or capital budgets. While operating budgets determine short-term viability, capital budgets look to the future. Most capital budgets are determined by top executives and each investment is carefully analyzed.

A manager is using a decision package to set funding priorities for a hospital unit. What type of budgeting is the manager most likely using?

a. Flexible

b. Operating

c. Capital

d. Zero based

B, C, D

Key principles of managed care include the use of primary care providers as gatekeepers, a focus on prevention, a decreased emphasis on inpatient hospital care, the use of clinical practice guidelines for providers, selective contracting, capitation, utilization review, the use of formularies to manage pharmacy care, and continuous quality monitoring and improvement. The client's choice of providers is often limited.

A nurse is caring for a client who has managed health insurance. What are the likely characteristics of this client's insurance plan? Select all that apply.

a. Clients as gatekeepers of their health services

b. A focus on prevention of illness

c. Decreased emphasis on inpatient hospital care

d. Use of capitation

e. Unlimited choice of providers

A

The Affordable Care Act was aimed at increasing consumers' options for obtaining health insurance. It did not alter the criteria for Medicaid. In most forms of managed care, the client does not act as the "gatekeeper" for his or her own care. Out-of-state treatment was not a focus of the PPACA.

What aspect of a client's care is most likely to be influenced by the Patient Protection and Affordable Care Act (PPACA)?

a. The number of health insurance plans that the client can choose between

b. The likelihood that the client will have to seek out-of-state treatment

c. The client's ability to act as the "gatekeeper" of his or her own care

d. The client's ability to qualify for Medicaid

D

A PPO provides financial incentives to consumers to use a select group of preferred providers and pay less for services. Clients do not normally have to pay out of pocket, and there is no obligation to demonstrate preventative care or to be assessed by a nurse before seeing a physician.

A client belongs to an HMO that is a preferred provider organization (PPO). When requiring health care, this client will most likely:

a. prove that they have received preventive care from a provider at some point.

b. pay out of pocket for care and then submit for reimbursement.

c. be assessed by a nurse before being referred to a physician.

d. choose between the providers that are in the PPO.

B

The impetus of diagnosis-related groupings changed the structure of Medicare payments from a retrospectively adjusted cost-reimbursement system to a prospective, risk-based one. None of the other options were involved in the change.

What changed the structure of Medicare payments from a retrospectively adjusted cost-reimbursement system to a prospective, risk-based one?

a. Zero-based budgets

b. Diagnosis-related groupings

c. Prospective payment system

d. Incremental budgets

A

A budget that is predicted too far in advance has greater probability for error. For this reason, it is not desirable to create a budget too far in advance.

Which statement concerning a budget is true?

a. A budget's reliability decreases if it is prepared significantly in advance of the funding period.

b. Budgets should be created as far in advance is possible.

c. A budget is revised every 3 months during a fiscal year.

d. Budgets are reliable only when expenses are fixed.

A, B, C, D

Fiscal planning is not intuitive; it is a learned skill that improves with practice. Fiscal planning also requires vision, creativity, and a thorough knowledge of the political, social, and economic forces that shape health care. Subordinates should be included in the process.

Which statements regarding fiscal planning are true? Select all that apply.

a. Social influences affect fiscal planning.

b. A successful fiscal planner must be creative.

c. An understanding of economic forces is necessary to perform fiscal planning.

d. Practical experience is a key to being a good fiscal planner.

e. Subordinates should be excluded from fiscal planning.

C

Spending more does not always equate to higher quality health outcomes. The United States spends more per capita on health care than any other industrialized country; and yet outcomes in terms of teenage pregnancy rates, low-birth-weight infants, and access to care are worse than many countries that spend significantly less.

Which statement about American health care spending is correct?

a. A large budget for health care equals quality outcomes.

b. America spends less than any other industrialized country on health care.

c. Outcomes related to low-birth-weight infants are worse than many other industrialized countries.

d. The scarcity of resources is the biggest factor in the failure to reach outcomes.

B

The first step in the budgetary process involves assessment. That is, the manager must assess what needs to be covered in the budget. Creating a plan and maximizing cost-effectiveness occur after the assessment. Identifying the organization's larger strengths and weaknesses is not an explicit part of the budgetary assessment.

A nurse-manager is participating in the budgeting process. What task should the manager perform first?

a. Creating a spending plan

b. Determining what needs to be covered in the budget

c. Identifying the organization's strengths and weaknesses

d. Determining how to maximize cost-effectiveness

B, C, D, E

A budget is a financial plan that includes estimated expenses as well as income for a period of time. Accuracy dictates the worth of a budget; the more accurate the budget blueprint, the better the institution can plan the most efficient use of its resources. Examples of fixed expenses might be a building's mortgage payment or a manager's salary; variable expenses might include the payroll of hourly wage employees and the cost of supplies. Personnel costs are usually considered to be a controllable expense, not an uncontrollable expense.

Which statements regarding a budget are true? Select all that apply.

a. Personnel costs are normally considered to be an uncontrollable expense.

b. A budget contains an estimate of both expenses and income for a fixed period.

c. It allows for an institution to plan for the effective use of its resources.

d. The cost of supplies is an example of a variable expense.

e. A mortgage is an example of a fixed expense.

B

Historically, there have been significant changes in reimbursement policies that have happened quickly. These changes threaten the accuracy of budgeting. Depreciation is more predictable and changes in client safety regulations usually do not have such significant effects on the budget process. The emergence of an HMO would not be expected to affect an organization's budget.

During the budgetary process, a nurse-manager and the other members of the fiscal planning team are considering factors that may affect the accuracy of the budget. What factor should the team prioritize?

a. Legislation regarding client safety

b. Possible changes in reimbursement policies

c. Depreciation of capital equipment

d. Establishment of new HMOs in the region

A

Flexible budgeting allows for adjustments throughout the year based on volume. Flexible budgets do not necessarily involve longer budget cycles or more participation by staff. Flexible budgeting has no effect on reimbursement policies.

An organization is considering the adoption of flexible budgeting. What advantage will this type of budgeting provide to the organization?

a. Increased ability to adapt to changing circumstances throughout the year

b. Increased reimbursement from state and federal agencies

c. Longer budget cycles

d. Increased opportunities for staff to participate in the budget process

C

Utilization review is a process used by insurance companies to assess the need for medical care and to assure that payment will be provided for the care. Utilization review typically includes precertification or preauthorization for elective treatments, concurrent review, and, if necessary, retrospective review for emergency cases. Profits are always a relevant consideration, but many other variables would be considered. The client's baseline functioning and the circumstances of the original injury are not the primary focuses of a utilization review.

A client is a member of an HMO and has chronic shoulder pain from an old injury. The client has decided to pursue shoulder surgery and the HMO has required a utilization review. What will this review focus on?

a. The circumstances surrounding the client's original injury

b. The client's baseline level of functioning

c. The costs and benefits of the proposed surgery

d. The profit to be made from the surgery

B

Moral hazard is the risk that the insured will overuse services just because the insurance will pay the costs. This does not denote an increase in high-risk behavior, noncompliance with regulations, or abandonment of the HMO by consumers.

The managers of an HMO have argued against a proposed decrease in deductibles, citing a risk of moral hazard. What phenomenon would show that the managers' concerns were justified?

a. Members of the HMO adopt high-risk behaviors because they know that treatment is available.

b. Members of the HMO use more health care services because of the reduced cost.

c. Members are reluctant to comply with the HMO regulations.

d. Members leave the HMO for other HMOs that have more favorable terms.

A

ACOs exist to better coordinate care for Medicare clients across care settings. Health promotion and illness prevention would be lesser concerns. In this particular context, justifying clients' care plans would not be the nurse's major task.

A nurse-manager is working in the context of an accountable care organization (ACO). What task will this manager most likely perform?

a. Coordinating care for Medicare clients

b. Providing community-based illness prevention

c. Health promotion

d. Determining whether clients' care plans are justified