Ch 1. Healthcare Finance Basics
Healthcare finance - correct answer ✔✔The practice of finance, including both accounting and financial
management, within health services (provider) organizations.
Provider - correct answer ✔✔An organization that provides healthcare services (treats patients).
What is the proper definition of healthcare finance? - correct answer ✔✔Depends on the context (ex:
policymaker or manager, type of healthcare organization)
Accounting vs Financial management - correct answer ✔✔Accounting: Measurement in financial (dollar)
terms. Reflects the resources, operations, and financing of organization. The purpose of accounting is to
create and provide to interested parties, both internal and external, useful information about an
organization's operations and financial status.
Financial management: Provides the theory, concepts, and tools necessary to kelp managers make better
financial decisions.
Are the disciplines of accounting and financial management independent? - correct answer ✔✔No.
What are the characteristics of a business? - correct answer ✔✔-Obtains financing from the
marketplace. *Uses the funds to buy assets (lab equipment, etc.)
-Operates the assets to provide goods or services (x-ray, lab work, etc.)
-Sells the goods or services to create revenue.
*To be financially viable, a business has to have sufficient revenue to pay all of the costs associated with
creating and selling its goods or services.
What is the difference between a business and a pure charity? - correct answer ✔✔Business: Makes
money.
Pure charity: Non-profit, not expecting an income.
, What is the primary role of finance? - correct answer ✔✔To plan for, acquire, and utilize resources to
maximize the efficiency (and value) of the enterprise.
Finance activities include... - correct answer ✔✔- Planning and budgeting
- Financial reporting
- Capital investment decisions: Focuses on the acquisition of land, buildings, and equipment.
- Financing decisions
- Working capital management
- Contract management
- Financial risk management
Capital - correct answer ✔✔The funds raised by a business that will be invested in assets, such as land,
buildings, and equipment, that support the organizational mission.
Capital budgeting - correct answer ✔✔The process of analyzing and choosing new long-term assets such
as land, buildings, and equipment.
What are the four C's that summarize finance activities? - correct answer ✔✔-Cost minimization: Cost is
a resource use associated with providing or supporting a specific service.
-Cash sufficiency
-Capital access
-Control of financial resources
Finance department structure at large providers (typically hospitals) - correct answer ✔✔1. Chief
financial officer (VP-finance):Head of the finance department who typically reports directly to the
organization's CEO and is responsible for all finance activities within the organization. Directs two senior
managers who help manage finance activities (compeller and treasurer).
2. Comptroller:
-Budgeting and reporting activities
Healthcare finance - correct answer ✔✔The practice of finance, including both accounting and financial
management, within health services (provider) organizations.
Provider - correct answer ✔✔An organization that provides healthcare services (treats patients).
What is the proper definition of healthcare finance? - correct answer ✔✔Depends on the context (ex:
policymaker or manager, type of healthcare organization)
Accounting vs Financial management - correct answer ✔✔Accounting: Measurement in financial (dollar)
terms. Reflects the resources, operations, and financing of organization. The purpose of accounting is to
create and provide to interested parties, both internal and external, useful information about an
organization's operations and financial status.
Financial management: Provides the theory, concepts, and tools necessary to kelp managers make better
financial decisions.
Are the disciplines of accounting and financial management independent? - correct answer ✔✔No.
What are the characteristics of a business? - correct answer ✔✔-Obtains financing from the
marketplace. *Uses the funds to buy assets (lab equipment, etc.)
-Operates the assets to provide goods or services (x-ray, lab work, etc.)
-Sells the goods or services to create revenue.
*To be financially viable, a business has to have sufficient revenue to pay all of the costs associated with
creating and selling its goods or services.
What is the difference between a business and a pure charity? - correct answer ✔✔Business: Makes
money.
Pure charity: Non-profit, not expecting an income.
, What is the primary role of finance? - correct answer ✔✔To plan for, acquire, and utilize resources to
maximize the efficiency (and value) of the enterprise.
Finance activities include... - correct answer ✔✔- Planning and budgeting
- Financial reporting
- Capital investment decisions: Focuses on the acquisition of land, buildings, and equipment.
- Financing decisions
- Working capital management
- Contract management
- Financial risk management
Capital - correct answer ✔✔The funds raised by a business that will be invested in assets, such as land,
buildings, and equipment, that support the organizational mission.
Capital budgeting - correct answer ✔✔The process of analyzing and choosing new long-term assets such
as land, buildings, and equipment.
What are the four C's that summarize finance activities? - correct answer ✔✔-Cost minimization: Cost is
a resource use associated with providing or supporting a specific service.
-Cash sufficiency
-Capital access
-Control of financial resources
Finance department structure at large providers (typically hospitals) - correct answer ✔✔1. Chief
financial officer (VP-finance):Head of the finance department who typically reports directly to the
organization's CEO and is responsible for all finance activities within the organization. Directs two senior
managers who help manage finance activities (compeller and treasurer).
2. Comptroller:
-Budgeting and reporting activities
