IHP 630 (Healthcare Finance & Reimbursement) Proctored Midterm Exam 2026

IHP 630

Healthcare Finance & Reimbursement


Proctored Midterm Exam Review


(With Solutions)



2026




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,Multiple Choice (MCQ)
1. A hospital implements a bundled payment arrangement for
joint replacement surgeries. Which of the following is a
primary financial risk associated with this model? A)
Increased number of claims submissions B) Reduced patient
throughput C) Cost overruns exceeding the fixed payment D)
Higher administrative billing costs Answer: C Rationale:
Bundled payments provide a fixed rate for a group of services, so
if costs exceed this amount, the provider absorbs the loss.
2. Which of the following best describes the purpose of the
Diagnosis-Related Group (DRG) system? A) To classify
patients solely by age and gender B) To provide fixed
reimbursement based on patient diagnosis and treatment
complexity C) To increase hospital revenue by billing every
service separately D) To regulate physician salaries Answer: B
Rationale: DRGs categorize hospital cases and assign payment
to encourage cost-effective care.
3. Which reimbursement model incentivizes providers to
reduce unnecessary hospital readmissions? A) Fee-for-
service B) Capitation C) Value-Based Purchasing D) Cost-plus
reimbursement Answer: C Rationale: Value-Based Purchasing
programs tie payments to quality measures, including reduced
readmissions.
4. A nurse manager notices that the hospital's accounts
receivable days have increased significantly. This most likely
indicates: A) Faster payment collection from insurance
companies B) Delays in billing or payment processes C)
Increased patient satisfaction D) Higher cash flow Answer: B
Rationale: Increased accounts receivable days usually reflect
slower payments and potential cash flow challenges.
5. When a healthcare organization uses activity-based costing
(ABC), it primarily aims to: A) Calculate costs based on patient
length of stay B) Allocate overhead costs more precisely to
healthcare services C) Reduce variable costs by cutting supplies
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, D) Standardize salaries across departments Answer: B
Rationale: ABC assigns indirect costs to services based on
activities consumed, enhancing cost accuracy.

True/False
6. The Medicare Severity Diagnosis-Related Group (MS-DRG)
system incorporates patient severity to calculate
reimbursement levels. Answer: True Rationale: MS-DRGs
adjust payments based on patient severity, comorbidities, and
complications to reflect resource use.
7. Capitation payment models pay providers a fixed amount per
patient regardless of services provided, which may lead to
underutilization of care. Answer: True Rationale: Providers
may limit services to control costs since payment is fixed.
8. In fee-for-service reimbursement, there is an inherent
financial incentive to increase the volume of services
rendered. Answer: True Rationale: Providers are paid for each
service, encouraging higher service volume.
9. Hospital outpatient departments always receive higher
reimbursement rates than physician offices for the same
procedures. Answer: False Rationale: Reimbursement varies
by payer and site of service; sometimes physician offices have
higher rates depending on the setting.
10. Cost shifting occurs when healthcare providers
increase charges to privately insured patients to
compensate for losses from Medicaid or Medicare
underpayments. Answer: True Rationale: Providers offset
revenue shortfalls by charging payers willing to pay more.

Short Answer
11. Explain the concept of "revenue cycle management" in
healthcare finance. Answer: Revenue cycle management is the
process of managing all administrative and clinical functions
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