MHA 706 Midterm Practice Questions with
Verified Correct Answers
Proprietorships & Partnerships: Pros & Cons
Pros: Ease of Information, Subject to a few regulations, no corporation income taxes.
Cons: Limited life, difficult to transfer, unlimited life, difficult to raise capital.
Corporations: Pros & Cons
Pros: Unlimited life, easy transfer of ownership, limited liability, ease of raising capital.
Cons: Cost of formation and reporting, double or triple taxes must be paid.
Non-profit Organization
Exempt from taxes. Goal is to improve community.
For-profit Organizations
(Investor Owned) Goal is to maximize shareholder return. Owe taxes.
Agency Problem
the possibility of conflict of interest between the stockholders and management of a firm.
Example: Hire someone to carry out a job function, but they go out of their interests instead
of best interests of company/organization.
Third-party payor system in the US (i.e. private vs public)
Private: Blue Cross Blue Shield, Commercial Insurers, Self-Insurers. (AETNA)
Public: Medicare and Medicaid-both offer services to different levels. "Safety net" Lowest
reimbursement rates.
,Reimbursement methods (fee-for-service vs. capitation)
Fee for Service: payment is tied to amount of services provided. (Decades ago) Dental
industry
Capitation: payment is tied to the size of the covered population (number of enrollees)
Payment is based on per # per month. Decreasing utilization Population is healthier.
Medicare reimbursement for different types of providers
Medicare parts A, B & C.
Medicare Part A (aka Hospital Insurance or HI)
Provides hospital insurance automatically at age 65 (if FICA qualified) at no fee but may
have deductible & co-pay.
Medicare Part B
The part of the Medicare program that pays for physician services, outpatient hospital
services, durable medical equipment, and other services and supplies.
Medicare Part C (Medicare Advantage)
•Replaces and covers expenses found in Part A and B
•Medicare private fee-for-service plans (PFFS)
•Medicare managed care plans (HMOs and PPOs)
•Medicare specialty plans
Medicare—Part D Prescription Drug Coverage
a United States federal-government program to subsidize the costs of prescription drugs and
prescription drug insurance premiums for Medicare beneficiaries.
, Impact of the Affordable Care Act (what the bill changed about the healthcare
environment)
Created new standards, individual mandates, exchanges, and Medicaid expansion.
Focused on quality through clinical compensation, bundled payment, value-based purchasing.
Regulations and standards of financial accounting (e.g. SEC, GAAP, FASB)
-Securities and Exchange Commission (SEC): has the legal authority to regulate the form and
content of financial statements.
-Financial Accounting Standards Board (FASB)
-Generally Accepted Accounting Principles (GAAP): the conventions that have evolved from
the pronouncements and rulings of the implementing organizations constitute a set of
guidelines for the preparation of financial accounting statements. -ONLY applies only to
financial accounting statements. Does NOT remain STATIC.
GAAP (Generally Accepted Accounting Principles)
Split into 3 categories: Assumptions, Principles, & Constraints
Assumptions of GAAP
economic entity, monetary unit, periodicity, going concern
Principles of GAAP
historical cost, revenue recognition, expense recognition (matching), full disclosure
Constraints of GAAP
Materiality & Cost-benefit
Accrual Accounting
Verified Correct Answers
Proprietorships & Partnerships: Pros & Cons
Pros: Ease of Information, Subject to a few regulations, no corporation income taxes.
Cons: Limited life, difficult to transfer, unlimited life, difficult to raise capital.
Corporations: Pros & Cons
Pros: Unlimited life, easy transfer of ownership, limited liability, ease of raising capital.
Cons: Cost of formation and reporting, double or triple taxes must be paid.
Non-profit Organization
Exempt from taxes. Goal is to improve community.
For-profit Organizations
(Investor Owned) Goal is to maximize shareholder return. Owe taxes.
Agency Problem
the possibility of conflict of interest between the stockholders and management of a firm.
Example: Hire someone to carry out a job function, but they go out of their interests instead
of best interests of company/organization.
Third-party payor system in the US (i.e. private vs public)
Private: Blue Cross Blue Shield, Commercial Insurers, Self-Insurers. (AETNA)
Public: Medicare and Medicaid-both offer services to different levels. "Safety net" Lowest
reimbursement rates.
,Reimbursement methods (fee-for-service vs. capitation)
Fee for Service: payment is tied to amount of services provided. (Decades ago) Dental
industry
Capitation: payment is tied to the size of the covered population (number of enrollees)
Payment is based on per # per month. Decreasing utilization Population is healthier.
Medicare reimbursement for different types of providers
Medicare parts A, B & C.
Medicare Part A (aka Hospital Insurance or HI)
Provides hospital insurance automatically at age 65 (if FICA qualified) at no fee but may
have deductible & co-pay.
Medicare Part B
The part of the Medicare program that pays for physician services, outpatient hospital
services, durable medical equipment, and other services and supplies.
Medicare Part C (Medicare Advantage)
•Replaces and covers expenses found in Part A and B
•Medicare private fee-for-service plans (PFFS)
•Medicare managed care plans (HMOs and PPOs)
•Medicare specialty plans
Medicare—Part D Prescription Drug Coverage
a United States federal-government program to subsidize the costs of prescription drugs and
prescription drug insurance premiums for Medicare beneficiaries.
, Impact of the Affordable Care Act (what the bill changed about the healthcare
environment)
Created new standards, individual mandates, exchanges, and Medicaid expansion.
Focused on quality through clinical compensation, bundled payment, value-based purchasing.
Regulations and standards of financial accounting (e.g. SEC, GAAP, FASB)
-Securities and Exchange Commission (SEC): has the legal authority to regulate the form and
content of financial statements.
-Financial Accounting Standards Board (FASB)
-Generally Accepted Accounting Principles (GAAP): the conventions that have evolved from
the pronouncements and rulings of the implementing organizations constitute a set of
guidelines for the preparation of financial accounting statements. -ONLY applies only to
financial accounting statements. Does NOT remain STATIC.
GAAP (Generally Accepted Accounting Principles)
Split into 3 categories: Assumptions, Principles, & Constraints
Assumptions of GAAP
economic entity, monetary unit, periodicity, going concern
Principles of GAAP
historical cost, revenue recognition, expense recognition (matching), full disclosure
Constraints of GAAP
Materiality & Cost-benefit
Accrual Accounting
