Accounting / Finance / Business HFMA CSAF CERTIFIED
SPECIALIST ACCOUNTING AND FINANCE EXAM STUDY
GUIDE 2026 – COMPLETE CONCEPT REVIEW & PRACTICE
MATERIALS (LATEST EDITION)
Domain 1: Healthcare Finance & Payment Systems
1. Q: What is the fundamental difference between a fee-for-service (FFS) and a value-
based payment model?
o A: FFS reimburses for volume (each service/procedure), incentivizing more care.
Value-based models tie payment to quality, outcomes, and efficiency,
incentivizing effective and coordinated care.
2. Q: Define DRG (Diagnosis-Related Group) in the context of Medicare inpatient
payments.
o A: A DRG is a patient classification system that groups patients with clinically
similar conditions and resource consumption. Medicare pays a hospital a fixed
rate per discharge based on the assigned DRG, regardless of the actual length of
stay or services used.
3. Q: What is the purpose of a CMS-1500 form?
o A: It is the standard claim form used by non-institutional providers (e.g.,
physicians, nurse practitioners) to bill Medicare and other payers for professional
services.
4. Q: What is the UB-04 (CMS-1450) form used for?
o A: It is the standard claim form used by institutional providers (e.g., hospitals,
skilled nursing facilities, ambulatory surgery centers) to bill for facility services.
5. Q: Explain the concept of "charity care" versus "bad debt."
o A: Charity care is provided to patients who are known to be unable to pay, and is
never recorded as revenue. Bad debt arises from patients who are expected to
pay (based on financial screening) but ultimately do not, after all collection
efforts fail. Bad debt is recorded as revenue and then an expense.
6. Q: What are the three main components of the Medicare Advantage (Part C) program?
, o A: 1) Provided by private insurance companies approved by Medicare. 2) Bundles
Part A (hospital), Part B (medical), and often Part D (drugs). 3) Paid via capitated,
risk-adjusted payments from CMS.
7. Q: What does "capitation" mean in managed care contracting?
o A: A fixed, per-member-per-month (PMPM) payment to a provider or system to
cover a defined set of services for a enrolled patient, regardless of how many
services are used. The provider assumes financial risk.
8. Q: Define "deductible," "copayment," and "coinsurance."
o A: Deductible: Amount patient pays out-of-pocket before insurance begins to
pay. Copayment: Fixed amount (e.g., $20) patient pays for a specific
service. Coinsurance: Percentage (e.g., 20%) of the allowed charge that the
patient pays.
9. Q: What is an "Explanation of Benefits" (EOB)?
o A: A statement from an insurer to a patient explaining how a claim was
processed, detailing what was charged, allowed, paid by insurance, and owed by
the patient.
10. Q: What is the significance of the "Charge Master" (CDM)?
o A: It is the comprehensive list of all billable items (services, procedures, supplies,
drugs) with their associated charge prices. It is the foundation for all patient
billing and must be meticulously maintained for accuracy and compliance.
Domain 2: Healthcare Accounting & Financial Reporting
11. Q: According to GAAP, what is the primary difference in reporting charity care on the
income statement vs. bad debt?
o A: Charity care is not recognized as patient service revenue or an expense. Bad
debt is initially recorded as patient service revenue and then an allowance
(contra-revenue) or expense is recognized, reducing net revenue.
12. Q: What are the three main financial statements, and what does each communicate?
o A: Balance Sheet: Financial position (Assets = Liabilities + Net Assets) at a point in
time. Statement of Operations: Revenues, expenses, and change in net assets
over a period. Statement of Cash Flows: Sources and uses of cash (Operating,
Investing, Financing) over a period.
,13. Q: Define "net patient service revenue" (NPSR).
o A: Gross patient charges minus contractual allowances (discounts to third-party
payers), charity care, and policy discounts (e.g., prompt pay). It is the revenue
the organization expects to collect.
14. Q: What is a "contractual allowance"?
o A: The difference between a hospital's gross charges and the amount a third-
party payer (e.g., Medicare, Medicaid, commercial insurer) has contractually
agreed to pay. It is the most significant deduction from revenue.
15. Q: Differentiate between "permanent" and "temporary" restricted net assets.
o A: Permanently Restricted: Donor-stipulated principal that must be maintained
in perpetuity (e.g., endowment). Temporarily Restricted: Donor-stipulated funds
that must be used for a specific purpose or time period.
16. Q: What is the purpose of the "allowance for doubtful accounts"?
o A: It is a contra-asset account on the balance sheet that estimates the portion of
accounts receivable that will not be collected. It aligns reported A/R with net
realizable value.
17. Q: How are "supplies" typically expensed in hospital accounting?
o A: Through the consumption method. Supplies are capitalized as an inventory
asset when purchased and expensed only when they are actually used for patient
care.
18. Q: What is "fund accounting," and which types of organizations commonly use it?
o A: A system that segregates resources into funds based on donor restrictions or
operational purposes. Commonly used by not-for-profit and governmental
organizations.
19. Q: What does "variance analysis" involve in the monthly close process?
o A: Comparing actual financial results to the budget (and potentially prior year) to
identify significant favorable or unfavorable differences, investigate the causes
(volume, rate, efficiency), and take corrective action.
20. Q: Define "accrual basis accounting" and why it's used in healthcare.
o A: Revenue is recognized when earned (services provided), and expenses are
recognized when incurred (resources used), regardless of when cash is
, exchanged. It provides a more accurate picture of financial performance than
cash basis.
Domain 3: Operational Finance & Decision Support
21. Q: What is a "cost driver" in activity-based costing (ABC)?
o A: A factor that causes a change in the cost of an activity. Examples: number of
lab tests, patient days, surgical minutes, square footage.
22. Q: Differentiate between "direct costs" and "indirect (overhead) costs."
o A: Direct costs can be traced specifically to a patient, department, or service
(e.g., nurse labor in the ICU, pacemaker for a surgery). Indirect costs support the
overall organization and cannot be easily traced (e.g., administration,
housekeeping, utilities).
23. Q: What is the formula for the "contribution margin"? Why is it important?
o A: Contribution Margin = Net Revenue - Variable Costs. It represents the amount
available to cover fixed costs and then contribute to profit. It's crucial for break-
even analysis and service line decisions.
24. Q: What is "break-even analysis"?
o A: Determining the point (in units of service or dollars) where total revenue
equals total costs (fixed + variable), resulting in zero profit/loss.
25. Q: When evaluating capital equipment purchases, what does "Net Present Value
(NPV)" tell you?
o A: NPV calculates the present value of all future cash inflows and outflows of a
project. A positive NPV indicates the project is expected to add value and exceed
the required rate of return (hurdle rate).
26. Q: What is the "Internal Rate of Return (IRR)"?
o A: The discount rate that makes the NPV of a project equal to zero. It represents
the projected annual rate of growth the investment is expected to generate.
Projects with IRR above the hurdle rate are considered.
27. Q: Define "payback period."
o A: The length of time required for an investment's net cash inflows to recover its
initial cost. A simpler, non-time-value-of-money metric for liquidity risk.
SPECIALIST ACCOUNTING AND FINANCE EXAM STUDY
GUIDE 2026 – COMPLETE CONCEPT REVIEW & PRACTICE
MATERIALS (LATEST EDITION)
Domain 1: Healthcare Finance & Payment Systems
1. Q: What is the fundamental difference between a fee-for-service (FFS) and a value-
based payment model?
o A: FFS reimburses for volume (each service/procedure), incentivizing more care.
Value-based models tie payment to quality, outcomes, and efficiency,
incentivizing effective and coordinated care.
2. Q: Define DRG (Diagnosis-Related Group) in the context of Medicare inpatient
payments.
o A: A DRG is a patient classification system that groups patients with clinically
similar conditions and resource consumption. Medicare pays a hospital a fixed
rate per discharge based on the assigned DRG, regardless of the actual length of
stay or services used.
3. Q: What is the purpose of a CMS-1500 form?
o A: It is the standard claim form used by non-institutional providers (e.g.,
physicians, nurse practitioners) to bill Medicare and other payers for professional
services.
4. Q: What is the UB-04 (CMS-1450) form used for?
o A: It is the standard claim form used by institutional providers (e.g., hospitals,
skilled nursing facilities, ambulatory surgery centers) to bill for facility services.
5. Q: Explain the concept of "charity care" versus "bad debt."
o A: Charity care is provided to patients who are known to be unable to pay, and is
never recorded as revenue. Bad debt arises from patients who are expected to
pay (based on financial screening) but ultimately do not, after all collection
efforts fail. Bad debt is recorded as revenue and then an expense.
6. Q: What are the three main components of the Medicare Advantage (Part C) program?
, o A: 1) Provided by private insurance companies approved by Medicare. 2) Bundles
Part A (hospital), Part B (medical), and often Part D (drugs). 3) Paid via capitated,
risk-adjusted payments from CMS.
7. Q: What does "capitation" mean in managed care contracting?
o A: A fixed, per-member-per-month (PMPM) payment to a provider or system to
cover a defined set of services for a enrolled patient, regardless of how many
services are used. The provider assumes financial risk.
8. Q: Define "deductible," "copayment," and "coinsurance."
o A: Deductible: Amount patient pays out-of-pocket before insurance begins to
pay. Copayment: Fixed amount (e.g., $20) patient pays for a specific
service. Coinsurance: Percentage (e.g., 20%) of the allowed charge that the
patient pays.
9. Q: What is an "Explanation of Benefits" (EOB)?
o A: A statement from an insurer to a patient explaining how a claim was
processed, detailing what was charged, allowed, paid by insurance, and owed by
the patient.
10. Q: What is the significance of the "Charge Master" (CDM)?
o A: It is the comprehensive list of all billable items (services, procedures, supplies,
drugs) with their associated charge prices. It is the foundation for all patient
billing and must be meticulously maintained for accuracy and compliance.
Domain 2: Healthcare Accounting & Financial Reporting
11. Q: According to GAAP, what is the primary difference in reporting charity care on the
income statement vs. bad debt?
o A: Charity care is not recognized as patient service revenue or an expense. Bad
debt is initially recorded as patient service revenue and then an allowance
(contra-revenue) or expense is recognized, reducing net revenue.
12. Q: What are the three main financial statements, and what does each communicate?
o A: Balance Sheet: Financial position (Assets = Liabilities + Net Assets) at a point in
time. Statement of Operations: Revenues, expenses, and change in net assets
over a period. Statement of Cash Flows: Sources and uses of cash (Operating,
Investing, Financing) over a period.
,13. Q: Define "net patient service revenue" (NPSR).
o A: Gross patient charges minus contractual allowances (discounts to third-party
payers), charity care, and policy discounts (e.g., prompt pay). It is the revenue
the organization expects to collect.
14. Q: What is a "contractual allowance"?
o A: The difference between a hospital's gross charges and the amount a third-
party payer (e.g., Medicare, Medicaid, commercial insurer) has contractually
agreed to pay. It is the most significant deduction from revenue.
15. Q: Differentiate between "permanent" and "temporary" restricted net assets.
o A: Permanently Restricted: Donor-stipulated principal that must be maintained
in perpetuity (e.g., endowment). Temporarily Restricted: Donor-stipulated funds
that must be used for a specific purpose or time period.
16. Q: What is the purpose of the "allowance for doubtful accounts"?
o A: It is a contra-asset account on the balance sheet that estimates the portion of
accounts receivable that will not be collected. It aligns reported A/R with net
realizable value.
17. Q: How are "supplies" typically expensed in hospital accounting?
o A: Through the consumption method. Supplies are capitalized as an inventory
asset when purchased and expensed only when they are actually used for patient
care.
18. Q: What is "fund accounting," and which types of organizations commonly use it?
o A: A system that segregates resources into funds based on donor restrictions or
operational purposes. Commonly used by not-for-profit and governmental
organizations.
19. Q: What does "variance analysis" involve in the monthly close process?
o A: Comparing actual financial results to the budget (and potentially prior year) to
identify significant favorable or unfavorable differences, investigate the causes
(volume, rate, efficiency), and take corrective action.
20. Q: Define "accrual basis accounting" and why it's used in healthcare.
o A: Revenue is recognized when earned (services provided), and expenses are
recognized when incurred (resources used), regardless of when cash is
, exchanged. It provides a more accurate picture of financial performance than
cash basis.
Domain 3: Operational Finance & Decision Support
21. Q: What is a "cost driver" in activity-based costing (ABC)?
o A: A factor that causes a change in the cost of an activity. Examples: number of
lab tests, patient days, surgical minutes, square footage.
22. Q: Differentiate between "direct costs" and "indirect (overhead) costs."
o A: Direct costs can be traced specifically to a patient, department, or service
(e.g., nurse labor in the ICU, pacemaker for a surgery). Indirect costs support the
overall organization and cannot be easily traced (e.g., administration,
housekeeping, utilities).
23. Q: What is the formula for the "contribution margin"? Why is it important?
o A: Contribution Margin = Net Revenue - Variable Costs. It represents the amount
available to cover fixed costs and then contribute to profit. It's crucial for break-
even analysis and service line decisions.
24. Q: What is "break-even analysis"?
o A: Determining the point (in units of service or dollars) where total revenue
equals total costs (fixed + variable), resulting in zero profit/loss.
25. Q: When evaluating capital equipment purchases, what does "Net Present Value
(NPV)" tell you?
o A: NPV calculates the present value of all future cash inflows and outflows of a
project. A positive NPV indicates the project is expected to add value and exceed
the required rate of return (hurdle rate).
26. Q: What is the "Internal Rate of Return (IRR)"?
o A: The discount rate that makes the NPV of a project equal to zero. It represents
the projected annual rate of growth the investment is expected to generate.
Projects with IRR above the hurdle rate are considered.
27. Q: Define "payback period."
o A: The length of time required for an investment's net cash inflows to recover its
initial cost. A simpler, non-time-value-of-money metric for liquidity risk.
