Test Bank
,Name: Class: Date:
Chapter 1 - The Environment of Healthcare Finance
True / False
1. Healthcare is more heavily regulated than most other businesses in the United States.
a. True
b. False
ANSWER: True
2. A recent trend in healthcare is the growth of for-profit public corporations that own multiple hospitals and other
healthcare facilities.
a. True
b. False
ANSWER: True
3. Home healthcare services are in decline because providing services at home is not cost effective.
a. True
b. False
ANSWER: False
4. Ambulatory care refers to services provided by paramedics or emergency medical technologists while transporting a
patient to a hospital.
a. True
b. False
ANSWER: False
Multiple Choice
5. Which of the following financial management characteristics differentiates health care from other businesses?
a. Operating budgets
b. Need for cash flow
c. Third-party payers
d. Accounting method
ANSWER: c
6. Which type of healthcare reimbursement system pays a fixed amount per patient?
a. Medicaid
b. Capitation plan
c. Third-party insurance
d. Healthcare maintenance organization
ANSWER: b
7. Prior to the Great Depression, hospitals in America received most of their funding from ____.
a. charitable donations
b. city governments
c. patient payments
d. physician organizations
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,Name: Class: Date:
Chapter 1 - The Environment of Healthcare Finance
ANSWER: a
8. Which of the following private-sector companies developed hospitalization insurance?
a. Medicare
b. Medicaid
c. Blue Shield
d. Blue Cross
ANSWER: d
9. What factor resulted in the rapid increase of employer-sponsored healthcare insurance during World War II?
a. Rationing
b. Wage freezes
c. Fear of socialism
d. A government
mandate ANSWER: b
10. When Medicare and Medicaid were established in 1965, their costs increased much more than the
government planners expected. What was changed in 1982 in an attempt to keep costs down?
a. Physicians were given incentives to use fewer resources.
b. Patients were given incentives to improve their health.
c. Hospital budgets were controlled by the federal government.
d. Payments to healthcare providers were based on patients’ diagnoses
. ANSWER: d
11. Which type of healthcare insurance plan uses primary care physician gatekeepers to coordinate the care of
plan participants?
a. Capitation plan
b. Health maintenance organization
c. Preferred provider plan
d. Fee-for-service
plan ANSWER: b
12. Most proprietorships form professional corporations in order to ____.
a. reduce taxes
b. raise capital by selling shares
c. maximize ability to transfer ownership equity
d. reduce financial
liabilities ANSWER: d
13. A small, closely held corporation is owned by ____.
a. a parent corporation
b. public stockholders
c. private investors
d. a proprietorship
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, Name: Class: Date:
Chapter 1 - The Environment of Healthcare Finance
ANSWER: c
14.Ifyouownstockinapublicly-heldcorporationthatbecomesbankrupt,youwill____.
a. be billed for a portion of legal costs
b. lose only the value of your stocks
c. owe a portion of the corporation’s debt
d. owe a portion of the corporation’s unpaid
taxes ANSWER: b
15. Federal tax revenues are based on a C Corporation’s ____.
a. gross revenues
b. net revenues and profits
c. dividends
d. profits and
dividends ANSWER: d
16. A not-for-profit hospital must ____.
a. be operated by a religious organization
b. adopt a corporate structure
c. have annual stockholder meetings
d. be staffed by
volunteers ANSWER: b
17. The urgent care facility of a hospital is ____.
a. an in-patient facility
b. an out-patient facility
c. a tax-exempt facility
d. a non-classified
facility ANSWER: b
18. The Hospital Survey and Construction Act of 1946 produced ____.
a. an increase in the availability of in-patient hospital services
b. a doubling in the number of not-for-profit hospitals
c. a decrease in hospital charges due to greater competition
d. a five-year increase in life expectancy of Americans
ANSWER: a
19. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) resulted in ____.
a. fee-for-service plans for Medicare
b. preferred provider insurance plans
c. a prospective payment system for Medicare
d. for-profit hospital corporations
ANSWER: c
Page 3
,Name: Class: Date:
Chapter 1 - The Environment of Healthcare Finance
True / False
1. Healthcare is more heavily regulated than most other businesses in the United States.
a. True
b. False
ANSWER: True
2. A recent trend in healthcare is the growth of for-profit public corporations that own multiple hospitals and other
healthcare facilities.
a. True
b. False
ANSWER: True
3. Home healthcare services are in decline because providing services at home is not cost effective.
a. True
b. False
ANSWER: False
4. Ambulatory care refers to services provided by paramedics or emergency medical technologists while transporting a
patient to a hospital.
a. True
b. False
ANSWER: False
Multiple Choice
5. Which of the following financial management characteristics differentiates health care from other businesses?
a. Operating budgets
b. Need for cash flow
c. Third-party payers
d. Accounting method
ANSWER: c
6. Which type of healthcare reimbursement system pays a fixed amount per patient?
a. Medicaid
b. Capitation plan
c. Third-party insurance
d. Healthcare maintenance organization
ANSWER: b
7. Prior to the Great Depression, hospitals in America received most of their funding from ____.
a. charitable donations
b. city governments
c. patient payments
d. physician organizations
Page 1
,Name: Class: Date:
Chapter 1 - The Environment of Healthcare Finance
ANSWER: a
8. Which of the following private-sector companies developed hospitalization insurance?
a. Medicare
b. Medicaid
c. Blue Shield
d. Blue Cross
ANSWER: d
9. What factor resulted in the rapid increase of employer-sponsored healthcare insurance during World War II?
a. Rationing
b. Wage freezes
c. Fear of socialism
d. A government
mandate ANSWER: b
10. When Medicare and Medicaid were established in 1965, their costs increased much more than the
government planners expected. What was changed in 1982 in an attempt to keep costs down?
a. Physicians were given incentives to use fewer resources.
b. Patients were given incentives to improve their health.
c. Hospital budgets were controlled by the federal government.
d. Payments to healthcare providers were based on patients’ diagnoses
. ANSWER: d
11. Which type of healthcare insurance plan uses primary care physician gatekeepers to coordinate the care of
plan participants?
a. Capitation plan
b. Health maintenance organization
c. Preferred provider plan
d. Fee-for-service
plan ANSWER: b
12. Most proprietorships form professional corporations in order to ____.
a. reduce taxes
b. raise capital by selling shares
c. maximize ability to transfer ownership equity
d. reduce financial
liabilities ANSWER: d
13. A small, closely held corporation is owned by ____.
a. a parent corporation
b. public stockholders
c. private investors
d. a proprietorship
Page 2
, Name: Class: Date:
Chapter 1 - The Environment of Healthcare Finance
ANSWER: c
14.Ifyouownstockinapublicly-heldcorporationthatbecomesbankrupt,youwill____.
a. be billed for a portion of legal costs
b. lose only the value of your stocks
c. owe a portion of the corporation’s debt
d. owe a portion of the corporation’s unpaid
taxes ANSWER: b
15. Federal tax revenues are based on a C Corporation’s ____.
a. gross revenues
b. net revenues and profits
c. dividends
d. profits and
dividends ANSWER: d
16. A not-for-profit hospital must ____.
a. be operated by a religious organization
b. adopt a corporate structure
c. have annual stockholder meetings
d. be staffed by
volunteers ANSWER: b
17. The urgent care facility of a hospital is ____.
a. an in-patient facility
b. an out-patient facility
c. a tax-exempt facility
d. a non-classified
facility ANSWER: b
18. The Hospital Survey and Construction Act of 1946 produced ____.
a. an increase in the availability of in-patient hospital services
b. a doubling in the number of not-for-profit hospitals
c. a decrease in hospital charges due to greater competition
d. a five-year increase in life expectancy of Americans
ANSWER: a
19. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) resulted in ____.
a. fee-for-service plans for Medicare
b. preferred provider insurance plans
c. a prospective payment system for Medicare
d. for-profit hospital corporations
ANSWER: c
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