ANM Financial Management and Budgeting 3 — Questions and Answers
Question 1: Which of the following BEST describes the purpose of a capital budget in healthcare?
- To plan day-to-day operating expenses for the fiscal year
- To allocate funds for major equipment, facilities, and long-term investments (Correct answer)
- To track monthly variances in supply costs
- To manage short-term staffing fluctuations
Correct answer: To allocate funds for major equipment, facilities, and long-term investments
Capital budgets plan for significant, long-term expenditures such as new equipment, building renovations, or major technology systems.
Question 2: A nurse manager is asked to justify a budget request using a cost-benefit analysis. The analysis should compare:
- Total staff hours to patient satisfaction scores
- The financial costs of a proposal to its measurable financial and non-financial benefits (Correct answer)
- Direct costs only to gross revenue
- Fixed costs to variable costs of the program
Correct answer: The financial costs of a proposal to its measurable financial and non-financial benefits
Cost-benefit analysis weighs all costs of a decision against all anticipated benefits, including both quantifiable and qualitative outcomes.
Question 3: The ANM observes that overtime costs spiked significantly in the last pay period due to unexpected call-outs. This is an example of a:
- Volume variance (Correct answer)
- Efficiency variance
- Rate variance
- Price variance
Correct answer: Volume variance
A volume variance occurs when the actual number of hours worked differs from the budgeted amount due to changes in staffing demand or availability.
Question 4: Under a prospective payment system (PPS), hospitals receive reimbursement based on:
- Actual costs incurred for each patient
- A predetermined fixed rate per diagnosis-related group (DRG) (Correct answer)
- The number of nursing hours provided per patient
- Daily room and board charges
Correct answer: A predetermined fixed rate per diagnosis-related group (DRG)
PPS reimburses hospitals a fixed amount based on the patient's DRG, regardless of the actual cost of care provided.
Question 5: When a unit's actual expense is lower than budgeted, this is referred to as a:
- Negative variance
- Favorable variance (Correct answer)
- Unfavorable variance
- Volume variance
Correct answer: Favorable variance
A favorable variance means actual costs were less than budgeted, which generally indicates efficient resource use.
Question 6: Full-time equivalent (FTE) calculations are used in nursing budgets primarily to:
- Calculate individual nurse productivity scores
- Determine reimbursement rates from payers
- Standardize staffing needs independent of hours worked per week (Correct answer)
- Track supply utilization per patient day
Correct answer: Standardize staffing needs independent of hours worked per week
FTEs convert varying work schedules into a standard unit (1 FTE = 2,080 hours/year) to plan and compare staffing levels consistently.
Question 7: Which financial statement shows a healthcare organization's assets, liabilities, and net assets at a specific point in time?
- Income statement
- Balance sheet (Correct answer)
- Cash flow statement
- Operating budget report
Correct answer: Balance sheet
The balance sheet (statement of financial position) presents assets, liabilities, and net assets as of a specific date.
ANM Financial Management and Budgeting 3
Which of the following BEST describes the purpose of a capital budget in healthcare?