ANM Financial Management and Budgeting 4 — Questions and Answers
Question 1: A nurse manager is preparing the annual operating budget. Which of the following should be considered FIRST?
- Last year's actual expenditures and current year variances
- The capital budget requests from the unit
- The organization's strategic plan and anticipated patient volumes (Correct answer)
- Salary increases scheduled for next fiscal year
Correct answer: The organization's strategic plan and anticipated patient volumes
The operating budget should align with the organization's strategic priorities and projected patient volumes before examining historical spending.
Question 2: Which of the following is a PRIMARY advantage of zero-based budgeting for a nursing unit?
- It requires less time to prepare than traditional budgeting
- It assumes all prior budget lines are valid and carries them forward
- Every expense must be justified, eliminating outdated or unnecessary costs (Correct answer)
- It focuses exclusively on capital expenditures
Correct answer: Every expense must be justified, eliminating outdated or unnecessary costs
Zero-based budgeting requires each line item to be justified from scratch each cycle, promoting elimination of low-value expenditures.
Question 3: A hospital's payer mix has shifted to a higher proportion of Medicaid patients. The ANM should anticipate this will most likely:
- Increase net revenue per case
- Decrease net revenue due to lower Medicaid reimbursement rates (Correct answer)
- Have no impact on unit-level budgeting
- Increase capital budget allocations
Correct answer: Decrease net revenue due to lower Medicaid reimbursement rates
Medicaid typically reimburses at lower rates than commercial insurers, so a shift toward more Medicaid patients reduces net revenue per case.
Question 4: The ANM is asked to reduce supply expenses by 10% without compromising patient safety. The BEST approach is to:
- Eliminate all discretionary supply orders immediately
- Conduct a utilization review to identify waste and standardize products (Correct answer)
- Reduce supply par levels across all categories equally
- Defer supply ordering until the end of the fiscal year
Correct answer: Conduct a utilization review to identify waste and standardize products
Utilization review identifies where supplies are overused or wasted and allows targeted reductions while maintaining care quality.
Question 5: In healthcare financial management, contribution margin is calculated as:
- Total revenue minus total expenses
- Net revenue minus variable costs (Correct answer)
- Fixed costs minus variable costs
- Gross revenue minus capital expenditures
Correct answer: Net revenue minus variable costs
Contribution margin represents the revenue remaining after variable costs are subtracted, available to cover fixed costs and contribute to profit.
Question 6: A nurse manager receives a monthly financial report showing that hours per patient day (HPPD) is consistently higher than budget. This most likely indicates:
- Patient acuity is lower than planned
- Revenue is exceeding projections
- Staffing levels are higher relative to census than budgeted (Correct answer)
- Supply costs are the primary budget driver
Correct answer: Staffing levels are higher relative to census than budgeted
Higher than budgeted HPPD means more nursing hours are being used per patient day, suggesting overstaffing relative to volume or acuity adjustments not reflected in the budget.
Question 7: Which of the following BEST describes a rolling budget?
- A budget based on prior year actuals with a fixed percentage increase
- A continuously updated budget that adds a new period as the current period closes (Correct answer)
- A budget that must be fully approved by the board each quarter
- A zero-based budget reviewed annually
Correct answer: A continuously updated budget that adds a new period as the current period closes
A rolling (or continuous) budget extends the planning horizon by adding a new future period each time a current period ends, keeping planning current.
ANM Financial Management and Budgeting 4
A nurse manager is preparing the annual operating budget.
Which of the following should be considered FIRST?