HAC Healthcare Accounting Financial Reporting & Analysis 2 — Questions and Answers
Question 1: Under ASC 954, which financial statement is unique to not-for-profit healthcare entities compared to for-profit hospitals?
- Statement of cash flows
- Statement of changes in net assets (Correct answer)
- Income statement
- Balance sheet
Correct answer: Statement of changes in net assets
Not-for-profit healthcare entities present a statement of changes in net assets, classifying net assets as with or without donor restrictions per ASC 954.
Question 2: A hospital's days in accounts receivable is calculated as:
- Net patient revenue / Average accounts receivable
- Average accounts receivable / (Net patient revenue / 365) (Correct answer)
- Gross charges / 365
- Net patient revenue x 365 / Total assets
Correct answer: Average accounts receivable / (Net patient revenue / 365)
Days in accounts receivable equals average net accounts receivable divided by average daily net patient revenue (net patient revenue divided by 365).
Question 3: Which Medicare cost report form do hospitals use to report cost and charge data to CMS annually?
- Form CMS-2552 (Correct answer)
- Form CMS-1450
- Form UB-04
- Form CMS-855A
Correct answer: Form CMS-2552
Form CMS-2552 (the Hospital Cost Report) is the annual Medicare cost report hospitals submit to their Medicare Administrative Contractor.
Question 4: In healthcare financial reporting, 'contractual adjustments' represent:
- Bad debt write-offs for uninsured patients
- The difference between gross charges and amounts agreed upon with payers (Correct answer)
- Government penalties for billing errors
- Discounts given to hospital employees
Correct answer: The difference between gross charges and amounts agreed upon with payers
Contractual adjustments are the difference between a hospital's gross charges and the negotiated or mandated rates accepted from payers such as Medicare, Medicaid, and commercial insurers.
Question 5: A healthcare organization's operating margin is best defined as:
- Net income / Total revenue
- Operating income / Total operating revenue (Correct answer)
- EBITDA / Net patient revenue
- Net patient revenue / Total assets
Correct answer: Operating income / Total operating revenue
Operating margin equals operating income divided by total operating revenue, measuring core operational profitability excluding non-operating items.
Question 6: Under GASB 34, a governmental hospital must present which primary financial statements?
- Statement of net position, statement of revenues/expenses/changes in net position, and cash flow statement (Correct answer)
- Balance sheet, income statement, and statement of changes in equity
- Fund financial statements only
- Statement of activities and statement of financial position
Correct answer: Statement of net position, statement of revenues/expenses/changes in net position, and cash flow statement
Governmental hospitals following GASB 34 present a statement of net position, a statement of revenues, expenses, and changes in net position, and a statement of cash flows.
Question 7: Which ratio measures a hospital's ability to cover its long-term debt obligations from operations?
- Current ratio
- Debt service coverage ratio (Correct answer)
- Days cash on hand
- Return on equity
Correct answer: Debt service coverage ratio
Debt service coverage ratio equals income available for debt service (operating income plus depreciation and amortization) divided by annual debt service requirements.
HAC Healthcare Accounting Financial Reporting & Analysis 2
Under ASC 954, which financial statement is unique to not-for-profit healthcare entities compared to for-profit hospitals?