Financial Management of Health Care Organizations

WILLIAM N. ZELMAN is a professor emeritus in the Department of Health Policy and Administration at the University of North Carolina at Chapel Hill. MICHAEL J. MCCUE is a professor in the Department of Health Administration at Virginia Commonwealth University. NOAH D. GLICK is currently an independent health care consultant in physician practice operations. MARCI S. THOMAS is a clinical associate professor in the Department of Health Policy and Administration in the School of Public Health at the University of North Carolina, Chapel Hill.

• Preface xiiiAcknowledgments xixThe Authors xxiChapter 1 The Context of Health Care Financial Management 1Changing Methods of Health Care Financing and Delivery 3Addressing the High Cost of Care 9Value‐Based Payment Mechanisms 19Summary 22Key Terms 23Review Questions 23Notes 24Chapter 2 Health Care Financial Statements 25The Balance Sheet 27The Statement of Operations 49The Statement of Changes in Net Assets 64The Statement of Cash Flows 66Summary 71Key Terms 73Key Equations   73Review Questions and Problems 74Appendix A: Financial Statements for Sample Not‐for‐Profit and For‐Profit Hospitals, and Notes to Financial Statements 84Note 99Chapter 3 Principles and Practices of Health Care Accounting 101The Books 101An Example of the Effects of Cash Flows on Profit Reporting under Cash and Accrual Accounting 106Recording Transactions 108Developing the Financial Statements 118Summary 125Key Terms 126Review Questions and Problems 126Chapter 4 Financial Statement Analysis 137Horizontal Analysis 138Trend Analysis 144Vertical (Common‐Size) Analysis 144Ratio Analysis   146Liquidity Ratios   152Revenue, Expense, and Profitability Ratios 161Activity Ratios 169Capital Structure Ratios 175Summary 183Key Equations   186Key Terms 187Review Questions and Problems 187Chapter 5 Working Capital Management 209Working Capital Cycle 209Working Capital Management Strategies 211Cash Management 215Sources of Temporary Cash 216Revenue Cycle Management 221Collecting Cash Payments 225Investing Cash on a Short‐Term Basis 228Forecasting Cash Surpluses and Deficits: The Cash Budget 230Accounts Receivable Management 233Methods to Monitor Revenue Cycle Performance 237Fraud and Abuse 239Summary 243Key Terms 246Key Equations   246Review Questions and Problems 246Notes 257Chapter 6 The Time Value of Money 259Future Value of a Dollar Invested Today 260Present Value of an Amount to Be Received in the Future 267Future and Present Values of Annuities 270Future and Present Value Calculations and Excel Functions for Special Situations 276Summary 284Key Terms 285Key Equations   286Review Questions and Problems 287Appendix B: Future and Present Value Tables 292Note 301Chapter 7 The Investment Decision 303Objectives of Capital Investment Analysis 304Analytical Methods 307Using an NPV Analysis for a Replacement Decision 321Summary 326Key Terms 328Key Equation   328Review Questions and Problems 328Appendix C: Technical Concerns in Calculating Net Present Value 336Appendix D: Adjustments for Net Working Capital 342Appendix E: Tax Implications for For‐Profit Entities in a Capital Budgeting Decision and the Adjustment for Interest Expense 345Appendix F: Comprehensive Capital Budgeting Replacement Cost Example 349Chapter 8 Capital Financing for Health Care Providers 361Equity Financing 364Debt Financing 365Bond Issuance Process 377Lease Financing 389Summary 396Key Terms 397Key Equations 398Review Questions and Problems 398Appendix G: Bond Valuation, Loan Amortization, and Debt Borrowing Capacity 402Notes 411Chapter 9 Using Cost Information to Make Special Decisions 413Break‐Even Analysis 414Product Margin 437Applying the Product Margin Paradigm to Making Special Decisions 441Summary 448Key Terms 449Key Equations   450Review Questions and Problems 450Appendix H: Break‐Even Analysis for Practice Acquisition 461Chapter 10 Budgeting 467The Planning‐and‐Control Cycle 467Organizational Approaches to Budgeting 472Types of Budgets 483Monitoring Variances to Budget 490Group Purchasing Organizations 492Summary 494Key Terms 496Key Equation 497Review Questions and Problems 497Appendix I: An Extended Example of How to Develop a Budget 499Chapter 11 Responsibility Accounting 523Decentralization   523Types of Responsibility Centers 526Measuring the Performance of Responsibility Centers 531Budget Variances 533Summary 545Key Terms 547Key Equations   548Review Questions and Problems 548Chapter 12 Provider Cost‐Finding Methods 553Cost‐to‐Charge Ratio 553Step‐Down Method 554Activity‐Based Costing   561Summary 573Key Terms 573Review Questions and Problems 574Chapter 13 Provider Payment Systems 579Evolution of the Payment System 583Risk Sharing and the Principles of Insurance 607Evolving Issues 612Technology 614Summary 616Key Terms 616Review Questions and Problems 617Appendix J: Cost‐Based Payment Systems 619Notes 624Glossary 627Useful Websites 653Index 657