Healthcare Finance : An Introduction to Accounting and Financial Management

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  • Edition: 4th
  • Format: Hardcover
  • Copyright: 2007-11-23
  • Publisher: Health Administration Pr
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Table of Contents

Prefacep. xiii
The Healthcare Environment
Introduction to Healthcare Financep. 3
Defining Healthcare Financep. 3
Purpose of the Bookp. 5
The Role of Finance in Health Services Organizationsp. 6
The Structure of the Finance Departmentp. 8
Health Services Settingsp. 9
Regulatory and Legal Issuesp. 15
Current Challengesp. 17
Organization of the Bookp. 17
How to use this Bookp. 19
The Financial Environmentp. 25
Alternative Forms of Ownershipp. 30
Organization Goalsp. 34
Tax Lawsp. 36
Third-Party Payersp. 38
Managed Care Plansp. 42
Alternative Reimbursement Methodsp. 44
Financial Accounting
Financial Accounting Basics and the Income Statementp. 59
Historical Foundations of Financial Accountingp. 60
The Users of Financial Accounting Informationp. 61
Regulation and Standards in Financial Accountingp. 62
Basic Concepts of Financial Accountingp. 65
Accounting Methods: Cash Versus Accrualp. 68
Recording and Compiling Accounting Datap. 71
Income Statement Basicsp. 74
Revenuesp. 75
Expensesp. 79
Net Incomep. 82
Net Income Versus Cash Flowp. 84
Income Statements of Investor-Owned Firmsp. 85
A Look Ahead: Using Income Statement Data in Financial Statement Analysisp. 86
The Balance Sheet and Statement of Cash Flowsp. 93
Balance Sheet Basicsp. 94
Assetsp. 96
Liabilitiesp. 102
Equityp. 104
Fund Accountingp. 108
The Statement of Cash Flowsp. 108
Transactionsp. 112
Another Look Ahead: Using Balance Sheet Data in Financial Statement Analysisp. 117
Managerial Accounting
Managerial Accounting Basics, Cost Behavior, and Profit Analysisp. 127
The Basics of Managerial Accountingp. 127
Cost Classifications: Fixed and Variablep. 129
Cost Behaviorp. 130
Cost Classifications: Semi Fixedp. 133
Profit (CVP) Analysisp. 134
Breakeven Analysisp. 139
Operating Leveragep. 142
Profit Analysis in a Discounted Fee-for-Service Environmentp. 144
Profit Analysis in a Capitated Environmentp. 149
The Impact of Cost Structure on Financial Riskp. 156
Cost Allocationp. 163
Direct Versus Indirect (Overhead) Costsp. 163
Introduction to Cost Allocationp. 164
Cost Allocation Basicsp. 165
Cost Allocation Methodsp. 169
Direct Method Illustrationp. 171
Changing to a Better Cost Driverp. 177
Step-Down Method Illustrationp. 180
Activity-Based Costingp. 182
Final Thoughts on Cost Allocationp. 186
Pricing and Service Decisionsp. 193
Healthcare Providers and the Power to Set Pricesp. 194
Price Setting Strategicsp. 195
Target Costingp. 197
Setting Prices on Individual Servicesp. 198
Setting Prices Under Capitationp. 199
Setting Managed Care Plan Premium Ratedp. 207
Using Relative Value Unites (RVUs) to Set Pricesp. 212
Making Service Decisions (Contract Analysis)p. 214
Planning and Budgetingp. 225
The Planning Processp. 226
Operational Planningp. 229
Introduction to Budgetingp. 231
Budget Typesp. 232
Budget Decisionsp. 235
Constructing a Simple Operating Budgetp. 237
Variance Analysisp. 240
The Cash Budgetp. 248
Basic Financial Management Concepts
Time Value Analysisp. 263
Time Linesp. 264
Future Value of a Lump Sum (Compounding)p. 265
Present Value of a Lump Sum (Discounting)p. 270
Opportunity Costsp. 273
Solving for Interest Rate and Timep. 275
Annuitiesp. 277
Perpetuitiesp. 282
Uneven Cash Flow Streamsp. 283
Using Time Value Analysis to Measure Return on Investment (ROI)p. 286
Semiannual and Other Compounding Periodsp. 290
Amortized Loansp. 294
Financial Risk and Required Returnp. 301
The Many Faces of Financial Riskp. 302
Introduction to Financial Riskp. 303
Risk Aversionp. 305
Probability Distributionsp. 305
Expected and Realized Rated of Returnp. 307
Stand-Alone Riskp. 308
Portfolio Risk and Returnp. 311
Measuring the Risk of Investments Held in Portfoliosp. 319
Portfolio Betasp. 325
Relevance of the Risk Measuresp. 326
Interpretation of the Risk Measuresp. 327
The Relationship Between Risk and Required Returnp. 328
Long-Tern Financing
Long-Term Debt Financingp. 341
The Cost of Moneyp. 341
Common Long-Term Debt Instrumentsp. 343
Debt contractsp. 348
Bond Ratingsp. 350
Credit Enhancementp. 352
Interest Rate Componentsp. 352
The Term Structure of Interest Ratesp. 356
Economic Factors That Influence Interest Rate Levelsp. 358
Debt Valuationp. 359
Equity Financingp. 379
Equity in For-Profit Businessp. 379
Types of Common Stockp. 383
Procedures for Selling New Common Stockp. 383
The Market for Common Stockp. 386
Regulation of Securities Markersp. 387
The Investment Banking Processp. 389
Equity in Not-for-Profit Businessp. 391
Common Stock Valuationp. 393
Security Market Equilibriump. 400
Informational Efficiencyp. 401
The Risk/Return Trade-Offp. 404
Capital Structure and the Cost of Capitalp. 411
Capital Structure Basicsp. 411
Impact of Debt Financing on Accounting Risk and Returnp. 412
Capital Structure Theoryp. 415
Identifying the Optimal Capital Structure in Practicep. 418
Not-for-Profit Businessesp. 420
Cost of Capital Basicsp. 422
Cost of Debt Capitalp. 423
Cost of Equity Capitalp. 425
The Corporate Cost of Capitalp. 434
Cost of Capital Estimation for Small Businessesp. 436
An Economic Interpretation of the Corporate Cost of Capitalp. 439
Capital Investment Decisions
The Basics of Capital Budgetingp. 451
Project Classificationp. 452
The Role of Financial Analysis in Healthcare Capital Budgetingp. 453
Overview of Capital Budgeting Financial Analysisp. 454
Cash Flow Estimationp. 454
Cash Flow Estimation Examplep. 461
Breakeven Analysisp. 468
Return on Investment (Profitability) Analysisp. 469
Some Final Thoughts on Breakeven and Profitability Analysesp. 475
Capital Budgeting in Not-for-Profit Businessesp. 475
The Post-Auditp. 478
Using Capital Budgeting Techniques in Other Contextsp. 479
Project Risk Assessment and Incorporationp. 491
Types of Project Riskp. 492
Relationships Among Stand-Alone, Corporate, and Market Riskp. 493
Risk Analysis Illustrationp. 494
Sensitivity Analysisp. 496
Scenario Analysisp. 499
Qualitative Risk Assessmentp. 502
Incorporating Risk into the Decision Processp. 503
Marking the Final Decisionp. 506
Adjusting Cash Outflows for Riskp. 507
Divisional Costs of Capitalp. 509
An Overview of the Capital Budgeting Decision Processp. 510
Capital Rationingp. 512
Other Topics
Current Asset Management and Financingp. 523
An Overview of Short-Tern Financial Managementp. 523
Current Asset Investment and Financing Policiesp. 525
Cash Managementp. 530
Marketable Securities Managementp. 534
Long-Tern Securities Managementp. 535
Receivables Managementp. 536
Supply Chain Managementp. 541
Short-Term Financingp. 544
Financial Condition Analysisp. 561
Financial Statementsp. 562
Financial Ratio Analysisp. 565
Tying the Financial Ratios Together: Du Pont Analysisp. 577
Other Analytical Techniquesp. 579
Operating Indicator Analysisp. 580
Limitations of Financial Ratio and Operating Indicator Analysisp. 583
Economic Value Added (EVA)p. 584
Benchmarkingp. 585
Key Performance Indicators and Dashboardsp. 586
Lease Financing and Business Valuationp. 597
Leasing Basicsp. 597
Tax Effectsp. 599
Financial Statement Effectsp. 601
Lease Evaluationp. 603
Motivations for Leasingp. 611
Business Valuationp. 615
Glossaryp. 627
Indexp. 647
About the Authorp. 659
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