Download Regulatory and Laws - examprofessional.com

NURSING HOME ADMINISTRATOR LICENSURE
EXAM REVIEW C
COURSE
◘ MODULE 6
National Exam
Form B
Financial
 Speed Reader
Examination 1
Examination 2
Examination 3
Stan Mucinic, LNHA
`
Financial
.
Copyright © 2005-2012 by Stan Mucinic.
All rights reserved
1 of 34
Legal Notices
Students enrolled in the “National Nursing Home Administrator Licensing Course” are purchasing the
professional knowledge of the instructor to assist the student to prepare for the national licensure
exam administered by the National Association of Boards of Examiners (NAB).
This is a 5-week intensive independent study program designed to provide students a unique
personalized and structured learning environment where progress is monitored by the instructor
through email to help students maintain focus and complete scheduled assignments timely.
THE INSTRUCTOR MAKES NO EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION OF
ANY KIND THAT COMPLETION OF THIS OR ANY LICENSURE PREPARATION COURSE
OFFERED BY INSTRUCTOR WILL GUARANTEE A PASSING SCORE ON ANY LICENSING
EXAM.
An individual’s ultimate success in passing the licensure exam is dependent on an individual’s
professional experience, academic preparation, and the time and energy the individual can commit to
exam study and preparation. A student’s work schedule or other commitments may require more time
to prepare for an exam than allotted. The student is solely responsible for licensing exam
registration/testing and retesting fees.
HOW TO USE THE STUDY GUIDES
Step 1 – VERY IMPORTANT - The personalized test organizer that comes with the program is the key to your
success and sets this program apart from any other. It is critical you follow the instructions and score each
exam, and file the completed exams into your binder. Try to keep to the schedule and email your test results to
the instructor to stay focused.
Step 2. - Speed Reader – Read the speed reader for each module once or twice before taking the module
exam(s). Read the speed reader over and over again until you familiarize yourself with its contents. THE MORE
TIMES YOU LOOK IT THE MORE LIKELY YOU ARE TO REMEMBER IT.
Step 3 – Exam Packet - The exam packet contains questions designed to measure your comprehension and
retention of the material you read. Take each exam over and over again until you score 100%. Make sure you
score each exam and record the results in your organizer or you will not be able to gauge your progress.
The exam questions are cross referenced to the speed reader to allow you to quickly find and review material
you missed on the exam as follows:
Page Number
2/1.8(13)
Section number
Thus, the specific material would be found on page 2 of the speed reader, section 1.8, subparagraph 13.
Contact Information
Email Stan Mucinic at [email protected] with any questions and after you score each practice exam
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
2 of 34
Financial
SECTION 1 – CRITICAL FINANCIAL CONCEPTS
Section 1.1 - Facts and Myths about the Exam
1. This module is the most difficult for 99% of all students preparing for the national exam
2. Students experience tremendous anxiety in dealing with financial concepts because they have had so little
experience in the day to day financial management of a skilled nursing facility and these concepts seem so abstract
that they cannot or subconsciously will not master them
3. It is my experience that when encountering a financial question, their brain processes literally freeze up and
shutdown.
4. Here are some truths about the exam that will hopefully reduce your anxiety




You will actually be given very few math questions on the exam
Any questions you will be given will be very basic and easy to solve. You are not allowed to use a
calculator so most questions can be solved by just looking at them
These financial concepts are as easy as 1-2-3
These concepts are so critical to your success as the CEO of your multi-million dollar company and it is
very important that you understand the financial process including the profit and loss statement,
calculating labor hours and calculating PPDs (Per Person Per Day Costs) for food and supplies. You
also need to understand the concept of a financial control process and communicating to department
heads and staff your financial goals and how to track and record expenditures.
Section 1.2 Financial Management Systems in a Nursing Home
Here are some basic truths about financial management system in a nursing home:
1. The process is pretty much the same in every company
2. Your corporate officers or governing body prepares your budget and income and expense targets
3. Your main job is to know what those financial targets are and to keep your facility on target and monitor your
status on a daily basis
4. Your main responsibility is to keep your labor costs and controllable expenses like supplies and capital
expenditures within target
Section 1.3 The Spend Down Sheet, Profit and Loss Statement, General Ledger
1. The critical tools that you use everyday to track and control expenses is the spend down sheet, profit and
loss statement and the general ledger You never actually see or use the balance sheet.
2. A spend down sheet is similar to a check register. You give each department head a set amount of
money to put into their checking account and as they spend money or spend down they record those
amounts on their spend down sheet and subtract the amounts from their beginning balance which is what
they have left. You need to review their spend down sheets with them at least weekly. They always run out
of money at the end of the month You must track your PPD or cost Per Person per Day
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
3 of 34
SAMPLE SPEND DOWN SHEET
Date
6-1-12
6-2-12
6-5-12
VENDOR
RAW FOOD – DIETARY
INVOICE AMOUNT
Opening Bal.
SYSCO
SYSCO
$2000,00
$1000.00
JUNE 2012
GL CODE
ENDING BAL
20098-09
20098-11
$12,000.00
$10,000.00
$ 9,000,00
3. If census drops then you have to adjust your spending accordingly until census increases (cut back 10% or
$1200)
4. The most important tool you will use to manage your facility operations is your profit and loss statement.
5. Your profit and loss statement or income statement is essentially your operating budget. An
operating budget details your income and expenses. If your spend down sheet is your check register then
your profit and loss statement is your monthly checking account statement.
6. Your budget is essentially your business plan and your budget must be checked constantly to compare
operating results with planned results. You review you profit and loss statement with your executive
managers monthly.
7. The profit and loss statement is produced at the end of each month and is a detail of your financial
performance for a given month
SAMPLE - Profit and loss statement
June 1-30 2012
GL Code
Revenues
700
800
900
Category
Rehab
Med A
Med B
Medicaid
Insurance
Totals
Expenses
100
200
300
400
Nursing Supplies
Payroll
Maintenance Supplies
Raw Food
TOTALS
Net Profit/Loss
Budget
Actual
Variance
260,000.00
40,000.00
160,000.00
50,000.00
$510,000.00
280,000.00
46,000.00
156,000.00
52,000.00
$534,000.00
20,000.00
$6,000.00
( 4,000.00)
$2,000.00
$24,000.00
$5,000.00
300,000.00
6,000.00
12,000.00
$323,000.00
$4,975.00
390,700.00
2,900.00
1,1000.00
$399,675.00
$134,325.00
$25.00
(90,700.00)
3100.00
10,900.00
($76,675)
PPD
.10
1.20
1.10
.90
1.23
8. The profit and loss statement or income statement only summarizes operating results. There are no
vendors or account codes or invoices listed on this document. The only information it gives you is the results
of all operations (revenues and expenses) (profit or loss) for the month of June.
9. There is nothing in the P&L concerning assets, liabilities or capital (investor equity or net worth)
10. The only information on the P&L is revenue and expenses. THAT IS IT! It only shows if income earned was
sufficient to pay for your bills in June or a specific period of time.
11. Negative numbers on a Profit and Loss statement are shown in parentheses (i.e. ($90,000) shows a loss).
12. The administrator for this facility made $134,325 in profit for the month. If that number was a loss, then the
facility would have to find another way to pay its bills for that month. In that case, they would look at another
financial statement called the Balance Sheet.
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
4 of 34
13. The balance sheet looks like this:
Balance Sheet
Jan 1 – Dec 31 2012
Assets
Building/Plant
Vehicles
Cash
Stocks and Bonds
Accounts Receivables
Inventory on Hand
Total
$1,200,000,00
100,000.00
120,000.00
200,000.00
300,000.00
200,000.00
$2,120,000.00
Accounts Payables
Mortgage
Bond payments
Bad debt
Credit line
Taxes
Total
$100,000.00
400,000.00
100,000.00
100,000.00
300,000.00
100,000.00
$1,100,000,00
Liabilities
Capital
Investor Equity
$1,020,000.00
Net Worth
$1,120,000.00
16. The balance sheet only summarizes the assets, liabilities and capital. There is no detailed information on the
balance sheet. There are no vendor names, or invoices or expenses or revenues.
17. The balance sheet only shows assets (what you own), liabilities (what you owe) and capital (investor equity)
and that is all. Again revenues and expenses do not appear on the balance sheet.
18. Going back to the example before, if you had lost money in June , then you would look at the balance sheet to
see you could sell to make up the difference (working capital).
20. Most likely you will not see your facility balance sheet. It is updated quarterly but your CFO
and accountants handle your cash flow and schedule payment of your bills. You will however see the debt
expense and interest expense for the revolving credit line on your Profit and Loss statement because you still
need to pay the interest expense. The line of credit keeps your operations going when you do not earn enough
money to pay your bills in a given month. Just like you would use your persona credit card if you ran out of
money
21. As we discussed before, the profit and loss statement and the balance sheet are financial statements and only
summarize the transactions recorded in the journals and the general ledger.
22. One reason why the financial statements contain summarized information is that these documents are
provided to your investors. They do not want to see the details of the thousands or millions of individual
transactions that are summarized in the financial statements. They just want to see the bottom line.
23. However that does not mean that you do not need to review each and every transaction in your facility.
24. As a matter of fact you need to personally sign and approve every invoice before it will be processed for
payment by your accounting department.
25 You will not deal with the journals that much. You have access to the journals through your accounting
system and can call up and review every transaction that has been processed by your central accounting
office.
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
5 of 34
26. Essentially, this is what the journals look like:
Journal January 2012
Date
1-1-12
1-12-12
1-23-12
1-30-12
1-31-12
1-31-12
Vendor
Home depot
Lowes
Sysco
Office Depot
Acme Supplies
Sysco
Amount
$1,200.00
$23.00.00
$2,300.00
$348.00
$1230.00
$2300.00
27. In the illustration above, the journals are the books of original entry. Financial transactions are
simply recorded by date – the date of the invoice or the check if monies were received
28. In reality, there is a separate journal for each type of transaction – payroll journal, cash receipts journals, cash
disbursement journal, general journal, accounts receivables journal, etc.
29. As administrators we do not refer to the journals because it is too hard to find anything because the
transactions are organized by date.
30 It is the general ledger we use the most. At some point the bookkeepers will post or transfer the transactions in
the journals and re-organize them by GL code or by vendor and at this is a much more user friendly document.
31. The general ledger looks like this:
General Ledger
GL Code
100
1-12-12
1-15-12
1-17-12
1-20-12
1-22-12
1-23-12
200
1-1-12
1-3-12
1-5-12
1-12-12
Nursing supplies
Acme supplies
Acme supplies
Acme sup plies
Hill Rom
Hill Rom
Hill Rom
Total
Raw Food
Sysco
Sysco
Dairy Rite
Sunshine Bakery
Debit
$300
$150
$200
$1200
$2200
$3100
7,150.00
Debit
$1000.00
3000.00
150.00
150.00
$4,300.00
Credit
($300)
($150)
($200)
(1200)
($2200)
($3100)
7,150.00
Credit
(1000.00)
(3000.00)
(150.00)
(150.00)
(4,300.00)
32. The general ledger is a document you will use often.
33. The general ledger summarizes the debits and credits in the journals and reflects every invoice processed.
34. With the profit and loss statement and the general ledger you can price together all financial activity in a
given month.
34. The general ledger is where you would look to see how an invoice was coded, the amount of the invoice and
when it was processed and paid.
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
6 of 34
35 An important tool you have to help you code invoices is the Chart of Accounts which looks like this:
Chart of Accounts
GL CODE
100
200
300
400
500
600
Expense
Nursing Supplies
Raw Food
Maintenance Supplies
Payroll
Office supplies
Pharmacy
36. It would be very hard to find anything in the General Ledger without the Chart of Accounts
37 Month End Close – A few days before the end of the month the business office switches into hyperdrive
as they rush to get all invoices coded and processed and sent to the corporate office. All checks received
during the month are deposited into the bank, All rehab billing must be put into the accounting system. The
accounts receivables clerk must send out all bills for payment before month end close.
38 The business manager needs to get the General ledger accounts to balance and once that happens, the
books are closed. This is a very tension filled and difficult time. That means when the general ledger
balances and the books are closed, no more monies received or paid out will be reflected in the current
month’s profit and loss. When the books are closed all financial results are final.
The accountants will generate a very preliminary profit and loss statement (this reflects your actual
results after all the numbers are crunched in the system) which will contain many errors and you will be
provided a copy which you need to carefully pore over and make sure all of the information is correct.
(This is called scrubbing the financials. The bookkeeping clerks and the accountants make small
mistakes and they make big mistakes, and you are ultimately responsible to ensure your financial
results are accurate. It could mean your job if you do not understand this simple fact.
VERY IMPORTANT!!!!
38. PRO FORMA FINANCIALS - The time just before you get your preliminary financials is a very stressful
time for the administrator. Especially if you are struggling with your census. As soon as you get your
Prelim P&L you turn to the last page to see whether or not you made a profit. .
39. Whether you made a profit or not, you need to carefully check your pro forma financials. Again, the
accountants and bookkeepers make mistakes and you could have missing invoices not reflected on the
P&L, There may be invoices from future months on this month’s P&L, A $3.00 invoice may be transposed
to $300 or $3000, Expenses are miscoded, or your accountant may make assumptions or projection in the
absence of specific information that are just flat out wrong.
40. The bookkeeping clerks enter the information into the journals and the general ledger. You need to have a
telephone conference with your accountant and ask lots of questions. I have seen it all and your
performance is based on your financial results and you live and die by your P&L. Learn it. Know it. Keep it
accurate and keep it clean.
41. You need to compare all of your spend down sheets with the general ledger and check that all invoices for
the month were approved and processed for payment. If there are any missing invoices you need to alert
your accountant to accrue the expense (accrual log) and put aside money from this month’s revenues to
pay for those invoices in future months. That is the accrual system. That is your main job.
42. If after you have done your review and you determine you lost money then you can expect a drill down
review with your Chief financial officer, CEO and regional vice president. You will need to explain any
variance and prepare a plan of correction to correct the situation and prevent any future losses.
43. It is critical that you know how to handle yourself during these calls.
44. My advice to you is to BE PREPARED.
45. But most of all, if you are asked a question you do not know the answer to, then say that you need to
research that question and you will get back to them. And follow up and get them the information.
46. Most importantly, know your budget targets, identify your variances and do your homework. If you are not
able to handle yourself during these calls, your career will be short lived.
47. I cannot emphasize that enough. This is not rocket science. The profit and loss statement and general
ledger are not complicated financial documents.
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
7 of 34
48. But you need to know how to read them and use them.
49. YOUR ARE THE CHIEF FINANCIAL OFFICER FOR YOUR FACILITY AND RESPONSIBLE FOR
MILLIONS OF DOLLARS. YOU NEED TO UNDERSTAND THESE CONCEPTS
50. You will not find this information anywhere else. So please review this section very carefully and ask
questions if you do not understand this.
51. Here are some very specific examples of common areas that always go off track:
1. Labor hours over Budget – Your staffing coordinator is not staffing properly and at proper levels
and staff is burning through overtime because of frequent call offs or poor planning. Check your
labor reports everyday and make sure that the time clock records are correct and staff is taking
their lunch breaks and do not use agency if you do not have to. For your financial conference call,
you need to identify the problem and have a plan on how you will bring spending in line next month.
Identify who is calling off, write them up and terminate them, but control of your budget. Reduce or
eliminate agency nurses if possible.
2. Raw Food over budget – Give your dietary manager their budget at the beginning of the month and
reduce the allowable budget by 10 percent and hold that amount in reserve to keep them from
going over budget. Break up the remaining amount $10,800 into 4 weekly amounts which is
approximately $3000 each week. Tell your dietary manager that they must get your written
authorization if they need to order more than $3000 a week in food. This ensures that have
enough for the last week of the month when they usually run out of money. They can always move
things around and dig into the emergency food supply to cut costs. If census drops further, cit
another 10 percent. If census holds or increases and then release the $1200 you are holding in
reserve or increase the amount above $12000 if census justifies that. For your conference call,
you need a plan to control costs and be specific if you go over budget. The same thing for dietary
labor hours. You need to adjust labor as census changes.
3. Nursing supplies – briefs, shampoo, over the counter meds - they run through these very quickly.
Need to have a process in place to monitor purchasing and staff usage. Identify losses, talk to staff
about supply levels and if there are cheaper alternatives or if residents are hoarding supplies then
deal with that issue. If the supply manager a budget with a 10 percent reserve and break up the
remainder into 4 equal amounts and adjust the purchasing amount towards the end of the month.
4. Pharmacy meds – residents on expensive IV antibiotics can bankrupt you, but using brand name
drugs instead of generics can cost you thousands of dollars. Have someone charged with looking
at your pharmacy bill each month and identify cost savings. Also, you return meds to the pharmacy
that are not used and are entitled to a credit. Make sure those credits are processed and you get
them. You should be costing out meds for each referral that you get and know how much their
medication will cost and what their individual insurance plan will cover. Work closely with the
attending physicians to arrange for standing orders to use certain generics over brand name drugs,
5. Equipment rentals – every time you rent a bed or a wheel chair, these amounts add up and can
take thousands of dollars off your bottom line. Make sure you actually have the equipment, if you
do and still need it, and look to buy the bed or wheel chair from your capital budget instead of
endlessly renting equipment. Much sure equipment is returned after the resident no longer needs it
or has been discharged. An expensive hospital bed can cost hundreds of dollars each month
these rentals need to be tracked closely each month and accounted for..
This is what you spend on average each month in a 120 bed facility
Controllable Expenses
Salaries/Payroll $230,000.00
Rehab (outsourced) $40,000
Pharmacy bill $25,000
Food $15,000 (average $5 per resident per day)
Maintenance costs $6,000
Nursing Supplies $7,000
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
8 of 34
Non-controllable expenses
Mortgage $30,000
Management fees $35,000
Insurance Premiums $30,000
Taxes $30,0000
(Clearly labor is your single largest controllable expense)
52. In some companies, even if you made money, they may still want to review your P&L for any variances.
SECTION 1.3 - OBRA 1987 – Nursing Home Reform Act
1. The key to understanding the national exam and your purpose as a nursing home administrator is to
understand the purpose of OBRA 1987 (Nursing Home Reform Act)
2.
In the 70’s and 80’s, Congress realized there were thousands of people living in hospitals, at a huge cost to
Medicare, because they were too frail or ill to be discharged home but did not require acute care.
3. To solve the problem, Congress gave physical rehabilitation centers a financial incentive to provide these
residents custodial care at a fraction of what a hospital bed would cost.
4. These residents were still entitled to Medicare and if they became sick and required hospitalization, or skilled
care, they would be covered under Medicare Part A.
5. However, if they did not require skilled care then their long term custodial care was paid for by Title 19
Medicaid.
6. However, In its zeal to create a quick fix and immediately shift the cost of these individuals from Medicare to
Medicaid, Congress literally dumped these individuals into the nation’s 17,0000 rehab centers without much
thought as to whether these sub-acute care centers could actually provide these individuals any meaningful
quality of life. These were essentially sub-acute hospitals
7. Up to this point rehab centers were geared to providing short term therapy to residents who went home after
they met their potential. Now most residents entering a nursing home feel anxious about the unknown.
8. Not surprisingly, a study ordered by Congress in 1987 revealed that nation’s 17,000 nursing homes were found
to smell of urine and feces, were under-staffed, had high rates of pressure sores, dehydration, falls and
fractures, lacked nutritious or adequate meals, and there were no required quality control or improvement
programs
9.
As a result of the 1987 study, Congress passed OBRA 1987 (the Nursing Home Reform Act) that totally
transformed the way nursing homes were paid from the retrospective payment system to the prospective
payment system. Reimbursement has significantly decreased since 1987.
10. For most nursing home administrators, one of the most challenging regulatory requirements written into law by
OBRA 1987 was the requirement to maintain the HIGHEST PRACTICABLE PHYSICAL, MENTAL AND
PSYCHOSOCIAL WELL BEING of each resident and to provide a HOME-LIKE ENVIRONMENT that deemphasized the institutional appearance of the nursing home.
11. We struggle with this every day because we are organized as a hospital and not as an assisted living facility or
a resort hotel, nor do we receive money to provide these services.
12. To improve the overall care of long term residents, OBRA 1987 required implementation of a uniform
comprehensive resident assessment system for the first time that assesses the various dimensions of a
resident’s physical, mental and psychosocial well being that is known as the Minimum Date Set or MDS.
13. Residents must be assessed within 14 days of admission and then every quarter (every 3 months) and
receive a full comprehensive assessment annually.
14. The MDS or minimum data set is the tool used to measure the outcome and effectiveness of the care provided
by a nursing home.
15. A resident must have a comprehensive assessment within 14 days of admission and then a care plan must
be finalized within 7 days of completion of the MDS.
SECTION 1.4 – MEDICARE INSURANCE PRIMER
1.
2.
3.
Medicare is Title XVIII or Title 18 of the Social Security Act and is the chief source of revenue for a facility and
you need to understand how it works.
Medicare was enacted in 1965 to provide health insurance to the elderly who were not able to afford
adequate health care as they aged.
Anyone 65 and older who has paid into the social security system for 40 quarters or 10 years, is eligible to
enroll in Medicare. Beneficiaries pay insurance premiums and co-pays.
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
9 of 34
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
Medicare has two main insurance programs called Medicare Part A and Part B.
Medicare Part A covers skilled care or inpatient care such as a hospital or a nursing home. Skilled care
includes, IV’s, wound care, tracheotomy care, skilled rehabilitation, ventilator care.
Medicare Part B covers outpatient services such doctor’s visits, outpatient procedures, outpatient diagnostic
procedures, durable medical equipment such as walking canes, wheelchairs and supplies such as diabetic
testing kits.
Medicare also pays for home health and hospice
Congress recently added a Medicare Part D Drug program that pays for medications while the individual is
in the community or in a nursing home and not being skilled.
For inpatient nursing home care under Medicare Part A, an individual must have a qualifying 3 day stay in a
hospital. Medicare will then pay for 100 days of skilled care for any one spell of illness.
The first 20 days are co-pay free, Medicare pays 100% of charges.
From day 21 to 100, the resident must pay a 20% co-pay or about $124 a day. That amounts to over $3000
a month or nearly $8,000 if they stay the full 100 days.
The average nursing home stay for a Medicare resident is about 30 days. Usually, the Medicare resident will
leave on day 21 to avoid paying the 20% daily co-pay.
Individuals can purchase a Medicare Supplement policy that pays the 20% Medicare co-pay and these
residents are highly prized because they can afford to take full advantage of their 100 days, they stay longer
and rehab can provide the services they need and generate more revenues for those services.
As previously mentioned, a resident needs a 3-night inpatient stay in a hospital to qualify for a Medicare
Part A nursing home stay. The 3 day time period starts from the day the resident is admitted to a bed and do
not count observation time” in the emergency room.
Important to Know - If you or your admissions staff do not verify the hospital admit date, and the facility
accepts the patient, you must take them and you will not be able to bill Medicare Part A if they have
exhausted their 100 days.
You must check the hospital documentation (resident face sheet, history and physical and medication orders)
to confirm the 3-day stay. You must run a MECCA through the Medicare Database to verify insurance status
and verify all stays at any nursing home they have been in for the past 60 days..
If you accept a resident who has exhausted all 100 days, you can bill Part B to pay for therapy and the
attending physician, but it pays a lower reimbursement then Part A, and the 20% co-pay starts on day one. In
the meantime they might qualify for Medicaid if they meet financial requirements to pay for room and board.
A patient must be in the bed at midnight of that day to count in the census and to bill the individual for that
day.
The same is true of the nursing home census. A resident discharged at 11:59 pm to the hospital would not
be counted in the nursing census that day.
If they left at 12.01 AM then they would be counted on your census and you could bill Medicare, Medicaid or
other insurance for that day. Must maintain a written record of admissions and discharges that includes
resident name, date of admission and discharge and location discharged.
Medicare claims are submitted on a UB 92 and are filed with a fiduciary intermediary which is an insurance
company. The intermediary keeps any monies they can deny for payment.
You have 20 days to appeal a denial payment and request a formal administrative hearing.
A resident who met the 3 day in-patient hospital stay and is discharged from a skilled nursing facility can
return to that facility within 30 days with a 3 night in a hospital, if a physician signs an order stating the
individual needs additional skilled care.
This is important to know because sometimes a resident requests to go home before they are strong enough
and they need to know they can come back and get the care they need if they realize they left too early.
60-Day Break In Benefits
25.
26.
27.
If a patient were admitted to ABC Nursing Home for skilled therapy December 15th 2008, Medicare would
pay for inpatient care up to 100 days or until March 28, 2008
If the resident used up all 100 days, then on day 101, their Part A benefits end.
Under the Medicare Insurance Plan, they would need a 60 day break, to be eligible for another 100 days,
meaning they will need to stay out of a nursing home for 60 days and not be skilled under Part B for more
than 4 days per week.
Supplemental Security Income
28.
lf an individual has worked 40 quarters and paid into the social security system and would be eligible for
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
10 of 34
Medicare at age 65, they can apply for benefits under the Supplemental Security Income program or SSI.
They will be eligible for social security pension payments and also qualify for Medicare that will pay for
medical care. If you have a resident who is under 65 and is disabled, you need to assess them to see if they
qualify for benefits under SSI.
Costing Out Care
29.
30.
31.
32.
It is critically important to understand that Medicare pays you a daily rate or a per diem rate based on the
RUG Rate and that rate is all-inclusive. Once you accept a patient, then you must pay for all care needs
regardless of the cost. When a resident needs IV antibiotics, hyperbaric treatment, etc., these treatments
cost hundreds of dollars each day and sometimes thousands of dollars and since you are only getting paid
a set amount maybe $500 - $600 a day, you need to cost out what you will need to provide.
HMOs also pay you a daily rate based on a level (level 1, level 2 and level 3) and while they will carve out
some expensive items, such as IV antibiotics and durable medical equipment, you pay for all other costs
and the rate is usually not enough to cover expenses. Again you need to cost out their care and negotiate
at the level of payment you need based on acuity and negotiate that rate with the insurance company.
Another key way to maximize your Medicare reimbursement is participating in a utilization review
meetings where clinical staff discuss the status of each resident, including ther progress and expected
discharge date.
You need to track the RUG rate for Medicare residents.
RUG Rate
33.
34.
35.
The RUG rate (Resource Utilization Group) rate is set by the Health Care Financing Administration (HCFA)
and is determined by a number of different factors such as the number of minutes of therapy needed and
the their ADL score, as well specialized nursing services needed.
The RUG rate is not based on the MDS. It is based on the number of minutes of skilled rehab, special
nursing needed and assistance with ADLs.
The more intense the rehab required or assistance with Activities of Daily Living (ADL’s), the higher the
rate. So an Ultra High rehab rate pays considerably more than a medium Rehab Rate. As a patient
improves, their RUG rate decreases
Section 1.5 - Medicaid Primer
1.
3.
4.
5.
6.
Medicaid (Title XIX or Title 19 of the Social Security Act) is a government benefit plan that is paid for by the
state and the federal government to provide assistance to poor people in finding suitable housing and health
care. Medicaid pays for the majority of long term care in nursing homes.
2.
Unlike Medicare, which is available to anyone regardless of income, Medicaid requires that you meet income
and asset requirements to qualify. Medicaid does not pay for skilled care.
The Medicaid program has community Medicaid and institutional Medicaid. An elderly individual may live in
the community and need food stamps or a cash stipend to pay for rent and food. They must meet financial
income and asset level to qualify for benefits. Institutional Medicaid is when they reside in a nursing home.
The Centers for Medicare and Medicaid Services (CMS) administers the Medicare and Medicaid contracts.
7. An individual cannot make more than $1860 per month in pension or other income. If they go over that
amount they not qualify or if they do have Medicaid they will lose their benefits
8. An individual cannot have more than $2000 in assets and still qualify for Medicaid, which is the SSI limit.
9. Therefore you must notify a resident with a trust fund when there account reaches $1800 or $200 less than the
SSI limit.
10. If one spouse is in a nursing home and the other is home, the other spouse is allowed to keep the house and
one car.
11. The look back period for Medicaid is 5 years (the time period which Medicaid will check bank records and
other public records to see if there has been a transfer a assets).
12. Discharge begins on the day of admission because it takes 45 days to get a Medicaid application
processed and approved.
13.
If you file the application within a couple of days of admission, then it will be approved by the time they
convert over to Medicaid if needed. If the resident does not need Medicaid coverage then you have lost
nothing.
14.
If you wait until the time their insurance coverage ends to submit the Medicaid application, you will be
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
11 of 34
15.
16.
17.
18.
waiting 45 to 60 days for payment and carrying that as an accounts receivable which could be $10,000 to
$12,000 per Medicaid pending. If you have 10 Medicaid pending that is $120,000 in cash your facility does
not have.
If the Medicaid office determines that the resident had undisclosed assets that disqualified them, then you
may still get paid for the period the resident was pending, up to 3 months, under the presumption of
eligibility, which means you provided care in good faith and did not know they would not qualify, and
Medicaid will pay for 90 days going back to the date of the application. But after that, Medicaid will not pay
anything.
A resident who is over assets to qualify for Medicaid must pay down their assets before they can qualify for
benefits. This is called “spending down”.
Therefore it is critically important that you track and stay on top of your residents who are Medicaid
pending and the timely filing of the application.
You are required to submit cost reports at the end of the year to Medicaid that detail your actual revenues
and expenses for the year. The cost report is due within 90 days from December 31 of the prior year.
Your Medicaid reimbursement rate is based on your actual costs.
1.6 - Private Insurance Plans
1.
2.
3.
4.
5.
6.
7.
8.
9.
Many individuals maintain a private insurance plan that may be an HMO (health maintenance organization)
or PPO (preferred provider plan)
You must be familiar with the terms of your contract with these providers, whether they require a 3 day stay,
whether they require pre-authorization before admission to your facility, what level you will be paid which is
how much they will pay you per day, what is included in your per diem rate and what medications are not
covered.
If you do not follow the requirements of your contract, you will not get paid.
Know your contracts and renegotiate rates or higher levels if you need to.
You need to cost out what services and medications the individual requires and how much you will get paid.
The insurance companies will get paid hundreds of dollars per day by Medicare and will only pay you a couple
hundred at most and shift the cost onto you. This is managed care. If it costs more to treat the person then
you are paid then you eat the difference.
You need to make sure you collect your co-pays when required and that the patient is discharged when the
insurance company issued a last covered date.
Make sure your business office bills promptly and provides complete records needed to substantiate payment
Many individuals have served in the armed forces and may be entitled to medical care through the Veterans
Administration. This may be especially good to know if you have a resident under 65 who does not have any
other insurance but was a veteran and qualifies for benefits
SECTION 2 – PRINCPLES OF FINANCIAL MANAGEMENT
2.1 – ADMINISTRATOR’S ROLE IN FINANCIAL MANAGEMENT
1. The administrator is responsible for all financial operations of the facility per OBRA ’87:
2.2 – FINANCIAL MANAGEMENT
1. Knowledge of past performance and problems is critical to planning and budgeting
2. Financial management involves:
a)
b)
c)
d)
e)
f)
g)
Developing a budget detailing what services to provide
Identifying required staffing and resources
Identifying cash in-flows and out-flows
Identifying capital equipment purchases, replacement and repair
Identifying operating and debt expenses
Identifying insurance needs
Establishing financial controls and security to protect assets
h)
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
12 of 34
SECTION 3 - FINANCIAL TERMINOLOGY
3.1 – REVENUES AND EXPENDITURES (EXPENSES)
1. Expenditure – Money paid to suppliers and vendors
1. Revenues – Earnings from operations
2. Deductions from revenues
a) Contractual discounts – negotiated through contract with government payor sources which reduce
revenues
b) Charity care – patient cannot afford to pay bill and it is written off
c) Bad debts – resident accounts past due but subject to collection
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Operating revenues – Derived from direct resident services (nursing, rehab, drugs)
Non-operating revenue – Derived from beauty salon, gift shop)
Revenue is not income
Income is derived from subtracting revenue from expenses = income
Ancillary Revenues – Posted under operating revenues
Net Income – Income after deduction for expenses and taxes
Net Loss – The facility lost money after deducting expenses from revenues
Net operating revenues – operating revenues less taxes and expenses
Gross operating revenues – operating revenues before deductions
Gross Income – Income before deductions
Uncollectible debt and contractual discounts are deducted from gross operating revenues
3.2 – ASSETS AND LIABILITIES
1.
2.
3.
4.
5.
6.
7.
8.
Liabilities – Things owed
Assets – Things owned
Capital Cost – Interest expense on a capital asset
Current asset – An asset that will or can be turned into cash within 12 months
Non-current asset – An asset that will not be turned into cash within 12 months
Prepaid insurance is an asset
Current Liabilities – Must be paid within 12 months
Notes Payables – Loans must be repaid within 12 months
9.
Non-current liabilities – Liabilities that will not be repaid within the next 12 months
3.3 – CAPITAL
1. Capital – Money invested in a business (owner’s equity, net worth) – The amount on the balance sheet
that represents ownership
2. Owners equity – The money invested by owners
3. Shareholder’s equity – The amount invested by shareholders
4. Fund Balance – Funds invested by a charitable organization
5. Working Capital - Current assets – current liabilities
3.4 – DEBT
1. Uncollectible debt – Deduct bad debts from gross operating revenues
3.5 – MISCELLANEOUS
1.
2.
3.
4.
Contractual discount – A discount given to HMO’s through a contract (single largest deduction to income)
Audited Financials – Books and financial statements that must be audited by a certified public accountant
Break even point – Total costs equal total revenues
Negative figures - Losses on financial sheets are shown in parenthesis
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
13 of 34
SECTION 4 – ACCOUNTING/BOOKKEEPING PROCESS
4.1 - ACCOUNTING PROCESS AND SYSTEMS
1. Accounting Process – Process of keeping books and preparing financial statements and reports
2. Accounting system – A recognized system of accounting used to keep the “books” and financial records
(needs to be consistent per GAAP)
3. Accountant – A professional who prepares financial reports from the books (accountants do not do original
entries – only the bookkeeper)
4. The accounting system determines how financial records must be kept
4.2 - BOOKKEEPING PROCESS
1. Bookkeeping – The process of physically recording each and every financial transaction (revenues and
expenses)
2. Bookkeeper – The individual responsible to record each financial transaction in the books
3. The “Books” – A set of records that list each monetary transaction of a business (the various journals and
the general ledger)(documents cash flow into and out of the facility)
4. Contra Account – Enter bad debts into the contra account
5. Source Documents - Bills, receipts, bank statements and cancelled checks
SECTION 5 – JOURNALS
5.1 – JOURNALS
1. Journals are the books of original entry – each transaction is first entered into the journals by date order by
the bookkeeper.
2. The journals include billing, cash receipts, accounts receivables, accounts payables.
3. General Journal – This is where the bookkeeper records transactions that do not fit anywhere else, are
one time occurring or extend beyond a single month (i.e., depreciation and prepaid expenses) (can locate
all payments received on a specific date)
4. The bookkeeper enters each financial transaction into the journals by date order
5. There are six types of journals:
a. General journal – Enter all non repeating entries and transactions that occur over several
months into this journal including:
1. Transactions that do not properly fit in any other journals are recorded in the general
journal
2. Expenses disbursed over many months are entered into the general journal
3. Make adjustments to other journals in the general journal
4. The various journals are closed each month when the debits and credits balance in
the general ledger and the profit and loss statement is prepared
b.
c.
d.
e.
f.
Cash receipts journal – Records all cash received for services
Billings journal – Records all monies owed to facility by customers for services provided
Accounts payable journal – Records all monies owed to suppliers and others
Cash disbursements journal – Records monies actually disbursed to supplies and others
Payroll journal – Summarizes all payroll checks
5.2 – Double Entry Bookkeeping
2. Every transaction recorded in the journals must have a debit and a credit
a) Debit – left side journal
b) Credit – right side journal
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
14 of 34
SECTION 6 – GENERAL LEDGER
6.1 - GENERAL LEDGER
1. The transactions in the journals are transferred or posted to the general ledger and organized into
accounts in the order they appear in the balance sheet
2. The general ledger does the following:
i. Maintains a continuous balance in each account for the month
ii. Enables a trial balance
3. Chart of Accounts – Functions like a table of contents and lists all accounts in the general ledger in the
order they would appear in the financial statements
4. Posting – The entries in the journals are transferred to the general ledger by the bookkeeper
5. The purpose of the ledger is to add up all of the debits and credits in the journals to ensure they balance or
zero out – this is called a trial balance
6. The general ledger summarizes all credits and debits in the journals
6.2 – TRIAL BALANCE
1. When the debits and credits zero out or balance in the ledger, the “books” (or the journals) are closed at
the end of the month and the accountant prepares the profit and loss statement
2. When the books balance and the profit and loss statement is prepared, the general ledger is closed
and the accountant prepares the financial statements
3. If the ledger does not balance then there was an error in recording the transactions
SECTION 7 - FINANCIAL STATEMENTS
7.1 - PURPOSE OF FINANCIAL STATEMENTS
1. The financial statements summarize data from the thousands of transactions in the journals, the general
journal and the general ledger
2. The accountants prepare the financial statements each month after the trial balance zeros out and the
books balance
3. The accountants summarize the results of operations in a format that allows managers and investors to
glance at the reports and determine within seconds whether a company is making or losing money and to
compare that data with projected performance and performance from prior years
4. Without this summarized data, investors would have analyze the tens of thousands of transactions in the
journals and determine for themselves how well a company is performing and whether or not a company is
solvent or near bankruptcy and what an investor’s investment is worth
5. The financial statements must be audited by a certified public accountant
7.2 – THE FINANCIAL STATEMENTS
1. The financial statements consist of four financial documents that must be provided to investors
a)
b)
c)
d)
Balance Sheet
Profit and Loss Statement
Statement of changes in financial condition
Notes to financial statements
7.3 - BALANCE SHEET
1. The balance sheet details the value of a company’s assets, liabilities and the owners equity (net worth) as
of a certain date
2. Assets equal the liabilities plus capital
3. Assets are listed on the left side
4. The balance sheet summarizes the assets, liabilities and capital accounts (financial well being)
5. The accounting equation is assets = liabilities + capital
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
15 of 34
7.4 – PROFIT AND LOSS STATEMENT – (Income statement)
1. Shows whether a company made money and whether revenues were sufficient to cover expenses
2. The profit and loss statement contains revenues and expenses. THERE ARE NO ASSETS, LIABILITES
AND CAPITAL ON THE PROFIT AND LOSS STATEMENT
3. Likewise, you will never find revenues and expenses on the balance sheet
7.5 - STATEMENT OF CHANGES IN FINANCIAL CONDITION
3. Explains how working capital was used and any increases or decreases in capital that occurred between two
accounting periods or balance sheets
7.6 - NOTES TO FINANCIAL CONDITIONS
1. The accountants who prepared the financial statements explain their interpretations or
calculation of figures or variations in the books
7.7 -OTHER FINANCIAL STATEMENTS
1. Statement of revenues and expenses – reports revenues by source and expenses by functional category
for a year
2. Statement of Cash Flows – reports the sources and uses of cash for the year
3. Statement of Changes in Fund Balance – Reports increases and decreases in owner’s equity or fund
balance during the year.
SECTION 8 - GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES)
8.1 – GAAP – GAAP establishes the rules which public companies, like Microsoft, must follow when disclosing their
financial well being to investors. A company’s accountants prepare the balance sheet and profit and loss statement
but GAAP requires a certified independent accountant to verify all claims made by the company.
1.
2.
3.
4.
Entity Principle – A business is separate from the owner and money withdrawn must be recorded
Consistency Principle – Must use the same accounting format (accrual or cash system) from year to year
Full Disclosure Principle – Must disclose all income, expenses and debt and losses
Time Period Principle – Reporting periods must be the same from year to year (Sept 30)
Must choose either a) calendar year – Jan 1 to December 31 or b) fiscal year – Oct 1 to Sept 30
Objective Evidence Principle – Must keep copies of all bills, receipts, cancelled checks (your source
documents) since they are the best evidence of your transactions and must be produced to the auditors. If
there is no paper trail then it did not happen and the auditors will flag such claims on your financial
statements.
6.
Materiality principle – All financial data that is relevant to an investor’s decision to invest must be disclosed
7.
Realization Principle – Do not recognize revenues until earned (cash basis). One creative accounting
methods used by some companies has been to record inventory in their warehouse as income on
the theory that it will be sold one day. This is fraudulent and the independent auditors will look for
actual electronic receipts of actual sales or other documentation to show actual revenues.
8.
Matching Principle – You must match revenues to expenses that generated the revenue (accrual)
9.
Conservatism Principle – A company must calculate the value of its assets and inventory and this principle
requires the most conservative estimate or lower value be used to minimize an over valuation of a
company’s assets or net worth to hide losses
10. Objectivity Principle – Accounting data is based on most the most objective evidence or source documents
(a paper trail). Minimizes the chance a company will produce falsified records
11. Continuing Concern Principle – Financials assume a business will continue from year to year
5.
SECTION 9 - RATIO ANALYSIS
9.1 - RATIO ANALYSIS
1. Managers express financial information as ratios to simplify the analysis and comparison of financial data
2. A ratio is always a fraction with one number divided into another
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
16 of 34
3. Must compare the ratio (data) over a period of time to identify meaningful trends (increasingly profitable or
losing money)
4. Ratios are very handy to tag critical info from financial statements (cash flow, profit or loss, available cash
on hand to pay bills, net worth, how quickly bills are paid and money owed is collected.
5. Ratios can be used to compare performance to other facilities and industry averages
6. A ratio of debt to assets over 1.0 is positive (facility can pay bills) - under 1.0 then facility has trouble paying
bills
9.2 – FINANCIAL RATIOS – Please read this very carefully a few times. This is finance in a nutshell
1. Ratios are simply tools we use everyday to assess our available financial resources to determine how in
the world we are going to pay our bills each month.
2. Typically, a facility has hundreds of thousands of dollars coming in (revenues) and hundreds of thousands
of dollars going out (expenses).
3. Remember that money we bill our customers for services we provide them is not money received and in
the bank, and available to pay bills.
4. It may take us weeks if not months to actually get paid.
5. Your accountants track every accounts payable (people you owe money to) to make sure they get paid
timely or they will cut off any future credit to you.
6. Businesses run on credit. Your food supplier (SYSCO) is on the hook for tens of thousands of dollars in
food products it ships to you each month with terms that payment is due within 30 days.
7. Your pharmacy supplies tens of thousands of dollars in drugs to you each month, and your medical
supplies vendor provides you tens of thousands of dollars each month in supplies that it acquired through
credit from its suppliers.
8. We do not pay for these items in advance. We purchase them on credit.
9. Our vendors purchase the items they provide you on credit and they need to get paid by their customers
timely so they can pay their suppliers and stay in business.
10. Working Capital is current assets – current liabilities. We are subtracting and not dividing). Therefore
11. this is not a ratio but it is an important tool to calculate the actual dollar amount you have available to pay
bills or fund critical capital projects.
12. Quick Ratio or Acid test ratio - (most liquid assets) (cash + accounts receivables + market securities)
divided by current liabilities. Note: we are dividing here so this is a ratio. We are dividing our most liquid
money resources by our current liabilities. This formula identifies assets that can be turned into cash
within a few days.
13. Current Ratio – (current assets divided by current liabilities). This tool is a ratio or a number that
represents a company’s financial power to pay its debts. Unlike the formula for working capital, here we
divide instead of subtract our current assets by our current liabilities. The preferred ratio is 2:1. Which
means that a company will ideally have 2 dollars of equity for every dollar of debt. So a company with $1
million in liabilities would ideally have $2 million in assets. However, a company with a lower ratio (i.e. 1:1
or 1.2:1 may also be acceptable). Below 1.0, a company may have problems paying its liabilities.
14. Debt to Asset Ratio – Total liabilities divided by total assets. This is an important ratio because this time
we are looking at total debt (current and long term debt) and total assets (current and long term assets)
and identifying what percentage of our operations is financed by debt. The ideal ratio of total debt to total
assets is less than .50 (50 percent) or less of our total debt. This means that a company with $2 million is
total assets would have no more than $1 million in debt.
15. Percentage of Gross Profit Ratio – This ratio is used to calculate what percent of your earnings is profit
after you deduct operating expenses and this yields your gross profit.
For instance: calculate your gross profit on revenues of $40,000 with fixed expenses of $17,000 and
variable expenses of $13,000
You solve this equation by add $17,000 + $13,000 = $30,000 then divide $30,000 by $40,000 = 25%
Your gross profit is 25% ($10,000 x 4 = $40,000)
This ratio measures your efficiency since it takes you $1 to produce $4
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
17 of 34
16. Common Interest Formula –
We do not use this formula very often but it is easy to solve. We need to calculate the first month’s
interest payment given a set of facts.
If we had an $80,000 loan at 9% interest for 10 years and paid only interest in the first year, what would be
the interest payment for the first month
Amount of loan x interest rate / 12 months
For example, $80,000/10 years = $8000 in principal a year. The first year interest would then be $80,000
x 9% = $7200. Again we need to know what the first month’s interest payment so we would write the
check for $600 ($7200 annual interest /12 months = $600 interest per month)
17.
Average Percentage of Occupancy
1.
You must know how to calculate your percentage of occupancy, which is easy.
DIVIDE THE NUMBER OF OCCUPIED BEDS BY THE NUMBER OF TOTAL BEDS AND
MULTIPLY BY 100 PERCENT
2. Daily occupancy rate - You report your vacancy and occupancy rate as a percentage. If you have
a 100 beds and 80 beds are filled, your occupancy rate is 80% (80/100). Your vacancy rate would
obviously be 20 empty beds or 20%.
Average Monthly occupancy rate - We track numbers on a monthly basis and your census goals are set
on a 30 day basis. If you wanted to calculate your average daily occupancy rate for June, you would just
need to know the number of available beds and the total resident days (how many beds were filled) for the
month.
For instance a facility with 150 beds has total of 4500 available resident days (150 x30). If you actually
had 3500 resident days in that month then you averaged 118 residents a day. (3500/30 = 118). Now you
know how many residents you had on average each day that month. You still need to know what
percentage of your available beds (150) were filled each day. The simplest way to do these calculations
is by the 10% rule. You can solve this in seconds.
Take the total number of beds and write down these percentages on your dry erase board during the
exam. Write out the percentages first and then solve the problem:
10% of 150 = 15
5% of 150 = 7.5 (15/2=7,5)
2.5% of 150 = 3.7 (7.5/2=3.7)
1.5% of 150 = 1.8
This will take 5 seconds and avoids complicated division and multiplication
Next, calculate the vacancy rate: 150 - 118 = 32 vacant beds. You had approximately 32 empty beds.
Since your vacancy rate is a smaller number we will calculate that first.
Looking at the numbers above we know
10% = 15 beds
10% = 15 beds
So 20% equals 30 beds but I need to get to 32 vacant beds total.
I can see that 2.5% is roughly 3.7 so 22.5% gets me to 33.5. I can approximate that my vacancy rate is
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
18 of 34
approximately 21% to 22%. Therefore my occupancy rate would be 100% - 22% (vacant beds) = 78%
occupied beds
I can check the answer by 150 x .78 = 117 so it is between 78 and 79%
Let’s say you have a total of 100 beds. That is not only the total number of available beds, it is also your
total potential income as well. For instance, if you earn an average of $300 for each bed per day, then
your income potential would be $300 x 100 beds = $30,000 a day x 30 days = $900,000 a month in
potential income. Every empty bed costs you money.
18. Average Percentage of Weight Loss
1. The formula is usual weight – actual weight / usual weight x 100
2. Residents are regularly weighed by the nursing staff to identify nutritional problems. We compare their
current or actual weight to the last weight recorded (Usual weight) A significant weight loss is more than
5% in one month, 7.5% in 3 months and 10% in 6 months.
Here is a typical case
Weight checks for Resident Sally Jones:
Date
Jan 1, 2008
Jan 9, 2008
Jan 17, 2008
Jan 28, 2008
Weight
160 Lbs
159 Lbs
156 Lbs
153 Lbs
+/Baseline weight
-1
-4
-7
In January this resident loss a total of 7lbs
160-7 = 153 lbs
using 10% rule
10% of 160 = 16
5% of 160 = 8
This resident lost 7 pounds in 1 month. A
significant weight loss for 1 month is 8 lbs. Missed
triggering a significant loss by 1 pound
19. Nursing Staffing hours Per Person Per Day
1.
This is one of the most critical formulas you need to know. It is also very simple. It is just that most people
use staffing sheets that do the math for them. However, as the administrator, you must check your staffing
several times a day to ensure that you meet min staffing requirements. You cannot trust that your charge
nurses are on top it.
Almost every state sets the minimum hours of nursing and nurse aide time they must be provided each
day.
On average, it looks like this:
Licensed nursing: 1 hr per day per resident
Nurse Aide: 3 hours per day per resident.
The number of residents in the facility x hours needed per resident
Hours of direct care provided per nurse or nursing aide
For the purposes of our practice questions we will use 8 hours per employee per shift.
So if we have 110 residents physically in the facility then we would need the following number of nurses
and nursing aides that day.
Nurses: 110 x 1 hr per resident = 110 hours/8 hours per nurse = 13.7 nurses or approx 14 nurses
Nursing aides: 110 residents x 3 hours per resident = 330 hours/8 hours per nurse aide = 41.25 or 42
aides
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
19 of 34
20. Cost per Person Per Day for Food
The formula is Total Food Cost Expenses = Cost per Person Per Day
Total Resident Days
You must track your food costs on a daily basis. You are given a total budgeted food cost per person per
day that is usually $5 per day. Food is a controllable cost and you and your dietary manager need to
know how to track that cost and adjust accordingly if census falls. Corporate tracks that cost very carefully
The formula to calculate person per day for food is
Total Food Expense = PPD
Total resident days
If you spent $15,000 in June for food and had 3000 total resident days then you spend $4 per person per
per day
15,000 = 5
3000
You would check the answer by multiplying $5 by 3000 = $15,000
21.
Cost per Person Per Day for Operating Expenses (Total expenses)
1.
The formula for food cost per day is the same for all PPD calculations. You are simply dividing your
total cost by the total resident days.
The formula is Total Expenses
Total Resident Days
2.
For instance if you spent $20,000 on nursing supplies in a given month and had 3000 resident days,
you spent an average of $6.66 per person. (20,000/3000=6.66)
You can check the answer by multiplying 6.66 by 3000 = 20,000. (I would round up to 7 and do 7 x
3000 = 21000. it is close enough. We deal mostly with approximations
3.
22.
Medication Error Rate –
The equation is: number of medications not administered plus the number improperly administered
opportunities for error (total medications administered)
A facility is allowed a medication error rate of 5%
You may be asked to identify the correct formula or solve an equation
If 100 doses where administered and 5 were given to the wrong person and 5 were not administered at all.
What is the medication error rate?
5 +5 =
100
10 or 10%
100
23. Employee Absentee Rate
Lost work days
Total number of employee worked days
s
Where you have 220 full time employee who worked a 30 period and had 90 lost work days, what is the
absentee rate?
First, find total days worked = 220 x 30 days = 6600 days
Total lost work days = 90 days
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
20 of 34
6600
90
You can solve this problem quickly using the 10% rule
10% of 6600 = 660
5% of 6600 = 330
2.5% of 6600 = 165 (still too high)
1.5% of 6600 is approximately half of 165 or 85 which is closer to 90.
The absentee rate is approximately 1.5% We deal in approximations
24. Straight Line Depreciation –
A $20,000 car with a $2,000 salvage value would be depreciate at $300 per month
$20,0000 -$2000 = 18,000 = 3600 per year /12 = $300 a month in depreciation
5 years
5
25. Overtime Rate –
An employee works 52 hours in a one week work period at a rate of $8.00 per hour. What would be total
gross salary including overtime pay?
40 hours x straight pay = 40 x $8.00 = $320
12 hours x time and a half = 12 x $12 = $144
Total pay = $464
26. Payback Period
The payback period for an investment of $60,000 with an annual savings of $3000?
Amount of investment = Pay Back Period
Annual savings
60,000/3000 per year = 20 years 20 x $3000 = $60,000
It will take 20 years for this investment to pay back the original investment cost
27. Employee Turnover Rate
Number of Employees Terminated
d
Number of Employees Employed Throughout the Year
A facility employed 150 employees throughout the year and 15 employees had been discharged and 5
Resigned by year end. What was the approximate annual turnover rate?
20 = ,13 or 13%
150
28. Fixed salary Cost –
To check the answer 150 x .13 = 19.50 or approx. 20 workers
A nursing home with 100 beds pays the administrator $90,000 a year. The current occupancy rate is 80%?
What is the administrator’s approximate fixed salary cost per resident day?
Since this is an average computation, we can run the numbers for one month even though it asks for annual
cost. 100 beds x 80% = 80 residents per day average occupancy.
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
21 of 34
The total expense is $90,000. We need to reduce this to a monthly basis.
90,000/12 months = $7500 a month $7500/30 = $250 a day.
We are spending $250 a day on 80 residents
Our cost per day is 250/80 = $3.12 per resident per day
If we check the answer we spent $3.12 x 80 = $24.96 This is an approximate answer
29. The average number of days to collect money is 58 days – more than that is not good
SECTION 10 - ACCOUNTING SYSTEMS
10.1 - ACCOUNTING SYSTEMS
1. There are two types of accounting systems:
2. Cash Basis Accounting
a. Transactions are recorded only when cash actually changes hands (i.e., an expense is only
recorded when paid and revenues are recorded when payment is received)
b. Only 1% of nursing homes use this system because Medicare requires books to be kept on an
accrual basis; or
3. Accrual Basis Accounting
a. Transactions are recorded when revenues are earned (not actually paid but when services are
rendered and expenses recorded when incurred and not when paid
b. Main purpose of accrual system is so Medicare can match revenues and expenses when they
are incurred to determine actual expenses for services provided.
c. Under the cash accounting system, actual payment for services is received from customers
months after the service is provided and bills may not be paid by a facility for months after an
expense is incurred
d. Accrual system accounts for depreciation, accounts payable and receivables
SECTION 11 - DEPRECIATION
11.1 - DEPRECIATION
1) Assets lose value over time (use, wear and tear) and a business must adjust its books to account for
diminishing value (depreciation) of its assets to more accurately calculate the value or net worth of a
business
2) The IRS mandates that each asset have a depreciation schedule and that the asset be gradually
devalued during its useful life (i.e. vehicles must be depreciated over five years0
3) A capital asset is an asset that is worth more than $500 and has a useful life of more than one year and
will not be converted to cash within 12 months of purchase
4) Capital assets include land, buildings, equipment, goodwill, trademarks
5) A for-profit business can deduct depreciation expenses which include the cost of purchase, shipping,
installation (one time costs) (interest is not depreciable)
6) Businesses receive a tax deduction for depreciation to encourage them to set aside money each year to
eventually replace the asset at the end of its useful life
7) Only 10% of facilities actually fund capital costs by setting aside monies each month to fund
replacement/repair costs
8) Most firms use the tax deduction for depreciation to pay for other expenses and not for capital asset
replacement
9) Renovating an asset is a depreciable expense
10) Repairing damage to or regular maintenance of an asset is not depreciable
11) Depreciation is an expense associated with the use of an asset
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
22 of 34
11.2 - DETERMINING DEPRECIATION EXPENSE
1)
2)
3)
4)
5)
6)
7)
8)
9)
Historical Cost – The cost to acquire an asset depreciated over several years
Historical costs includes purchase price, taxes, shipping, delivery, installation
Useful life – Number of years an asset can be expected to be used
Salvage Value – Value of an asset at the end of its useful life
Straight-line depreciation – The historical cost of an asset is spread evenly over its life (i.e., a $20,000
truck has a useful life of 5 years would be depreciated at $4,000 annually. The truck can then be sold
for salvage value or kept on the books at it salvage value at the end of 5 years but depreciation can no
longer be deducted
Book value - of an asset is the cost of an asset minus depreciation (i.e., the book value of a $20,000
truck after 1 year is $16,000
Accelerated Depreciation – Most of the depreciation expense is written off in the first years of an
asset’s life. This allows a business to buy newer equipment faster
Sum-of-the-years-digits and double-declining-balance are types of accelerated depreciation
Purpose of Depreciation – Recognizes assets lose value and reflects true value on books and
allows business to fund capital asset replacement over time
11.3 -DEPRECIATION SCHEDULES
1) Must maintain a depreciation schedule for each asset
2) You can use more than one depreciation schedule for an asset
3) The IRS and manufacturers publish depreciation schedules
11.4 - ACCOUNTING FOR DEPRECIATION
1.
2.
3.
Depreciation is entered each month into the general journal
The monthly depreciation expense on a $20,000 truck is $333 ($20,000/5 years=
$4000 annually/12)
Fixed assets – land buildings, major and minor movable equipment
SECTION 12 - COST FINDING
12.1 - COST FINDING
1.
2.
3.
4.
5.
6.
Cost finding is the process of allocating costs to traceable sources ad identifying true costs
Cost finding is used to determine whether to continue a particular service
Costs are one of the few components of operating a facility that the administrator has control over
Of all costs, labor costs are the largest costs and one under control by the administrator
Costs are a component of input
Efficiency – Amount of input (money, supplies, labor) used to attain or produce a certain level of output
12.2 – Fixed Costs
1. Fixed cost – Does not fluctuate due to resident census (mortgage, administrator salary)
2. Total fixed costs – A fixed cost that changes per volume – a fixed cost decreases in cost as volume
increases
12.3 – Variable Costs
1. Variable cost – Fluctuates directly with resident census (number of meals, nursing staffing that night)
2. Total variable cost – Unit cost does not change as patient volume increases – a $1.00 band aid is the
same cost no matter how many patients
12.4 – Semi Variable Costs
1. Semi-variable cost – Has both a fixed cost and variable cost component (electric bill – set cost per
wattage but total wattage cost fluctuates with use
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
23 of 34
12.5 - Allocating Indirect costs –
1. Step down method – systematic allocation of all cost centers (i.e., nursing, administration, maintenance
use laundry services and the laundry costs are allocated to these other cost centers)
2. Reciprocal Method
SECTION 13 - REVENUE/COST CENTERS
13.1 – REVENUE CENTERS
1.
2.
3.
4.
5.
Revenues are a component of output/outcomes
Revenues are subject to competition and regulation
Units or departments that generate revenue are revenue centers
Nursing usually generates most revenues (nursing, rehab, drugs)
Substantial earned interest can be considered revenue
13.2 - COST CENTERS
1. Cost centers are units identified with certain costs
2. Revenue centers are also cost centers
3. Administration, maintenance, housekeeping and dietary are cost centers – they do not generate much
revenues that can be billed directly to customers since the per diem rate includes those services
4. Telephone, insurance and interest expense are cost centers
13.3 - DIRECT COSTS
1. Direct costs are directly attributable to a revenue center
2. Direct costs are also called resident/patient care costs
3. Direct costs includes salaries, payroll taxes, benefits
13.4 -INDIRECT COSTS
1. Indirect costs are not directly attributable to a revenue center
2. Indirect costs are also known as support service costs (laundry, admin)
3. Indirect costs includes maintenance, dietary and laundry services
13.5 - SUPPORT SERVICE COSTS
1.
2.
3.
4.
5.
Support service costs are costs not directly reimbursed by Medicare and Medicaid
Administrative costs are not reimbursed.
Social services are not directly reimbursed and must be paid for from other reimbursable services
Revenue centers are also cost centers
Administration, maintenance, housekeeping and dietary are support service costs and cannot be billed
directly to customers since the per diem rate includes those services
13.6 - RECIPROCAL METHOD
1. The reciprocal method of cost finding is used to identify reciprocal services between cost centers
13.7 - RATE SETTING
1. Rate setting establishes the basis to set rates for services
2. Once the costs for the revenue centers are identified, service rates can be developed to recover those
costs and provide a profit margin
SECTION 14 – BUDGETS
14.1 - OVERVIIEW
1.
2.
3.
4.
5.
Financial
Budgets require examination of internal and external factors (environment) affecting facility
Budgets reflect the administrator’s long term and short term goals
Budgets should be reviewed monthly and used throughout the year
Budgets are revised as conditions require
Budgets provide a comparison between projected and actual results
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
24 of 34
6.
7.
8.
9.
Budgets are prepared by top management
Organizational goals are the basis for budget preparation
Budgets are the facility’s strategic plans
Budgets are used to plan and control facility operations
14.2 -BUDGETING APPROACH
1. Top Down – Budget prepared by administrator/corporate with no input from dept heads
2. Participatory – Budget developed by dept heads and fine tuned by administrator
a) Dept heads more likely to budget if they have input
14.3 – FIVE STEP BUDGET PROCESS
1. Assess internal and external environment
a) Increased/decreased competition
b) New competition
c) Available labor pool
2. Programming
a) A contingency plan prepared by the administrator that anticipates internal and external forces
(extra money in budget for salary increases – inflation)
3. Operating budget
a) Operating budget includes both an expense budget and a revenue budget:
1. Expense Budget – lists expenses and capital needs for coming year
a. Projects expenses by:
1.
2.
3.
4.
Increase all expenses by 10%
Identify specific trends
Analyze prior expenses and Identify all costs
Use checklists to identify costs
2. Revenue Budget –
a. Projects revenue from the coming year
3. Variance Analysis
a.
b.
c.
Compare actual to projected results
Any significant variance must be investigated and corrected
Main reason for over spending is use of agency personnel
4. Cash budget
a)
b)
c)
d)
Estimate of inflows and outflows of cash for next 12 months
Cash budget is prepared from expense and revenue budgets
Need cash budget to ensure adequate cash flow to pay bills
Outflows easier to predict then when customers will pay bills
5. Capital budget
a) Summarizes all anticipated capital expenditures
b) Capital asset has a useful life of more than 1 year and costs more than $500
14.4 - TYPES OF BUDGETS
1. Operating Budget- sets revenue targets and limits on expenses
2. Cash Budget- tracks cash flows
3. Capital Budget – lists specific capital purchases and repairs
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
25 of 34
14.5 - PRO FORMA FINANCIALS
1. The budget concludes with the pro forma financials
2. Pro forma financials are preliminary financial statements based on budgeted amounts derived from
operating budget
SECTION 15 – PAYROLL
15.1 - OVERVIEW
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Payroll is a bookkeeping function
Should distribute paychecks to employees in person
Should issue stop payment on checks not cashed in reasonable time
All paychecks should have 2 signatures
The person preparing payroll checks should not issue their own check
Payroll is the largest source of cash outflow
Payroll is the single largest expense
Payroll accounts for 50% of total costs
Payroll is a controllable cost
The payroll journal lists all paychecks distributed to employees
At the end of each month payroll expenses are transferred from the payroll journal to the general ledger
Must document hours worked by each department for reimbursement
Must maintain separate bank account for payroll
15.2 - PAY RATES
1.
2.
3.
4.
Gross Pay – Multiply hourly rate by hours worked
Net Pay – Gross pay minus all deductions
Overtime Pay – Multiply regular rate by 1 ½
Payroll taxes withheld from paychecks (i.e., FICA, Medicare, income taxes) are deposited quarterly into
a bank account in the name of the federal government
SECTION 16- RESIDENT TRUST FUND
16.1 - RESIDENT TRUST FUND
1.
2.
3.
4.
5.
The facility must have a signed contract whenever a facility takes possession of resident property
The contract creates a trust relationship between the facility and a resident
Should manage cash and place other property in care of family
Funds held in trust should be recorded in a separate book from other accounts
A signed receipt issued to a resident for any property held in trust is kept in resident funds book
SECTION 17 - CASH HANDLING
17.1 - CASH HANDLING
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Resident funds should be kept in an account separate from facility funds
Do not maintain more than $500 in the facility petty cash
All cash should be handled by 2 employees who are bonded
Stamp all checks “deposit only”
Make daily list of all cash and checks received
One copy of the list is given to the person who makes the deposit
The person who makes up the deposit slip should not also make the deposit
A person who makes a cash payment must be given a receipt
Cash receipts are recorded in the cash receipts journal and the patient’s Accounts Receivable account
At the end of the month the cash receipts journal is posted to the general ledger
SECTION 18 - ACCOUNTS PAYABLE
18.1 - ACCOUNTS PAYABLE
1. Accounts payable are monies owed by the facility to creditors and vendors
2. Make a separate file for each vendor
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
26 of 34
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
File a copy of any purchase order in each vendor file
Staff must check goods received against invoices to ensure everything was delivered
The receiving slip is then filed in vendor file
The vendor then sends an invoice that demands payment for goods delivered
Check the final invoice against the purchase order and receiving slip
Invoices customarily are paid within 30 days
Checks should be signed by 2 people
Payments are recorded in the cash disbursements journal
Invoices are stamped paid and placed in the vendor file
Keep purchase orders, receiving slips and invoices for 1 year
Claims for reimbursement may be rejected for the following reasons:
a)
b)
c)
d)
Medicare claims must be submitted to a fiscal intermediary
Ancillary charges must be itemized
Incomplete claims are rejected and returned
Late claims may be rejected entirely
SECTION 19 - PATIENT CENSUS REPORT
19.1 - PATIENT CENSUS REPORT
1. Patient Census Report – The billing office prepares the patient census report from the patient census
form (midnight report) that is filled out by nursing staff after 12 AM to certify which patients are officially
in the facility
2. The Census report is used to determine routine resident charges (per diem charges)
3. Routine charges are then transferred to the patient accounts
4. Payor sources demand timely and accurate billing
19.2 – MEDICARE/MEDICAID BIILLING
1. Medicare requires a separate bill for each Medicare patient to be submitted to a fiscal intermediary who
processes the claim
2. Medicaid requires one composite monthly bill for all Medicaid patients
19.3 – RESIDENT CENSUS FORM
1. The nursing department takes a census each night at midnight to verify who is residing in the facility
and notes the number of admissions, discharges, transfers and bedhold. The forms is used by the
business office to prepare the resident census report
SECTION 20 - FINANCIAL CONTROL SYSTEMS
20.1 - FINANCIAL CONTROL SYSTEMS
1.
2.
3.
4.
5.
6.
7.
Financial controls refer to systems that identify problems when they occur
Must establish policies for all business office functions
No one person should have complete responsibility for any one financial function
One person should start a task and another finish it
Make employees take periodic vacations
Financial controls are designed to discourage and detect employee theft
No one should sign their own paycheck
SECTION 21 - ACCOUNTS RECEIVABLE
21.1 - ACCOUNTS RECEIVABLE
1.
2.
3.
4.
Must bill patients to collect money
A delay in billing equals lost money (i.e., interest)
Admissions based partially on financial considerations
If a patient is not paying with their own funds, then have the responsible party paying the bills sign an
agreement agreeing to pay the bills from the resident’s assets
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
27 of 34
5. Screen all potential patients for payor source and financial resources
6. Anticipate when patient eligible for Medicaid and ensure timely filing of application to ensure continued
care
7. Collect charge slips for services daily
8. Room, board, housekeeping included in per diem or routine charge
9. Beauty salon, therapy and phone charges are ancillary charges and are no included in the per diem
rate
10. Maintain a patient ledger card for each patient listing room number, daily rate
11. Charity Care - Services provided to individuals who cannot afford to pay must be written off as charity
care
SECTION 22 - DEBT COLLECTION
22.1 - DEBT COLLECTION
1.
2.
3.
4.
5.
Use diplomacy when collecting a debt
Make special accommodations when valid reason for missing payment
Write off uncollectible debts by documenting and reporting on financial statements
Difficult to put patient out on street for failure to pay bills
“Bad debts’ – resident accounts past due and subject to collection
SECTION 23 - INVENTORY CONTROL
23.1 – PURPOSE OF INVENTORY CONTROL
1.
2.
3.
4.
5.
6.
7.
Inventory comprises 30-40% of facility budget
Cycle counting is performing a daily inventory
Inventory control is needed to measure the amount and type of supplies
Inventory control discourages pilfering
Inventory control allows keeping supplies at optimal levels and avoid overstocking
Overstocking may result in opportunity costs (money unnecessarily tied up in inventory)
Maintains balance in supplies
23.2 – TERMINOLOGY
1. Just-in-time inventory keeps inventory in vendor warehouse and vendor delivers supplies just before
they are needed to avoid costly stocking
2. Economic Order Quantity – Optimum amount of materials needed to be ordered on a regular basis
3. Materials Requirements Planning – reduce the need for excessive inventories of supplies by analysis of
product/supplies needs and lead ordering time
23.3 – INVENTORY METHODS
1. Two types of inventory methods: 1) perpetual and 2) periodic
23.4 – PERPETUAL INVENTORY
1.
2.
3.
4.
5.
Perpetual Inventory begins with initial inventory and then monitor monthly
Most precise system or inventory method
Beginning inventory – complete physical count start of year
Inventory received – keeps running count of supplies
Total available inventory – available supplies from initial inventory and subsequent inventories
23.5 – PERIODIC INVENTORY
1. Involves an annual physical inventory
23.6 – INVENTORY MANAGEMENT PROCEDURES
1. Should store supplies in locked storeroom with controlled access
2. Inventory should be delivered to store rooms as soon as it arrives
3. Supplies should be distributed throughout facility to allow ready access
4. Make one person on each shift responsible to control access to supplies
5. Smaller facilities may use small store rooms instead of large central room
6. Source documents include receiving slips and requisition slips for perpetual inventory
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
28 of 34
7. If a physical count does not match inventory then there may be pilferage
8. The facility should standardize the type of supplies used throughout facility to lower costs
SECTION 24 – INVENTORY COSTINIG
24.1 – FIFO
1. FIFO – First in/First Out
2. FIFO assumes the supplies most recently purchased are more expensive than the supplies purchased
earlier
24.2 – LIFO
1. LIFO – Last In/First Out
2. LIFO assumes last supplies purchased (most recent) are used first lowering the value of remaining
supplies since most recent supplies would be most expensive and consumed first
24.3 – ADJUSTING FOR INFLATION
1. In times of high inflation, the lower priced inventory is used first
2. In times of low inflation, the higher priced supplies are used up first and less costly supplies remain in
inventory
3. Facility must choose either LIFO or FIFO method and use it consistently
4. Inventory costing method must be noted in notes to financial statements
5. inventory is valued at latest cost
24.4 –BUSINESS INSURANCE PROTECTION
General Liability Insurance – Insurance damage to property and injuries to visitors in facility
Malpractice Insurance – insures against injuries to others due to professional malpractice
Burglary Insurance – insures losses due to burglary and theft
Officers and directors Insurance - insures officers and directors who are sued for actions taken in their
position as a officer or director of the company – pays legal fees and any money judgments
5. Business Interruption Insurance – pays for lost revenues each day a business cannot operate due to a
disaster other reason beyond the owners control
1.
2.
3.
4.
6. Automobile Insurance – insures autos for property damage or bodily injury
7. Property insurance – covers damage from storms and fire to building
25,1 – MISCELLANEOUS TERMS
Term
Definition
Accounts Receivables
Over 90 days
Accounts receivables over 90 days need to be written off
Agency
One person acts on behalf of another and can bind the person
being represented
Affidavit
A written statement signed and notarized
Appeal
An appeal is where a decision by a court is reviewed by an
appellate court or higher court to determine if the judge made the
correct legal decision
Articles of Incorporation
This is a document that is filed with the state and forms a
corporation
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
29 of 34
Arbitrator
An alternative way to resolve disputes by having a third party
impose a resolution to a problem that is binding on both parties
and cannot be appealed. The arbitrator's decision is final
Arraignment
A proceeding where the accused is formally charged with a crime
and required to either enter a guilty or not guilty plea
Attachment
A court order to seize a debtor’s assets to pay a debt
Bankruptcy
The inability to pay one’s debts
Beneficiary
A person named in insured policy to receive policy proceeds
Bond
Brand mark
Corporations raise money by issuing bonds that guarantee an
investor a specified amount on a specified date. Usually the
investor purchases a bond at discounted rate and For instance an
investor may purchase a 5 year $100 bond for $80 that will mature
in 5 years and pays 5% interest per year. In five years the
company must redeem the bond and pay $100 face value and also
the interest each year as required, A bond is a debt of the
company
Logo or symbol that identifies a business
Brand name
Name that identifies a business
Bylaws
A document that specifies how a corporation is to be governed and
sets forth the officers and directors, place of business, outstanding
share of stock
Capital
Amount on the balance sheet that represents ownership in a
business
Cash equivalents
Any asset can be easily converted to cash is a cash equivalent
Centralization
Involves micro-managing a business with decision making power
held at the top levels
Chapter 7 Bankruptcy
The debtor’s assets are liquidated or sold to pay creditors and
remaining debts are discharged
Chapter 11 Bankruptcy
The debtor ‘s business is placed under protection of a bankruptcy
court and continues in business as they pay back their debts The
debtor’s business is run by a trustee
Chapter 13 Bankruptcy
The debtor is allowed to setup a payment schedule where a set
amount of money is deducted from their income on a regular basis
until the debts are paid off
Codes
Codes are where regulations are published
Commercial paper
commercial paper is an unsecured promissory note with a fixed
maturity of 1 to 270 days. Commercial Paper is a money-market
security issued (sold) by large banks and corporations to raise
money
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
30 of 34
Common Stock
Common stock shareholders are essentially the last to get paid in
the event a company is liquidated.
Complaint and
Summons
A civil case is started by filing a complaint with the court clerk and
serving a summons on the defendant giving them notice that they
have been sued
Convertible securities
A convertible security is a security that can be converted into
another security, for example, a bond that under certain terms can
be converted into equity or stock
Corporation
A corporation is an entity created by law that has perpetual
existence, limited liability for officers and shareholders
C Corporation
A C corporation is double taxed
Copyright
Right to use intellectual property owned by a business
Debenture
A debenture is a certificate issued by a company acknowledging
that it has borrowed money on which interest is being paid. It is an
unsecured corporate bond or a corporate bond that does not have
a certain line of income or piece of property or equipment to
guarantee payment to the investor.
Decentralization
Delegating decision making to front line managers and increasing
efficiency
Default
A failure to perform an obligation – (fail to make payment on a note
or loan and you default
Deposition
Testimony taken under oath
Directed Verdict
A verdict directed from a judge
Felony
A felony is violation of federal criminal law
Garnishment
Money is taken out of a debtor’s paycheck by the employer and
turned over to a creditor
There are several types of insurance policies 1.
Professional/malpractice for claims where patients are injured
because of negligence of staff, 2) general liability that covers a
facility for injury or damage to visitors and third parties, 3) business
interruption insurance that covers lost income due to some event
that closed the business, 4) boiler insurance that covers for
damage done by a boiler that explodes 5) Property insurance that
covers for wind or water damage to a facility 6) auto insurance that
covers for damage to vehicles
Insurance policies
Interrogatories
These are written questions that must be answered under oath
Judgment
A judgment is the final decree of a court
Letter of Credit or Line
of Credit
A letter of credit is a revolving line of credit that a company can
draw down and repay. A letter of credit is critical
Libel
To write or publish something that is untruthful and hurts another
person's reputation
Lien
A lien is recorded in the public records and is notice to other
creditors that they have a priority in being paid a debt owed to
them over other creditors in the event the company is bankrupt and
is liquidated
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
31 of 34
Liquidity
Assets exceed debts
Magistrate
A local judge as opposed to a judge in the state or federal court
system
Mediator
An alternative way to resolve disputes by having a third party
(mediator) help the parties to a dispute to find a solution without
imposing any resolution on the parties. The parties must mutually
agree to the outcome
Medicaid rule
A Medicaid resident to be eligible for coverage in a nursing home
cannot have more than $1860 in monthly income from all sources,
cannot have more than $2000 in assets, must be advised when
their trust fund reaches $1800 or $200 within the SSI limit of $2000
Misdemeanor
A violation of state criminal law
Mission Statement
Describes the purpose of a corporation
Mortgage
A mortgage is the transfer of an interest in property to a lender as
a security for a debt - usually a loan of money. While a mortgage
in itself is not a debt, it is the lender's security for a debt. It is a lien
recorded in the public records and gives the lender a priority
interest in the mortgaged property and the lender collects before
anyone else if the property is sold.
Motion
A document filed with a judge that requests the judge to take a
particular action in a pending case
Municipal bonds
These are bonds issued by a municipality
Ordinance
A law passed by a municipality
Original jurisdiction
Trial courts have original jurisdiction because they hear a case first
before it can be appealed. Appellate courts do not have original
jurisdiction. Appellate courts can only review an issue of law and
not any factual issues.
Partnership
A partnership is an arrangement where individuals own a business
and where the partners can bind each other partner and there is
unlimited liability for each partner
Pleading
A formal statement filed with the court
Preferred Stock
The preferred share holders have a priority claim to be
compensated in the event the company is liquidated
Privately held
corporation
A company that is owned by a small number of individuals who
own all of the outstanding shares of stock of the company
Promissory Note
A promissory note is a promise to repay a loan at a set interest
rate.
Public Corporation
A corporation that is formed by a governmental entity
Qualified Opinion
An opinion where an accountant that qualifies or explains some
limitation or problem in doing a full audit – (i.e., missing important
documents
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
32 of 34
Que Time
The time to turnaround a bed for the next incoming patient
Regulation
A rule passed by an administrative agency. An administrative
agency is established to implement a law. For example the
Department of Motor Vehicles was established to implement the
laws regarding the operation of a car.
Reverse Stock Split
At times a company's stock value may slide and they may reissue
stock to decrease the number of outstanding shares and increase
the value of each share. So if you have 1000 shares issued and
the value has slipped from $50 to $10, the company can reverse
the stock split to reduce outstanding shares and for every 2 shares
worth $10, the each investor now holds one share at $20 per share
S Corporation
“S” corporation is a corporation that chooses to pay taxes as a
partnership
Search warrant
A court order that authorizes law enforcement to search a
residence or business for specific evidence
Shall
Means mandatory or must
Slander
To say something to that is untruthful about another person that
results in damage to their reputation
SSI
SSI benefits are benefits under social security for people under 65
who are disabled and have worked 40 quarters (one quarter is 3
months) or 10 years and would be eligible for Medicare if they
reached 65. SSI is critically important because it entitles under
aged individuals who are disabled insurance coverage for skilled
medical care. You need to understand this payor source and
screen underage residents for SSI eligibility Otherwise they may
not have any other coverage
Stare Decisis
Means let the decision stand or let this case be precedent for all
future similar cases
Statute
A law passed by a state legislature or the Congress
Statute of limitations
Limits the time you can bring a lawsuit
Stock Split
When a company's stock reaches a certain dollar amount (i.e.
Microsoft at $200 a share, the company will split each shares in 2,
and revalue each share at $100 each. That makes the stock more
affordable and attractive to investors)
Sole Proprietor
An individual who owns a business that ends if he or she dies and
has no limited liability like a corporation
Subpoena
A subpoena is a court order for records or for an individual to
appear to testify at a court proceeding
US Constitution
The law of the land
Verdict
The final decision of a judge or jury in a case
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
33 of 34
Financial
Copyright © 2005-2012 by Stan Mucinic. All rights reserved
34 of 34