Healthcare Finance: An Introduction To Accounting And Financial Management

, by Gapenski, Louis C.

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ISBN: 9781567932324 | 1567932320
Cover: Hardcover
Copyright: 9/1/2004

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Preface

xiii

PART I The Healthcare Environment

Introduction to Healthcare Finance

(18)

Defining Healthcare Finance

(2)

Purpose of the Book

(1)

The Role of Finance in Health Services Organizations

(2)

Health Services Settings

(6)

Regulatory and Legal Issues

(2)

Organization of the Book

(1)

How to Use This Book

(4)

The Financial Environment

(32)

Alternative Forms of Business Organization

(5)

Alternative Forms of Ownership

(3)

Organizational Goals

(3)

Tax Laws

(2)

Third-Party Payers

(3)

Managed Care Plans

(2)

Alternative Reimbursement Methods

(14)

PART II Financial Accounting

Financial Accounting Basics and the Income Statement

(34)

Historical Foundations of Financial Accounting

(1)

The Users of Financial Accounting Information

(1)

Regulation and Standards in Financial Accounting

(3)

Basic Concepts of Financial Accounting

(3)

Accounting Methods: Cash Versus Accrual

(3)

Recording and Compiling Accounting Data

(2)

Income Statement Basics

(2)

Revenues

(4)

Expenses

(3)

Net Income

(2)

Net Income Versus Cash Flow

(1)

Income Statements of Investor-Owned Firms

(1)

A Look Ahead: Using Income Statement Data in Financial Statement Analysis

(7)

The Balance Sheet and Statement of Cash Flows

(34)

Balance Sheet Basics

(2)

Assets

(6)

Liabilities

(2)

Equity

(4)

Fund Accounting

102

(1)

The Statement of Cash Flows

102

(4)

Transactions

106

(5)

Another Look Ahead: Using Balance Sheet Data in Financial Statement Analysis

111

(10)

PART III Managerial Accounting

Managerial Accounting Basics, Cost Behavior, and Profit Analysis

121

(36)

The Basics of Managerial Accounting

121

(2)

Cost Classifications: Fixed and Variable

123

(1)

Cost Behavior

124

(3)

Cost Classifications: Semi-Fixed

127

(1)

Profit (CVP) Analysis

128

(5)

Breakeven Analysis

133

(3)

Operating Leverage

136

(2)

Profit Analysis in a Discounted Fee-for-Service Environment

138

(5)

Profit Analysis in a Capitated Environment

143

(7)

The Impact of Cost Structure on Financial Risk

150

(7)

Cost Allocation

157

(30)

Direct Versus Indirect (Overhead) Costs

157

(1)

Introduction to Cost Allocation

158

(1)

Cost Allocation Basics

159

(3)

Cost Allocation Methods

162

(2)

Direct Method Illustration

164

(7)

The Impact of Changing Cost Drivers

171

(3)

Step-Down Method Illustration

174

(2)

Activity Based Costing

176

(4)

Final Thoughts on Cost Allocation

180

(7)

Pricing and Service Decisions

187

(32)

Healthcare Providers and the Power to Set Prices

188

(1)

Price Setting Strategies

189

(2)

Target Costing

191

(1)

Setting Prices on Individual Services

192

(1)

Setting Prices Under Capitation

193

(8)

Setting Managed Care Plan Premium Rates

201

(5)

Using Relative Value Units (RVUs) to Set Prices

206

(2)

Making the Service Decision (Contract Analysis)

208

(11)

Planning and Budgeting

219

(34)

The Planning Process

220

(3)

Introduction to Budgeting

223

(1)

Budget Types

223

(3)

Budget Decisions

226

(2)

Constructing a Simple Operating Budget

228

(3)

Variance Analysis

231

(8)

The Cash Budget

239

(14)

PART IV Basic Financial Management Concepts

Time Value Analysis

253

(34)

Time Lines

254

(1)

Future Value of a Lump Sum (Compounding)

255

(4)

Present Value of a Lump Sum (Discounting)

259

(2)

Opportunity Costs

261

(2)

Solving for Interest Rate and Time

263

(2)

Annuities

265

(3)

Perpetuities

268

(1)

Uneven Cash Flow Streams

269

(3)

Using Time Value Analysis to Measure Financial Returns

272

(4)

Semiannual and Other Compounding Periods

276

(3)

Amortized Loans

279

(8)

Financial Risk and Required Return

287

(38)

The Many Faces of Financial Risk

288

(1)

Introduction to Financial Risk

289

(1)

Risk Aversion

290

(1)

Probability Distributions

291

(1)

Expected and Realized Rates of Return

292

(1)

Stand-Alone Risk

293

(2)

Portfolio Risk and Return

295

(9)

Measuring the Risk of Investments Held in Portfolios

304

(5)

Portfolio Betas

309

(1)

Relevance of the Risk Measures

310

(2)

Interpretation of the Risk Measures

312

(1)

The Relationship Between Risk and Required Return

312

(13)

PART V Long-Term Financing

Long-Term Debt Financing

325

(34)

The Cost of Money

325

(2)

Common Long-Term Debt Instruments

327

(4)

Debt Contracts

331

(2)

Bond Ratings

333

(2)

Credit Enhancement

335

(1)

Interest Rate Components

335

(4)

The Term Structure of Interest Rates

339

(2)

Debt Valuation

341

(18)

Equity Financing

359

(30)

Equity in For-Profit Businesses

359

(3)

Types of Common Stock

362

(1)

Procedures for Selling New Common Stock

363

(2)

The Market for Common Stock

365

(2)

Regulation of Securities Markets

367

(2)

The Investment Banking Process

369

(2)

Equity in Not-for-Profit Businesses

371

(2)

Common Stock Valuation

373

(6)

Security Market Equilibrium

379

(1)

Informational Efficiency

380

(3)

The Risk/Return Trade-Off

383

(6)

Capital Structure and the Cost of Capital

389

(36)

Capital Structure Basics

389

(1)

Impact of Debt Financing on Accounting Risk and Return

390

(3)

Capital Structure Theory

393

(3)

Identifying the Optimal Capital Structure in Practice

396

(2)

Not-for-Profit Businesses

398

(1)

Cost of Capital Basics

399

(2)

Cost of Debt Capital

401

(2)

Cost of Equity Capital

403

(9)

The Corporate Cost of Capital

412

(2)

An Economic Interpretation of the Corporate Cost of Capital

414

(11)

PART VI Capital Investment Decisions

The Basics of Capital Budgeting

425

(36)

Importance of Capital Budgeting

425

(1)

Project Classifications

426

(1)

The Role of Financial Analysis in Healthcare Capital Budgeting

427

(1)

Overview of Capital Budgeting Financial Analysis

428

(1)

Cash Flow Estimation

428

(7)

Cash Flow Estimation Example

435

(7)

Breakeven Analysis

442

(1)

Profitability (Return on Investment) Analysis

443

(3)

Some Final Thoughts on Breakeven and Profitability Analyses

446

(1)

Capital Budgeting in Not-for-Profit Businesses

446

(3)

The Post Audit

449

(1)

Using Capital Budgeting Techniques in Other Contexts

450

(11)

Project Risk Assessment and Incorporation

461

(30)

Types of Project Risk

462

(2)

Relationships Among Stand-Alone, Corporate, and Market Risk

464

(1)

Risk Analysis Illustration

464

(1)

Sensitivity Analysis

465

(4)

Scenario Analysis

469

(3)

A Subjective Approach to Risk Assessment

472

(1)

Incorporating Risk Into the Decision Process

472

(3)

Making the Final Decision

475

(1)

Adjusting Cash Outflows for Risk

476

(2)

Subsidiary Costs of Capital

478

(1)

An Overview of the Capital Budgeting Decision Process

479

(2)

Capital Rationing

481

(10)

PART VII Other Topics

Current Asset Management and Financing

491

(36)

An Overview of Short-Term Financial Management

491

(2)

Current Asset Investment and Financing Policies

493

(5)

Cash Management

498

(3)

Marketable Securities Management

501

(1)

Long-Term Securities Management

502

(1)

Receivables Management

503

(5)

Supply Chain Management

508

(2)

Short-Term Financing

510

(17)

Analyzing Financial Performance

527

(34)

The Statement of Cash Flows

528

(3)

Ratio Analysis

531

(11)

Tying the Ratios Together: Du Pont Analysis

542

(2)

Other Analytical Techniques

544

(1)

Market Value Added and Economic Value Added

545

(2)

Benchmarking

547

(2)

Operating Indicator Analysis

549

(2)

Limitations of Financial Performance Analysis

551

(10)

Lease Financing and Business Valuation

561

(30)

Leasing Basics

561

(2)

Tax Effects

563

(2)

Balance Sheet Effects

565

(2)

Lease Evaluation

567

(7)

Motivations for Leasing

574

(4)

Business Valuation

578

(13)

Index

591

(12)

About the Author

603

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Healthcare Finance: An Introduction To Accounting And Financial Management

Table of Contents

Supplemental Materials