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Kaplan HCA 440 Unit 4 Assignment 2014




Question;Name;Unit 4;Assignment;Short;Answer (2 @ 5 = 10);1. List and discuss the three;payment-determination bases.;2.;List;and describe the three categories of net assets.;Multiple;Choice (4 @ 4 = 16);3. Which of the following is not a ?principle?;of financial accounting?;A. Historical cost;B. Revenue recognition;C. Continuity;D. Matching;E. Full;disclosure;4. Accounts receivable (net) increased;by $500,000 during the year. This increase has what effect on cash flow?;A. Reduces it;B. Increases;it;C. No;effect;5. In 20X4, Olentangy Health Care;(OHC)?s cost of capital was 6%. Its investments on a historical cost valuation;basis are $80,000, on a replacement cost basis are $100,000, and on a current;market value basis are $110,000. If you were on OHC?s board, what minimum level;of annual cash flow would you require in order to continue operations and;proceed with planned significant new investments?;$6,000. Significant new;investments should be made only if the return based on replacement cost is;greater than the firm?s cost of capital. So, what cash flow, when divided;$100,000, gives 6%.;A. $4,800;B. $6,000;C. $6,600;D. $8,000;6. Beverly Enterprises owns a nursing;home that is currently earning $2.0 million in cash flow on an annual basis, but;this amount is expected to drop in the future. The nursing home has a book;value of $20 million, a replacement cost of $40 million, and a current sale;value of $10 million. If Beverly Enterprises has a cost of capital equal to 15;percent, at what value of annual cash flow would Beverly Enterprises be likely;to sell the nursing home?;A. $1,500,000;B. $2,000,000;C. $4,000,000;Numeric;Problems (4 @ 6 = 24);For;the following four problems, start with the price-setting example from the;text. The initial assumptions are provided in the table below.;Total cost;$100,000;Total volume;1,000;Average cost;$100;Payer volumes;Medicare (payment;rate = $95);400;Medicaid (payment;rate = $75);100;Managed Care #;1;(payment rate = $110);300;Managed Care #;2 (pay;80% of charges);100;Uninsured (pay;10% of charges);100;Total all payers;1,000;Desired net;income;$5,000;7.;Medicare;and Medicaid presently account for 50% of the volume. The hospital wishes to;reduce its dependence on government payers. Assume that Medicare volume is;reduced to 380 patients and Medicaid volume is reduced to 90 patients. The;volume from managed-care plan #1 rises to 320 patients from 300. The volume;from managed-care plan #2 increases to 110 patients. Thus, total volume is;unchanged at 1,000 visits. What is the new price necessary assuming all other;factors are unchanged?;8.;Start;with the original assumptions. The hospital is facing pressure from;public-interest groups to control the prices it charges to the uninsured.;Assume that the hospital is able through various efficiencies to cut its;per-visit cost by 5%. It also negotiates a 7% increase with managed-care plan;#1. Assuming all other factors are unchanged, what is the new required price?;9.;Start;with the original assumptions. Notice that managed care plan #1 receives a much;lower price in return for sending a larger volume of patients. Managed care;plan #2 (MC#2) wants to pay a lower cost;per case and is willing to send 250 more patients (350 total from MC#2) to the;clinic in return for a rate of $110 per case. Assume that the average cost per;case drops to $90 due to the economies of scale. All other assumptions are;unchanged. What is the new required price?;10.;Start;with the assumptions in problem 9. But now assume that the additional volume;does not enable enough economies-of-scale to reduce the average cost per case;as much as originally anticipated. Assume now that the average cost per case;drops only to $95. What is the new required price?


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