1. b All are essential in capital project budgeting except projecting bad debt of the year

2. C-Historical events is not a primary focus of Managerial account

3. C. Capitation

4. d. Capital budget is part of the strateguic plan and therefore completed evey 5 years

Agree with the above responses for Questions 1 & 2...

Q3: (d) Agree with Steve...Payment on charges creates an incentive to provide "more" care, rather than focusing on what is medically necessary.

Q4: (b) Nowicki states that capital budgeting occurs after the strategic plan, the operating plan, and the operating budget have been completed.

1. B
2. C; Historical events is not a primary focus
3. D; Allows the HCO to focus on what is medically necessary
4. C; I agree with Rick.

1. B - Bad debt calculations are part of the operating budget.

2. B - I agree with Rick. The allocation of bonuses is a performance management issue.

3. D - Charges provide the least incentive to providing only what is medically necessary, since this methodology generally reimburses the organization of a greater portion of costs incurred.

4. B - In my experience, the capital budget is finalized after the operating budget is complete. This allows the organization to have a clearer sense of how margins will contribute to financing future plans. However, the practice of using the strategic and operating plans to build a needs list (prior to completing the operating budget) and preliminary capital budget can be helpful in determining how aggressive the strategy, operating budget, and fund raising plans need to/can be, so a strong practical argument for C can be made as well.