CALIFORNIA STATE UNIVERSITY, LONG BEACHCollege of Health and Human Services

HEALTH CARE ADMINISTRATION PROGRAM562-985-5694 (Office). 562-985-5886 (Fax)

Fall 2008

HCA 515ADVANCED FINANCIAL MANAGEMENT IN HEALTH CARE

(3 Semester Hours)

Tuesdays7:00 – 9:45

ET 105

INSTRUCTOR

Tony Sinay, Ph.D.Professor and DirectorOffice: 562-985-5304

tsinay@csulb.edu

Office Hours

5:00 – 6:30 T 3:00 – 4:00 W and by appointment

HCA 515 ADVANCED FINANCIAL MANAGEMENT IN HEALTH CARE

3 Semester Hours

Catalog Description:

Financial environment, payment systems, discounted cash flow analysis, risk, financial statements, capital investments, and capital budgeting. Emphasis on decision making using accounting and finance theories, principles, concepts and techniques.

Pre-requisites:

Accounting 201 or equivalent.

Primary Goal:

Develop analytical and decision-making skills using accounting and finance theories, principles, concepts and techniques most important to health care administrators.

Course Objectives:

At the successful completion of this course, the student will: gain specific factual knowledge in health care finance including concepts, terminology,

classifications, methods and trends, know the use of computer spreadsheets for financial analysis, budgeting and

forecasting, and other financial management areas, learn how to use a financial calculator for health care management, develop competency with the analytical tools used by financial managers to solve

specific cases, understand the importance of financial management for health care organizations in a

rapidly changing medical delivery system, apply financial management concepts to health care settings using case studies and

assignments, demonstrate written and oral communication skills through analysis of case studies, be able to discuss key topics in health care finance and express opinions.

Required Texts and Supplies:

(1) Gapenski, L. C. (2007). Understanding Health Care Financial Management, Fifth Edition,

Chicago, IL; AUPHA-Health Administration Press.

(2) Gapenski, L.C. (2006) Cases in Healthcare Finance, 3rd Edition, Chicago, IL: AUPHA-

Health Administration Press.

(3) Business calculator-BA Models such as Texas Instruments BA-IIPLUS or SHARP EL-

733A.

Class Format:

This course will consist of extensive lectures, class discussions, assignments, group projects, and presentations. The instructor will explain topics in class, as scheduled and supplementary materials will be handed out when needed.

Case Presentation and Analysis: Each group, which consists of two or three students, will present one case from selected cases. Group and case assignments will be made in the first class. Each group should plan for a formal presentation with overheads, computer slides and handouts (PowerPoint required). These case presentations should take no longer than 25 minutes including time for questions.

Executive Summaries: Each student must turn in a total of two executive summaries from other student presentations. The executive summaries are accepted until the last day of the semester. They should be no longer than one page in length, single-spaced, 11-12 point type. Students should highlight the important findings and conclusions of the presentation.

Assignments: To get the most out of this class, students should read the material assigned prior to each Saturday class. There will be three short assignments (two three problems each) for selected weeks and be collected the following week. Students should complete the assignment and turn it in the following scheduled class. A financial calculator is needed for many of these assignments.

Written Case: Students will prepare a written case analysis from the assigned case study. The written case analysis should be no more than 12-15 pages in length. A review of case facts should be limited to one page or less. The analysis should be doubled-spaced and in 11-12 point type. The last day to turn in the written case is Dec. 11. (Earlier submissions are welcome). Each group will prepare ONLY ONE paper. Below is a general outline of a typical case analysis:

Exams: There will be a midterm and a final exam in this class. Midterm exam will be given in-class with multiple choice, and short essay questions and problems. Final exam will be take-home. Students may NOT discuss this exam with others and the written answers must be in the student’s own words and reflect their own analysis of the problem or issue. The take home exam must be word-processed and adhere to page limits indicated on the exam. Final exam will be distributed on Dec. 11and be completed by Dec. 18 which will be comprehensive. Please follow the directions on the final exam.

Absences: Attendance and participation are expected for all classes. If a student is ill, please inform the professor prior to the class and turn in the work as soon as possible. Students will receive no credit for unexcused late work. Please note that class participation grade is heavily influenced by your attendance.

Course Evaluation:

Success in achieving the course objectives will be evaluated with the following instruments. Students can accumulate up to 460 points from all course requirements.

Points WeightsWritten Case Analysis 100 points 21.7%Midterm I 100 points 21.7%Final 100 points 21.7%Class Assignments 60 points 13.0 [3 x 20 points]Case Presentation 60 points 13.0%Class Participation 40 points 8.7% TOTAL 460 points ~100%

Cutoff Points

A = 440 - 396 pointsB = 395 - 352 pointsC = 351 - 308 pointsF = less than 308 points

Tentatively Selected Cases for Analysis:

Case 1. Creekside Community Hospital (A)-financial statement analysisCase 2. Old Dominion Health Plans-benchmarking in managed care industryCase 6. Fairbanks Memorial Hospital-break-even analysisCase 8. Snowmass Village Clinic-cash budgetingCase 19. Florida Keys Hospital-capital budgetingCase 20. National Rehabilitation Centers-capital investments in stagesCase 21. New Orleans Health System-make or outsource Case 23. Lowcountry Health Partners-joint ventureCase 24. Madison Clinics-Valuing a physician practiceCase 25. Shasta Health System-financial assessment of physician extendersCase 29. Creekside Community Hospital (B)-financial forecastingCase 30. Silverton Healthcare-payment system from fee-for-service to PMPM

CHEATING AND PLAGIARISM

The following is excerpted from the California State University, Long Beach Policy Statement 85-19, dated December 13, 1985.

It is the policy of the faculty and administration to deal effectively with the student who practices cheating or plagiarism. These acts are fundamentally destructive of the process of education and the confident evaluation of a student's mastery over a subject. A University maintains respect and functions successfully within the larger community when its reputation is built on honesty. By the same token, each student benefits in helping to maintain the integrity of the University. This policy, therefore, provides for a variety of faculty actions including those which may lead to the assignment of a failing grade for a course and for administrative actions which may lead to dismissal from the University. It is the intent to support the traditional values that students are on their honor to perform their academic duties in an ethical manner. GENERAL:

The following definitions of cheating and plagiarism shall apply to all work submitted by a student.

DEFINITION OF PLAGIARISM:

Plagiarism is defined as the act of using the ideas or work of another person or persons as if they were one's own, without giving credit to the source. Such an act is not plagiarism if it is ascertained that the ideas were arrived at through independent reasoning or logic or where the thought or idea is common knowledge.

Acknowledgement of an original author or source must be made through appropriate references, i.e., quotation marks, footnotes, or commentary. Examples of plagiarism include, but are not limited to, the following: the submission of a work, either in part or in whole, completed by another; failure to give credit for ideas, statements, facts or conclusions with rightfully belong to another; in written work, failure to use quotation marks when quoting directly from another, whether it be a paragraph, a sentence, or even a part thereof. If you are doing close and lengthy paraphrasing of another writing or paraphrasing, you should consult the instructor.

Students are cautioned that, in conducting their research, they should prepare their notes by (a) either quoting material exactly (using quotation marks) at the time they take notes from a source; or (b) departing completely from the language used in the source, putting the material into their own words. In this way, when the material is used in the paper or project, the student can avoid plagiarism resulting from verbatim use of notes. Both quoted and paraphrased materials must be given proper citations.

DEFINITION OF CHEATING:

Cheating is defined as the act of obtaining or attempting to obtain or aiding another to obtain academic credit for work by the use of any dishonest, deceptive or fraudulent means. Examples of cheating during an examination would include, but not be limited to the following: copying, either in part or in wholes, from another test or examination; discussion of answers or ideas relating to the answers on an examination or test unless such discussion is specifically authorized by the instructor; giving or receiving copies of an exam without the permission of the instructor; using or displaying notes; "cheat sheets," or other information or devices inappropriate to the prescribed test conditions, as when the test of competence includes a test of unassisted recall of information, skill, or procedure; allowing someone other than the officially enrolled student to represent the same. Also included is plagiarism as defined and altering or interfering with the grading procedures.

It is often appropriate for students to study together or to work in teams on projects. However, such students should be careful to avoid use of unauthorized assistance, and to avoid any implication of cheating, by such means as sitting apart from one another in examinations, presenting the work in a manner which clearly indicates the effort of each individual, or such other method as is appropriate to the particular course.

ACADEMIC ACTION:

One or more of the following academic actions are available to the faculty member who finds a student has been cheating or plagiarizing.

(a) Review -- no action. (b) An oral reprimand with emphasis on counseling toward prevention of further

occurrences; (c) A requirement that the work be repeated; (d) Assignment of a score of zero (0) for the specific demonstration of competence,

resulting in the proportional reduction of final course grade; (e) Assignment of a failing final grade; (f) Referral to the Office of Judicial Affairs for possible probation, suspension, or

expulsion.

Although the University catalog does not cover this aspect of plagiarism, please be aware that it is NOT acceptable to submit the same paper for two courses. If you want to write a paper on the same topic area for two different courses, you must submit two different papers. If the faculty discovers that you have submitted the same paper for another course, you will receive a failing grade for your paper in this course.

TOPIC OUTLINEWEEK/DATE CONTENT/ACTIVITY/READINGS

Sept. 2 Introductions, Course Syllabus/OutlineCase and Group AssignmentsPart I The Healthcare EnvironmentIntroduction to healthcare financial management Chapter 1

Definition of health care financeGoals of the course The role of healthcare financeThe health services industryRegulatory and legal issuesAlternative forms of business organizationAlternative forms of ownershipTaxes and financial decisionsDepreciation

Sept. 9 Third party payer system Chapter 2Insurance conceptBasic characteristics of insuranceGeneric reimbursement methodsThird part payersMedicare payment systemsManaged care payment systems

Sept. 16, 23 Part II Basic Financial Management ConceptsBRING YOUR FINANCIAL CALCULATORTime value analysis Chapter 3

Future and present valuesLump sumsAnnuitiesSolving for I and NInvestment returnsAmortizationASSIGNMENT I DISTRIBUTED

Sept. 30 Financial risk and required return Chapter 4Financial risk basicsStand-alone riskPortfolio riskCorporate riskMarket risk

Oct. 7 Part III Capital Acquisition Debt Financing (READ)Chapter 5

Long term debtShort term debtCredit ratingsInterest rate componentsThe term structure of interest rates

Equity Financing (READ)Chapter 6

Preferred stockCommon stockThe Market for common stockRegulation of securities marketsEquity in not-for-profit institutions

Securities Valuation (LECTURE) Chapter 7The general valuation modelDebt valuationPreferred and common stock valuationInformational efficiency ASSIGNMENT II DISTRIBUTED

Oct. 14 Part IV Cost of Capital and Capital StructureCost of Capital Chapter 9

Capital asset pricing modelDiscounted cash flow approachCost of fund capital

Oct. 21 MIDTERM EXAM

Oct. 28 Part V Capital Allocation Chapter 11The Basics of Capital Budgeting

Relevance to the health careCash flow estimationBreakeven analysisProfitability analysisInternal rate of returnNet present value

Nov. 4 Project Risk Analysis Chapter 12Types of project risksSensitivity analysisScenario analysisMonte Carlo simulation analysisDecision tree analysis

Nov. 11 Part VI Financial Analysis and ForecastingOverview of financial statementsFinancial and Operating Analysis Chapter 13

Ratio AnalysisDu Pont Analysis Percentage Change AnalysisCommon Size AnalysisOperating AnalysisASSIGNMENT III DISTRIBUTED

Nov. 18 Financial Forecasting Chapter 14Strategic PlanningOperating plansThe financial planForecasting

Sustainable growthCash budgeting

Nov. 25 Working Capital Management Chapter 15Cash Management TechniquesMarketable securities managementReceivables managementCredit policyInventory managementCASE PRESENTATION

Dec. 2 Capitation, Rate Setting and Risk Sharing Chapter 19Provider incentives under capitationFinancial risk under capitationDeveloping Premium RatesRisk Sharing ArrangementsWithholdsCASE PRESENTATIONS

Dec. 11CASE PRESENTATIONSWRITTEN CASES DUE FINAL EXAM DISTRIBUTED

Dec. 18 FINAL EXAM DUE

Supplemental Readings

Hsiao, Braun, Kelly, and Becker, "Results, Potential Effects, and Implementation Issues of the Resource-Based Relative Value Scale, JAMA, October 28, 1988.

Boles and Glenn, “What Accounting Leaves Out of Hospital Financial Management,” Hospital and Health Services Administration, March/April 1986.

Cleverly and Nutt, “The Decision Process Used for Hospital Bond Rating-and its Implications,” Health Services Research, December 1984.

Wheeler and Smith, ‘The Discount Rate for Capital Expenditure Analysis in Health Care,” Healthcare Management Review, 13(2), 1988, 43-51.

Kennedy and Plath, “A Return-Based Alternative to IRR Evaluations,” Healthcare Financial Management, March 1994, 38-49.

Gapenski, “Capital Investment Analysis: Three Methods,” Healthcare Financial Management, Aug. 1993, 60-66.

Cleverly, “Financial Ratios, Summary Indicators for Management Decision-Making,” Hospital and Health Services Administration / Special I, 1981, 26-47.

Additional Readings

Anderson, G. F., Steinberg, E. P., Powe, N. R., and et. al. 1990. “Setting Payment Rates for Capitated Systems: A Comparison of Various Alternatives.” Inquiry 27, 225-233.

Cleverly, W. and Harvey, R. 1992. “Does Hospital Financial Performance Measure Up?” Health Care Financial Management 46(5), 21-26

Deatsch, D. G., and Shaw, D. S. 1990. “Physician Reimbursement: the Need for Change. Topics in Health Care Financing 16(3), 58-67.

Epstein, A. M., and Cumella, E. J. 1988. “Capitation Payment: Using Predictions of Medical Utilization to Adjust Rates.” Health Care Financing Review 10(1), 51-69.

Giacomino, D. 1993. “Cash Flows: Another Approach to Ratio Analysis.” Journal of Accountancy, March 1993, 55-?

Ginsburg, P. B., LeRoy, L. B., and Hammons, G. T. 1990. “Medicare Physician Payment Reform.” Health Affairs 9(1), 178-88.

Hadley, J., and Swartz, K. 1989. “The Impact on Hospital Costs between 1980 and 1984 of Hospital Rate Regulation, Competition and Changes in Health Insurance Coverage.” Inquiry 26, 35-47.

Hoerger, T. J., and Waters, T. M. 1993. “Competitive Bidding for Medicare Services.” Medical Care 31(10), 879-97.

Iglehart, J. K. 1991. “The Struggle Over Physician Payment Reform.” New England Journal of Medicine 325(11), 823-8.

Mitchell, J., and Ellis, R. P. 1992. “Alternative Payment Systems for Hospital Medical Staffs.” Inquiry 29, 33-43.

Muller, A. 1993. “Medicare Prospective Payment Reforms and Hospital Utilization: Temporary or Lasting Effects.” Medical Care 31(4), 296-308.

Newhouse, J. P., Manning, W. G., Keeler, E. B., and Sloss, E. M. 1989. “Adjusting Capitation Rates Using Objective Health Measures and Prior utilization.” Health Care Financing Review 10(1), 41-53.

Rogers, M., and Rothe, K. 1993. “Integrating Capital Budgeting techniques.” Health Care Strategic Management 10(2), 7-10.

Sherman, B. 1990. ‘How Investors Evaluate Hospitals’ Creditworthiness.” Healthcare Financial Management 44(3), 24-30.

Stearns, S. C. Wolfe, B. L. and Kindig, D. A. 1992. “Physician responses to Fee-For-Service and Capitation Payment.” Inquiry 29(4), 416-25.

Sunders, R., and et. al. 1993. “Strategic Capital Planning Scenarios for the Future.” Healthcare Financial Management 48(4), 50-53.

Watts, D., and et. al. 1993. “Integrating Technology Assessment Into the Capital Budgeting Process.” Healthcare Financial Management 47(2), 21-30.

Weiner, J. P., Starfield, B. H., Steinwachs, D. M., and Mumford, L. M. 1991. “Development and Application of Population-Oriented Measure of Ambulatory Care Case-Mix.” Medical Care 29(5), 452-72.

Whitcombe, M. E., and Cleverly, W. O. 1993. “Financial Performance of Academic Medical Center Hospitals.” Academic Medicine 68(10), 729-31.

Zuckerman, S. 1987. “Rate-Setting and Hospital Cost-Containment: All Payer Versus Partial -Payer Approaches.” Health Services Research 22(3), 307-26.

Case Presentation Evaluation Form

This presentation should be high quality, appropriate for a graduate study, and suitable for the board of a local health care organization. It may be done alone, or with classmates in which case both students will receive the same grade. Work-in-progress may be reviewed by the instructor for preliminary feedback. The presentation should be 25-30 minutes long, although additional time may be scheduled in advance. The Presentation should educate the audience and at least:

a. clearly state and explain the underlying case issue (s) and problem (s) to be resolvedb. describe and explain relevant health, economic, finance, and historical background of the case, issue, or

problemc. argue for and against potential solution (s)d. describe the solution (s) and its actual or likely implementatione. explain the actual (or expected ) results of the solution and relate them to the original problems and

issuesf. explain how this solution (s) is viewed by relevant interest groups in the organization and how it affects

(or is likely to affect) various departmentsg. suggest what you think will be implemented

Name: Topic: Date:

Criteria Points Comments/Suggestions

Introduction[0 – 5 points]

Focus[0 – 3]

Organization[0 – 5]

Content (a- g above)[0 – 20]

Original thinking[0 – 5]

Use of time[0 – 2]

Delivery[0 – 10]

Computer-made visuals[0 –5]

Discussion[0 – 5]…………………………………………………………………………………………………………………Total [0 –60]

Written Case Evaluation Form

This paper should be high quality, appropriate for a graduate study, and suitable for the board of a local health care organization. It may be done alone, or with classmates in which case both students will receive the same grade. Work-in-progress may be reviewed by the instructor for preliminary feedback. The paper should be written in APA style and could be no more than 15 pages long (one paper for each group). The content of the paper should educate the audience and at least:

a. clearly state and explain the underlying case issue (s) and problem (s) to be resolvedb. describe and explain relevant health, economic, finance, and historical background of the case,

issue, or problemc. argue for and against potential solution (s)d. describe the solution (s) and its actual or likely implementatione. explain the actual (or expected ) results of the solution and relate them to the original problems and

issuesf. explain how this solution (s) is viewed by relevant interest groups and how it affects (or is likely to

affect) various departmentsg. suggest what you think will be implemented (s)

Name: Topic: Date:Criteria Points Comments/Suggestions

Introduction[0 – 5 points]

Focus[0 – 5]

Organization[0 – 10]

Content (a- g above)[0 – 40]

Original thinking[0 – 5]

Use of references[0 – 5]

Writing, grammar, punctuation[0 – 15]

Tables, graphs[0 –5]

Discussion[0 – 5]

Timing[0 – 5] …………………………………………………………………………………………………………………Total [0 –100]

TEAM MEMBERS RATING FORM

Your name:Date:

Team project:

The ratings you provide on this form will be used to determine individual grades for your fellow team members. If you feel that someone has contributed less than, or more than, a fair share, then you can reflect those feelings on this evaluation form. As you consider each team member’s contribution, you should think about such things as:

1. attending team meetings2. defining and clarifying tasks3. researching and gathering need information4. analysis and problem solving5. working well with others6. ensuring that final products are done well7. giving time, effort, and energy,8. offering useful ideas9. helping to lead the team10. other contributions to the team and project

Rate each team member, excluding yourself, in terms of above criteria. List the names of the team members other than yourself, in the spaces below. Then, assign a number of points to each person to reflect your rating for each person’s contribution to the team project. These ratings must total 100. Someone who contributed more to the team would receive a higher number of points than someone who contributed less. Remember, the points must total 100. The instructor will use this information to assign an individual grade to each team member.

Group Member Names Points Assigned

Total points=100

Comments (Use other side if necessary)

Are there problems in the group such that the instructor should intervene? If so, for what purpose? (Use the other side if necessary).

STUDENT INFORMATION SHEETHCA 515 – Fall 2004

(TURN IN TO INSTRUCTOR)

Name___________________________________________________________

Name you prefer to use____________________________________________

Address_________________________________________________________

________________________________________________________________

Phone(s):________________________________________________________

Best time/place to reach you:_______________________________________

Fax(es):_________________________________________________________

E-mail address:__________________________________________________

Please describe briefly:

a. Your educational background and work experience:

b. Future educational and career plans:

c. Your reasons for taking this course, what you hope to learn from it:

d. Languages you speak, read and write