DETAILED CONTENTS. Preface...xxi. Part I The Healthcare Environment

Transcription

1 DETAILED CONTENTS Preface...xxi Part I The Healthcare Environment Chapter 1. Introduction to Healthcare Financial Management...3 Learning Objectives...3 Introduction...3 How to Use This Book...4 The Role of Financial Management in the Health Services Industry...6 Current Challenges...8 Organizational Goals...9 Tax Laws...13 Depreciation...21 Health Reform and Financial Management...25 Chapter Key Concepts...29 Chapter Models, Problems, and Mini-Cases...30 Selected Bibliography...31 Selected Websites...32 Notes...32 Supplement. Forms of Business Organization, Ownership, and Structure...33 Supplement Learning Objectives...33 Forms of Business Organization...33 Alternative Forms of Ownership...38 Organizational Structures...42 Supplement Key Concepts...46 Supplement Bibliography...47 Supplement Websites...47 Supplement Notes...47 vii

2 viii Detailed Contents Chapter 2. Health Insurance...49 Learning Objectives...49 Introduction...49 Insurance Concepts...50 Major Health Insurers (Third-Party Payers)...57 Private Insurers...57 Public Insurers...61 Development of Premium Rates...63 Consumer-Directed Health Plans...71 Value-Based Benefit and Insurance Design...75 Health Reform and Health Insurance...76 Chapter Key Concepts...79 Selected Case...81 Selected Bibliography...81 Selected Websites...81 Notes...82 Chapter 3. Payments to Providers...83 Learning Objectives...83 Introduction...83 Coding: The Foundation of Fee-for-Service Reimbursement...83 Generic Reimbursement Methods...85 Financial Incentives to Providers...89 Financial Risks to Providers...93 Reimbursement Methods Used by Medicare...95 Pay for Performance Health Reform and Payments to Providers Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Case Selected Bibliography Selected Websites Note Supplement. Risk Sharing Under Capitation Supplement Learning Objectives The Need for Risk Sharing Primary Care Withhold: Single Risk Pool Primary Care and Referral Withholds: Two Risk Pools...120

3 Detailed Contents ix Supplement Key Concept Supplement Case Part II Basic Financial Management Concepts Chapter 4. Time Value Analysis Learning Objectives Introduction Time Lines Future Value of a Lump Sum (Compounding) Present Value of a Lump Sum (Discounting) Opportunity Costs Solving for Interest Rate and Time Annuities Perpetuities Uneven Cash Flow Streams Using Time Value Analysis to Measure ROI Semiannual and Other Compounding Periods Amortized Loans A Review of Interest Rate Types Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Case Selected Resources Selected Website Notes Integrative Application The Problem The Analysis The Decision Chapter 5. Financial Risk and Required Return Learning Objectives Introduction The Many Faces of Financial Risk Introduction to Financial Risk Risk Aversion Probability Distributions Expected and Realized Rates of Return Stand-Alone Risk...177

4 x Detailed Contents Portfolio Risk and Return Portfolio Risk of Business Investments Portfolio Risk of Stocks (Entire Businesses) Portfolio Betas Relevance of the Risk Measures Interpretation of the Risk Measures The Relationship Between Risk and Return Some Thoughts About Beta and the CAPM Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Case Selected Bibliography Selected Websites Notes Integrative Application The Problem The Analysis The Decision Part III Capital Acquisition Chapter 6. Debt Financing Learning Objectives Introduction The Cost of Money Long-Term Debt Term Loans Bonds Short-Term Debt Credit Ratings Interest Rate Components Term Structure of Interest Rates Advantages and Disadvantages of Debt Financing Securities Valuation The General Valuation Model Debt Valuation Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Cases...253

5 Detailed Contents xi Selected Bibliography Selected Websites Notes Integrative Application The Problem The Analysis The Decision Supplement. Interest Rate Levels, Types of Short- Term Debt, Debt Contracts, Bond Insurance, Debt Refunding, and Economic Factors That Influence Interest Rate Levels Supplement Learning Objectives Interest Rate Levels Types of Short-Term Debt Debt Contracts Bond Insurance Debt Refunding Economic Factors That Influence Interest Rate Levels Supplement Key Concepts Chapter 7. Equity Financing Learning Objectives Introduction Rights and Privileges of Common Stockholders Selling New Common Stock The Market for Common Stock The Decision to Go Public Advantages and Disadvantages of Common Stock Financing Equity in Not-for-Profit Corporations Common Stock Valuation Security Market Equilibrium Informational Efficiency The Risk/Return Trade-Off Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Case...313

6 xii Detailed Contents Selected Bibliography Selected Websites Notes Integrative Application The Problem The Analysis The Decision Supplement. Classified Stock, Preferred Stock, Securities Regulation, and the Investment Banking Process Supplement Learning Objectives Classified Stock Preferred Stock Securities Regulation The Investment Banking Process Supplement Key Concepts Supplement Websites Chapter 8. Lease Financing Learning Objective Introduction Lease Parties and Types Per Procedure Versus Fixed Payment Leases Tax Effects Balance Sheet Effects Evaluation by the Lessee Evaluation by the Lessor Lease Analysis Symmetry Setting the Lease Payment Leveraged Leases Motivations for Leasing Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Case Selected Bibliography Selected Websites Notes Integrative Application The Problem...364

7 Detailed Contents xiii The Analysis The Decision Part IV Cost of Capital and Capital Structure Chapter 9. Cost of Capital Learning Objectives Introduction Overview of the Cost-of-Capital Estimation Process Estimating the Cost of Debt Estimating the Cost of Equity to Large Investor- Owned Businesses Estimating the Cost of Equity to Not-for-Profit Businesses Estimating the Corporate Cost of Capital An Economic Interpretation of the Corporate Cost of Capital Flotation Costs Divisional Costs of Capital Warning! Warning! Warning! Cost-of-Capital Estimation for Small Businesses Factors That Influence a Business s Cost of Capital Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Case Selected Bibliography Selected Websites Notes Integrative Application The Problem The Analysis The Decision Supplement. Measuring the Cost of Fund Capital Supplement Learning Objectives Measuring the Cost of Fund Capital Supplement Key Concepts Chapter 10. Capital Structure Learning Objectives...417

8 xiv Detailed Contents Introduction Impact of Debt Financing on Risk and Return Business and Financial Risk Capital Structure Theory The Miller Model Criticisms of the MM and Miller Models Financial Distress Costs Trade-Off Models Asymmetric Information Model of Capital Structure Summary of the Capital Structure Models Application of Capital Structure Theory to Not-for-Profit Firms Making the Capital Structure Decision Capital Structure Decisions for Small Investor- Owned Businesses Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Case Selected Bibliography Selected Websites Notes Integrative Application The Problem The Analysis The Decision Supplement. The Debt Maturity Decision Supplement Learning Objectives The Concept of Temporary and Permanent Assets Alternative Debt Maturity Policies Conclusions Regarding Debt Maturities Supplement Key Concepts Part V Capital Allocation Chapter 11. Capital Budgeting Learning Objectives Introduction Project Classifications...470

9 Detailed Contents xv The Role of Financial Analysis in Health Services Capital Budgeting Overview of Capital Budgeting Financial Analysis Cash Flow Estimation Cash Flow Estimation Example Breakeven Analysis Return on Investment Analysis Some Final Thoughts on Breakeven and Profitability Analysis Evaluating Projects with Unequal Lives Economic Life Versus Physical Life (Abandonment Value) Capital Budgeting in Not-for-Profit Businesses The Post-Audit Using Capital Budgeting Techniques in Other Contexts Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Case Selected Bibliography Selected Website Notes Integrative Application The Problem The Analysis The Decision Chapter 12. Project Risk Analysis Learning Objectives Introduction Types of Project Risk Relationships Among Stand-Alone, Corporate, and Market Risks Risk Analysis Illustration Sensitivity Analysis Scenario Analysis Monte Carlo Simulation Qualitative Risk Assessment Incorporating Risk into the Decision Process...536

10 xvi Detailed Contents Final Risk Assessment and Incorporation for the MRI Project Incorporating Debt Capacity into the Decision Process Adjusting Cash Outflows for Risk Real (Managerial) Options The Real Option of Abandonment An Overview of the Capital Budgeting Decision Process Capital Rationing Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Cases Selected Bibliography Selected Websites Notes Integrative Application The Problem The Analysis The Decision Part VI Financial Condition Analysis and Forecasting Chapter 13. Financial Condition Analysis Learning Objectives Introduction Financial Reporting in the Health Services Industry Financial Statement Analysis Ratio Analysis Tying the Ratios Together: Du Pont Analysis Operating Indicator Analysis Limitations of Financial Statement and Operating Indicator Analyses Economic Value Added Benchmarking Key Performance Indicators and Dashboards Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Cases Selected Bibliography...601

11 Detailed Contents xvii Selected Websites Notes Integrative Application The Problem The Analysis The Decision Supplement. Market Value Ratios, Common Size Analysis, and Percentage Change Analysis Supplement Learning Objectives Market Value Ratios Common Size Analysis Percentage Change Analysis Supplement Key Concepts Chapter 14. Financial Forecasting Learning Objectives Introduction Strategic Planning Operational Planning Financial Planning Revenue Forecasts Creating Forecasted Financial Statements Constant Growth Forecasting Factors That Influence the External Financing Requirement Problems with the Constant Growth Method Real-World Forecasting Computerized Financial Forecasting Models Financial Controls Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Cases Selected Bibliography Selected Websites Notes Integrative Application The Problem The Analysis The Decision...648

12 xviii Detailed Contents Part VII Other Topics Chapter 15. Revenue Cycle and Current Accounts Management Learning Objectives Introduction Cash Management Marketable Securities Management Revenue Cycle Management Supply Chain Management Current Liability Management Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Cases Selected Bibliography Selected Websites Notes Integrative Application The Problem The Analysis The Decision Supplement. Long-Term Securities Management, Credit Policy, and the EOQ Model Supplement Learning Objectives Long-Term Securities Management Credit Policy The Economic Ordering Quantity Model Supplement Key Concepts Chapter 16. Business Combinations and Valuation Learning Objectives Introduction Level of Merger Activity Motives for Mergers: The Good, the Bad, and the Ugly Types of Mergers Hostile Versus Friendly Takeovers Mergers Involving Not-for-Profit Businesses Business Valuation Unique Problems in Valuing Small Businesses...718

13 Detailed Contents xix Setting the Bid Price Structuring the Takeover Bid Due Diligence Analysis Corporate Alliances Goodwill Chapter Key Concepts Chapter Models, Problems, and Mini-Cases Selected Cases Selected Bibliography Selected Websites Notes Integrative Application The Problem The Analysis The Decision Supplement. Merger Regulation, the Role of Investment Bankers, and Who Wins? The Empirical Evidence Supplement Learning Objectives Merger Regulation The Role of Investment Bankers Who Wins? The Empirical Evidence Supplement Key Concepts Glossary Appendix: Key Formulas in Chapters Index About the Authors...817