Latest AHM-520 Free Dumps For Health Plan Finance And Risk Management Certification

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The Landau health plan will switch from using top-down budgeting to using bottom-up budgeting. One potential advantage to Landau of making this switch is that, compared to top-down budgeting, bottom-up budgeting is more likely to

  • A. Require little time or labor to complete
  • B. Enable Landau to incorporate key changes in regulatory requirements on a timely basis
  • C. Reflect top management's intentions for Landau
  • D. Reflect the realities of day-to-day operations

Answer: B


The core of a health plan's strategic financial plan is the development of its pro forma financial statements. The following statements are about these pro forma financial statements. Select the answer choice containing the correct statement.

  • A. A health plan's pro forma financial statements forecast what the plan's financial condition will be at the end of an accounting period, without regard to whether the health plan achieves its objectives.
  • B. Forecasting the balance sheet is more critical to the health plan than forecasting either the cash flow statement or the income statement, because the balance sheet drives the development of the other two statements.
  • C. In order to avoid allowing the desired financial results to drive the assumptions used in developing the pro forma income statement, a health plan should avoid linking these assumptions to the health plan's overall strategic plan.
  • D. A health plan can use its pro forma cash flow statement to calculate the net present value of the health plan's strategic plan.

Answer: D


Under the doctrine of corporate negligence, a health plan and its physician administrators may be held directly liable to patients or providers for failing to investigate adequately the competence of healthcare providers whom it employs or with whom it contracts, particularly where the health plan actually provides healthcare services or restricts the patient's/enrollee's choice of physician.

  • A. True
  • B. False

Answer: A


The physicians who work for the Sunrise Health Plan, a staff model HMO, are paid a salary that is not augmented with another type of incentive plan. Compared to the use of a traditional reimbursement method, Sunrise's use of a salary reimbursement method is more likely to

  • A. Encourage Sunrise's physicians to perform services that are not medically necessary
  • B. Completely eliminate service risk for Sunrise's physicians
  • C. Decrease Sunrise's liability for any negligent acts of the physicians in the plan's network of providers
  • D. Help stabilize expenses for Sunrise

Answer: D


The Arista Health Plan is evaluating the following four groups that have applied for group
healthcare coverage:
✑ The Blaise Company, a large private employer
✑ The Colton County Department of Human Services (DHS)
✑ A multiple-employer group comprised of four companies
✑ The Professional Society of Daycare Providers
With respect to the relative degree of risk to Arista represented by these four companies, the company that would most likely expose Arista to the lowest risk is the:

  • A. Blaise Company
  • B. Colton County DHS
  • C. Multiple-employer group
  • D. Professional Society of Daycare Providers

Answer: A


In a comparison of small employer-employee groups to large employer-employee groups, it is correct to say that small employer-employee groups tend to:

  • A. More closely follow actuarial predictions with respect to morbidity rates
  • B. Generate more administrative expenses as a percentage of the total premium amount the group pays
  • C. Have less frequent and smaller claims fluctuations
  • D. Expose an health plan to a lower risk of anti selection

Answer: B


The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.
The following statements are about Puma's evaluation of these investment centers. Select the answer choice containing the correct statement.

  • A. Investment Center Y's RI is greater than Investment Center X's RI.
  • B. The ROI for Investment Center X is 16.7%, and the ROI for Investment Center Y is 20.0%.
  • C. Because Investment Centers X and Y are different sizes, Puma should not use ROI to compare these investment centers.
  • D. According to the evaluation of ROI, Investment Center Y achieves a higher return on its available resources than does Investment Center X.

Answer: D


With regard to the major risk factors associated with group underwriting, it can correctly be stated that, typically,

  • A. The age and gender of group plan members are not predictors of utilization of health services by group members
  • B. A health plan's product design or delivery system has an impact on member selection of the health plan, unless the members are in an environment in which employees have at least two benefit options or health plans from which to choose
  • C. A health plan should track demographic factors of groups only if the plan specifically adjusts for demographic factors on a group basis
  • D. A large group is more likely to exhibit a consistent claims pattern, level of healthcare cost, or utilization of services than is a small group

Answer: D


A health plan that capitates a provider group typically provides or offers to provide stop-loss coverage to that provider group.

  • A. True
  • B. False

Answer: A


The medical loss ratio (MLR) for the Peacock health plan is 80%. Peacock's expense ratio is 16%.
Peacock's MLR and its expense ratio indicate that Peacock

  • A. Has a 4% potential profit margin
  • B. Has a combined ratio of 64%
  • C. Must increase its premium income in order to remain in business
  • D. Must rely on investment income in order to avoid financial losses

Answer: A


All publicly traded health plans in the United States are required to prepare financial statements for use by their external users in accordance with generally accepted accounting principles (GAAP). In addition, health insurers and health plans that fall under the jurisdiction of state insurance departments are required by law to prepare certain financial statements in accordance with statutory accounting practices (SAP). In a comparison of GAAP to SAP, it is correct to say that:

  • A. GAAP is established and promoted by the National Association of Insurance Commissioners (NAIC), whereas SAP is established and promoted by the Financial Accounting Standards Board (FASB)
  • B. The going-concern concept is an underlying premise of GAAP, whereas SAP tends to focus on the liquidation value of the MCO or the insurer
  • C. GAAP provides for a single method of valuing all of a health plan’s assets, whereas SAP offers the health plan more than one method for valuing its assets
  • D. The principle of conservatism is fundamental to GAAP, whereas SAP generally is not conservative in nature

Answer: B


Dr. Martin Cassini is an obstetrician who is under contract with the Bellerby Health Plan. Bellerby compensates Dr. Cassini for each obstetrical patient he sees in the form of a single amount that covers the costs of prenatal visits, the delivery itself, and post-delivery care . This information indicates that Dr. Cassini is compensated under the provider reimbursement method known as a:

  • A. global fee
  • B. relative value scale
  • C. unbundling
  • D. discounted fee-for-service

Answer: A


The provider contract that Dr. Timothy Meyer, a pediatrician, has with the Cardigan health plan states that Cardigan will compensate him under a capitation arrangement. However, the contract also includes a typical low enrollment guarantee provision. Statements that can correctly be made about this arrangement include that the low enrollment guarantee provision most likely:

  • A. Causes D
  • B. Meyer's capitation contract with Cardigan to transfer more risk to him than the contract otherwise would transfer
  • C. Specifies that Cardigan will pay D
  • D. Meyer under an arrangement other than capitation until a specified number of children covered by the plan use him as their PCP
  • E. Both A and B
  • F. A only
  • G. B only
  • H. Neither A nor B

Answer: C


The following statement(s) can correctly be made about a health plan's cash receipts and cash disbursements budgets:

  • A. To predict both the timing and the amount of its cash receipts, a health plan constructs the cash receipts budget using data from its sales forecast and investment forecasts.
  • B. A health plan uses a cash disbursements budget in order to establish the amount, but not the timing, of all of its cash disbursements.
  • C. Both A and B
  • D. A only
  • E. B only
  • F. Neither A nor B

Answer: B


The Harp Company self-funds the health plan for its employees. The plan is administered under a typical administrative-services-only (ASO) arrangement. One true statement about this ASO arrangement is that

  • A. This arrangement prevents Harp from purchasing stop-loss coverage for its health plan
  • B. The amount that Harp pays the administrator to provide the ASO services is not subject to state premium taxes
  • C. The administrator is responsible for paying claims from its own assets if Harp's account is insufficient
  • D. The charges for the ASO services must be stated as a percentage of the amount of claims paid for medical expenses incurred by Harp's covered employees and their dependents

Answer: B


The NAIC has developed a risk-based capital (RBC) formula for all health plans that accept risk. One true statement about the RBC formula for health plans is that it

  • A. is a set of calculations, based on information in a health plan's annual financial report, that yields a target capital requirement for the organization
  • B. fails to take into account a health plan's underwriting risk, which is the risk that the premiums the health plan receives will be insufficient to pay for the healthcare services it provides to its plan members
  • C. applies to all health plans in the United States
  • D. fails to assess the specific level of risk faced by each health plan

Answer: A


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