Top Tips Of Abreast Of The Times AHM-520 Sample Question

NEW QUESTION 1

Assume that the Lambda, Mesa, and Novella health plans are equal in every way except that the health plans have obtained equal amounts of net cash inflows from different sources, as shown below:
HealthPlan Source LambdaFinancing activities MesaInvesting activities NovellaOperating activities
From the following answer choices, select the response which indicates the health plan that would most likely be the most attractive to a potential plan sponsor, to a potential creditor, and to a potential investor.

• A. Potential Plan Sponsor = Lambda Potential Creditor = Mesa Potential Investor = Novella
• B. Potential Plan Sponsor = Lambda Potential Creditor = Novella Potential Investor = Mesa
• C. Potential Plan Sponsor = Novella Potential Creditor = Lambda Potential Investor = Mesa
• D. Potential Plan Sponsor = Novella Potential Creditor = Novella Potential Investor = Novella

Answer: D

NEW QUESTION 2

Dr. Jacob Winburne is compensated by the Honor Health Plan under an arrangement in which Honor establishes at the beginning of a financial period a fund from which claims approved for payment are paid. At the end of the given period, any funds remaining are paid out to providers. This information indicates that the arrangement between Dr. Winburne and Honor includes a provider incentive known as a:

• A. Risk pool, and any deficit in the fund at the end of the period would be the sole responsibility of Honor
• B. Risk pool, and any deficit in the fund at the end of the period would be paid by both D
• C. Winburne and Honor according to percentages agreed upon at the beginning of the contract period
• D. Withhold, and any deficit in the fund at the end of the period would be the sole responsibility of Honor
• E. Withhold, and any deficit in the fund at the end of the period would be paid by both D
• F. Winburne and Honor according to percentages agreed upon at the beginning of the contract period

Answer: A

NEW QUESTION 3

Users of the Fulcrum Health Plan financial information include:
✑ The independent auditors who review Fulcrum's financial statements
✑ Fulcrum's controller (comptroller)
✑ Fulcrum's plan members
✑ The providers that deliver healthcare services to Fulcrum plan members
✑ Fulcrum's competitors
Of these users, the ones that most likely can correctly be classified as external users with a direct financial interest in Fulcrum are the

• A. Independent auditors, the plan members, the providers, and the
• B. Competitors only
• C. Independent auditors, the controller, and the providers only
• D. Controller and the competitors only
• E. Plan members and the providers only

Answer: D

NEW QUESTION 4

The Violin Company offers its employees a triple option of health plans: an HMO, an HMO with a point of service (POS) option, and an indemnity plan.
Premiums are lowest for the HMO option and highest for the indemnity plan. Violin employees who anticipate that they will be individual low utilizes of healthcare services are most likely to enroll in the

• A. HMO and are least likely to enroll in the HMO with the POS option
• B. HMO and are least likely to enroll in the indemnity plan
• C. Indemnity plan and are least likely to enroll in the HMO
• D. Indemnity plan and are least likely to enroll in the HMO with the POS option

Answer: B

NEW QUESTION 5

One true statement about variance analysis is that

• A. A price variance is the difference between the budgeted quantities to be sold and theactual quantities sold, multiplied by the budgeted amount
• B. Variance analysis suggests solutions to a particular problem
• C. Positive variances generally are favorable, from a health plan's point of view, for the plan's expenses but unfavorable for the plan's revenues
• D. An effective variance system typically focuses on matters that require management's attention

Answer: D

NEW QUESTION 6

The following statements are about the capital budgeting technique known as the payback method. Select the answer choice containing the correct statement:

• A. The main benefit of the payback method is that it is simple to use.
• B. The payback method measures the profitability of a given capital project.
• C. The payback method considers the time value of money.
• D. The payback method states a proposed project’s cash flow in terms of present value for the life of the entire project.

Answer: A

NEW QUESTION 7

The Cardinal health plan complies with all of the provisions of HIPAA.
Cardinal has received requests for healthcare coverage from the following companies that meet the statutory definition of a small group:
✑ The Xavier Company has excellent claims experience
✑ The Youngblood Company has not previously offered group healthcare coverage to its employees
✑ The Zebulon Company has poor claims experience
According to HIPAA's provisions, Cardinal must issue a healthcare contract to

• A. Xavier, Youngblood, and Zebulon
• B. Xavier and Youngblood only
• C. Xavier only
• D. None of these companies

Answer: A

NEW QUESTION 8

In order to show the efficiency of a health plan's managers in using the health plan's investments to earn a return for stockholders, a financial analyst most likely would use a type of profitability ratio known as

• A. A net gain-to-total income ratio
• B. An insurance leverage ratio
• C. A statutory return on assets (ROA) ratio
• D. A gross profit ratio

Answer: C

NEW QUESTION 9

Three general strategies that health plans use for controlling types of risk are risk avoidance, risk transfer, and risk acceptance. The following statements are about these strategies. Three of these statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

• A. Generally, the smaller the likely benefits of accepting a risk, and the lower the costs of avoiding that risk, the greater the likelihood that a health plan will elect to avoid the risk.
• B. A health plan is seldom able to transfer any of the risk that utilization rates will be higher than expected and that its cost of providing healthcare will exceed the revenues it receives.
• C. If a risk is a pure risk from the point of view of a health plan, then the health plan most likely will attempt to avoid the risk.
• D. A health plan would most likely transfer some or all of its utilization risk if it pays a provider a rate that is based on the number of plan enrollees that choose the provider as their primary care provider (PCP).

Answer: B

NEW QUESTION 10

Advantages to a company that elects to self-fund and to administer all aspects of its healthcare benefit plan include:

• A. Eliminating state premium taxes
• B. Avoiding state-mandated benefit requirements
• C. Improving its cash flow position
• D. All of the above

Answer: D

NEW QUESTION 11

The following statements indicate the pricing policies of two health plans that operate in a particular market:
✑ The Accent Health Plan consistently underprices its product
✑ The Bolton Health Plan uses extremely strict underwriting practices for the small groups to which it markets its plan
From the following answer choices, select the response that correctly indicates the most likely market effects of the pricing policies used by Accent and Bolton.

• A. Accent = unprofitable business Bolton = high acquisition rate
• B. Accent = unprofitable business Bolton = low acquisition rate
• C. Accent = high profits Bolton = high acquisition rate
• D. Accent = high profits Bolton = low acquisition rate

Answer: B

NEW QUESTION 12

For this question, select the answer choice containing the terms that correctly complete blanks A and B in the paragraph below. The FASB mandates that accounting information must exhibit certain qualitative characteristics. One of these characteristics is ______ A _______, which means that a company's financial statements use the same accounting policies and procedures from one accounting period to the next, unless there is a sound reason for changing a policy or procedure. Another characteristic is ______ B _______, which requires a company to disclose in its financial statements all significant financial information about the company.

• A. A = reliability B = comparability
• B. A = reliability B = materiality
• C. A = consistency B = comparability
• D. A = consistency B = materiality

Answer: D

NEW QUESTION 13

The following statements are about pure risk and speculative risk—two kinds of risk that both businesses and individuals experience. Select the answer choice containing the correct statement.

• A. Healthcare coverage is designed to help plan members avoid pure risk, not speculative risk.
• B. Only pure risk involves the possibility of gain.
• C. An example of speculative risk is the possibility that an individual will contract a serious illness.
• D. Only speculative risk contains an element of uncertainty.

Answer: A

NEW QUESTION 14

A product is often described as having a thin margin or a wide margin. With regard to the factors that help determine the size of the margin of a health plan's product, it can correctly be stated that the

• A. greater the risk a health plan assumes in a health plan, the thinner the product margin should be
• B. more that competition acts to force prices down, the wider the product margins tend to become
• C. greater the demand for the product, the thinner the margin for this product tends to become
• D. longer the premium rates are guaranteed to a group, the wider the health plan's margin should be

Answer: D

NEW QUESTION 15

The sentence below contains two pairs of terms enclosed in parentheses.
Determine which term in each pair correctly completes the statement. Then select the answer choice containing the two terms that you have selected. In analyzing its financial data, a health plan would use (horizontal/common size financial statement) analysis to measure the numerical amount that corresponding items change from one financial statement to another over consecutive accounting periods, and the health plan would use (trend/vertical) analysis to show the relationship of each financial statement item to another financial statement item.

• A. Horizontal / trend
• B. Horizontal / vertical
• C. Common-size financial statement / trend
• D. Common-size financial statement / vertical

Answer: B

NEW QUESTION 16

The following statements are about various reimbursement arrangements that health plans have with hospitals. Select the answer choice containing the correct statement.

• A. A sliding scale per-diem charges arrangement differs from a sliding scale discount on charges arrangement in that only a sliding scale per-diem charges arrangement is based on total volume of admissions and outpatient procedures.
• B. Under a typical reimbursement arrangement that is based on diagnosisrelated groups (DRGs), if the payment amount is fixed on the basis of diagnosis, then any reduction in costs resulting from a reduction in days will go to the health plan rather than to the hospital.
• C. A negotiated straight per-diem charge requires payment of a single charge for a day in the hospital, regardless of any actual charges or costs incurred during the hospital stay.
• D. A straight discount on charges arrangement is the most common reimbursement method in markets with high levels of health plans.

Answer: C

NEW QUESTION 17
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