Financial Management, Budgeting, and Reimbursement
What this domain tests
Candidates must read budgets, understand payer mix, and know how LTC is reimbursed. Know the major payers - Medicare (skilled, time-limited with consolidated billing), Medicaid (state-administered, often case-mix or per-diem), managed care, private pay, and VA - and how each shapes revenue and risk.
Core concepts
- Budget types: operating, capital, and cash; variance analysis (actual vs. budget) and flexed budgets.
- Cost drivers: staffing (typically the largest cost), supplies, occupancy, and acuity.
- Reimbursement mechanics: per diem, case-mix/RUG-type grouping, fee-for-service, capitation, and value-based adjustments.
- Revenue cycle: eligibility, authorization, documentation, billing, and denial management.
- Key ratios: operating margin, days cash on hand, and cost per patient day.
Traps
Examiners test payer distinctions - e.g., assuming Medicare covers custodial long-term care (it does not), or that Medicaid eligibility is uniform nationwide (it is state-specific). Another trap is treating a favorable variance as always good (lower staffing cost may signal understaffing). Watch for confusing revenue with margin, or ignoring documentation as a reimbursement driver.
Worked example
A unit budgets 3,000 resident-days at $250/day. Actual: 2,800 days at $260/day. Budget = $750,000; actual = $728,000; variance = $22,000 favorable. But volume fell - the favorable variance masks a census problem. Isolate volume vs. rate effects before concluding performance is good.