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CPPM Practice Management study materials
CPPM Practice Management study resources

CPPM Practice Management practice questions

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Question 1Business and Financial Management

A practice has fixed costs of $120,000 per year, charges $100 per visit, and incurs $60 in variable cost per visit. What visit volume is required to break even?

  1. 2,400 visits
  2. 3,000 visits Correct answer.
  3. 1,800 visits
  4. 2,000 visits

Explanation

Break-even volume equals fixed costs divided by contribution margin per visit. Contribution margin is $100 minus $60, or $40, so $120,000 divided by $40 yields 3,000 visits.

Question 2Business and Financial Management

Which statement best describes contribution margin in a medical practice?

  1. Profit that remains after income taxes are deducted
  2. Revenue left after variable costs to cover fixed costs Correct answer.
  3. Revenue remaining after all fixed and variable costs
  4. Difference between gross charges and contractual allowances

Explanation

Contribution margin is revenue minus variable costs; it measures how much each unit of service contributes toward covering fixed costs and then generating profit. Fixed costs are excluded because they do not change with volume.

Question 3Business and Financial Management

A practice records $1,200,000 in gross charges and $420,000 in contractual allowances and discounts for the year. What is net patient service revenue?

  1. $1,200,000
  2. $780,000 Correct answer.
  3. $420,000
  4. $850,000

Explanation

Net patient service revenue equals gross charges less contractual allowances and discounts. Subtracting $420,000 from $1,200,000 leaves $780,000.

Question 4Business and Financial Management

A practice carries $600,000 in accounts receivable and reports $3,650,000 in annual net revenue. How many days in accounts receivable does this represent?

  1. 55 days
  2. 50 days
  3. 45 days
  4. 60 days Correct answer.

Explanation

Days in A/R equals accounts receivable divided by net revenue, multiplied by the number of days in the period. Here $600,000 divided by $3,650,000 times 365 equals 60 days.

Question 5Business and Financial Management

A flexible budget is a budget that:

  1. is revised only when a new fiscal year begins
  2. adjusts targets to the actual volume achieved Correct answer.
  3. projects cash receipts and payments by month
  4. sets spending limits that cannot change mid-year

Explanation

A flexible budget recalculates expected revenue and variable expense at the volume actually achieved, which isolates price and spending variances from volume effects. A static budget, by contrast, stays at the originally planned volume.

Question 6Business and Financial Management

Which expenditure belongs in a capital budget rather than an operating budget?

  1. Monthly malpractice insurance premium
  2. Purchase of a new ultrasound unit Correct answer.
  3. Weekly office supply order
  4. One month of locum tenens salary

Explanation

Capital budgets cover major assets with a useful life beyond one year, such as equipment and facility projects. Routine recurring costs, including insurance, supplies, and temporary staffing, belong in the operating budget.

Question 7Business and Financial Management

A department records 3,120 paid productive hours in a year. Using a standard 2,080-hour full-time equivalent, how many FTEs does this represent?

  1. 1.5 FTEs Correct answer.
  2. 1.8 FTEs
  3. 1.4 FTEs
  4. 1.2 FTEs

Explanation

FTEs equal total paid productive hours divided by 2,080 hours per FTE. Dividing 3,120 by 2,080 yields 1.5 FTEs.

Question 8Business and Financial Management

A practice reports current assets of $450,000 and current liabilities of $150,000. What is its current ratio?

  1. 2.0
  2. 1.5
  3. 3.0 Correct answer.
  4. 1.0

Explanation

The current ratio equals current assets divided by current liabilities, measuring short-term liquidity. Here $450,000 divided by $150,000 equals 3.0.

Question 9Business and Financial Management

Actual supply costs were $48,000 against a budget of $45,000. How should the variance be reported?

  1. $3,000 favorable
  2. $3,000 volume variance
  3. $3,000 unfavorable Correct answer.
  4. $93,000 total variance

Explanation

For an expense line, spending above budget is unfavorable because more resources were consumed than planned. The difference is $48,000 minus $45,000, or $3,000 unfavorable.

Question 10Business and Financial Management

A practice shifts 10 percent of its visit volume from a commercial payer paying 150 percent of Medicare to Medicare. What is the most likely financial effect?

  1. Net revenue per visit falls Correct answer.
  2. Net revenue per visit rises
  3. Gross charges per visit fall
  4. Net revenue per visit is unchanged

Explanation

Payer mix changes affect net revenue because each payer reimburses at a different rate relative to Medicare. Replacing higher-paying commercial volume with lower-paying Medicare volume lowers average net revenue per visit even though gross charges are unaffected.

Question 11Business and Financial Management

A practice has fixed costs of $200,000 and a contribution margin of $50 per visit. It wants to earn $50,000 in profit. What volume is required?

  1. 5,000 visits Correct answer.
  2. 6,000 visits
  3. 4,000 visits
  4. 4,500 visits

Explanation

Target volume equals fixed costs plus desired profit, divided by contribution margin per visit. Adding $200,000 and $50,000 gives $250,000, which divided by $50 yields 5,000 visits.

Question 12Business and Financial Management

A physician contract pays a base salary of $180,000 plus $50 for each work RVU above a 4,000 wRVU threshold. The physician produced 4,600 wRVUs. What is total compensation?

  1. $195,000
  2. $210,000 Correct answer.
  3. $180,000
  4. $200,000

Explanation

Only RVUs above the threshold earn the incentive rate. The physician exceeded the threshold by 600 wRVUs, which at $50 yields $30,000 added to the $180,000 base for $210,000.

Question 13Business and Financial Management

A practice bills $1,000,000 in gross charges, records $400,000 in contractual allowances, and collects $540,000. What is the net collection rate?

  1. 60%
  2. 84%
  3. 90% Correct answer.
  4. 54%

Explanation

Net collection rate equals payments divided by charges net of contractual allowances. Allowed amounts total $600,000, and $540,000 collected against that equals 90 percent.

Question 14Business and Financial Management

A practice reports a net profit for the year, yet its bank balance dropped sharply over the same period. Which explanation is most consistent with these facts?

  1. Accounts receivable grew faster than collections Correct answer.
  2. Gross charges were recorded at fee schedule rates
  3. Depreciation exceeded capital purchases
  4. The practice retired no debt during the year

Explanation

Accrual profit recognizes revenue when services are rendered, not when cash arrives. Rapid growth in receivables ties up cash and explains profit coexisting with a declining bank balance.

Question 15Business and Financial Management

Equipment costing $150,000 with an estimated salvage value of $30,000 and a five-year useful life is depreciated on a straight-line basis. What is annual depreciation expense?

  1. $30,000
  2. $36,000
  3. $25,000
  4. $24,000 Correct answer.

Explanation

Straight-line depreciation equals cost minus salvage value, divided by useful life. Subtracting $30,000 salvage from $150,000 leaves $120,000, which divided by five years is $24,000 per year.

Question 16Business and Financial Management

Under the net present value method, a capital investment should be accepted when:

  1. its accounting rate of return exceeds zero
  2. the present value of its inflows exceeds its cost Correct answer.
  3. its cash inflows exceed outflows in the first year
  4. its payback period is shorter than the asset's useful life

Explanation

Net present value discounts all expected cash flows at the cost of capital and compares them with the initial outlay. A positive NPV, meaning discounted inflows exceed cost, indicates the project adds value.

Question 17Business and Financial Management

Under a capitated contract, which factor poses the greatest financial risk to the practice?

  1. Higher-than-expected utilization Correct answer.
  2. Delay in claims adjudication
  3. A reduction in the fee schedule
  4. Denial of individual claims

Explanation

Capitation pays a fixed amount per member per month regardless of services delivered, so the practice keeps the difference between revenue and the cost of care. Unanticipated utilization therefore raises cost without raising revenue.

Question 18Business and Financial Management

A practice allocates $300,000 of overhead across 15,000 total encounters. A provider with 2,400 encounters would receive how much allocated overhead?

  1. $75,000
  2. $60,000
  3. $48,000 Correct answer.
  4. $24,000

Explanation

The allocation rate is $300,000 divided by 15,000 encounters, or $20 per encounter. Multiplying $20 by the provider's 2,400 encounters gives $48,000.

Question 19Business and Financial Management

A practice incurs $600,000 in total costs and produces 8,000 work RVUs. What is the cost per work RVU?

  1. $70 per wRVU
  2. $60 per wRVU
  3. $80 per wRVU
  4. $75 per wRVU Correct answer.

Explanation

Cost per work RVU is total cost divided by total work RVUs, giving a common yardstick for comparing provider efficiency. Here $600,000 divided by 8,000 equals $75 per wRVU.

Question 20Business and Financial Management

A practice has operating revenue of $2,000,000 and operating expenses of $1,900,000. What is its operating margin?

  1. 5% Correct answer.
  2. 10%
  3. 2.5%
  4. 95%

Explanation

Operating margin equals operating income divided by operating revenue. Operating income is $100,000, which divided by $2,000,000 gives 5 percent.

Question 21Business and Financial Management

Two mutually exclusive projects are under review. Project A costs $100,000 and has an NPV of $40,000 with an IRR of 30 percent; Project B costs $400,000 and has an NPV of $70,000 with an IRR of 18 percent. Which should be selected?

  1. Neither, because the IRRs cannot be compared
  2. Project B, because it creates more total value Correct answer.
  3. Project A, because it has the higher IRR
  4. Project A, because it needs less capital

Explanation

For mutually exclusive projects of different scale, NPV is the preferred criterion because it measures the dollar value added to the practice. Project B adds $70,000 versus $40,000, so it creates more wealth despite the lower percentage return.

Question 22Business and Financial Management

Medicare pays $100 per visit and the practice's charges are $250 per visit. Payer X pays 110 percent of Medicare, while Payer Y pays 55 percent of charges. Which payer yields the higher payment per visit?

  1. Payer X, at $110.00 per visit
  2. Both payers reimburse the same amount
  3. Payer Y, at $137.50 per visit Correct answer.
  4. Payer X, at $250.00 per visit

Explanation

Payer X pays 110 percent of the $100 Medicare rate, or $110. Payer Y pays 55 percent of the $250 charge, or $137.50, making it the better contract on a per-visit basis.

Question 23Business and Financial Management

A budget assumed 1,000 visits at $100 net revenue per visit. Actual results were 1,100 visits at $95. How should the $4,500 total variance be decomposed?

  1. $10,000 favorable volume and $5,500 unfavorable rate Correct answer.
  2. $10,000 favorable volume and $5,500 favorable rate
  3. $9,500 favorable volume and $5,000 unfavorable rate
  4. $4,500 favorable volume and no rate variance

Explanation

Volume variance equals the 100 extra visits at the budgeted $100 rate, or $10,000 favorable. Rate variance equals the $5 shortfall applied to the 1,100 actual visits, or $5,500 unfavorable, and the two net to $4,500 favorable.

Question 24Business and Financial Management

A practice has $3,650,000 in annual net revenue and $2,190,000 in annual operating expenses. It shortens days in accounts receivable from 50 to 40 while extending days in accounts payable from 30 to 40. Approximately how much cash is freed up?

  1. $120,000
  2. $160,000 Correct answer.
  3. $100,000
  4. $60,000

Explanation

Net revenue per day is $10,000, so a 10-day A/R reduction frees $100,000. Operating expense per day is $6,000, so a 10-day stretch in payables frees $60,000, for a combined $160,000.

Question 25Business and Financial Management

A shared savings contract sets a benchmark of $500 per member per month with a 3 percent minimum savings threshold and a 50/50 split. Actual cost was $470 per member per month across 20,000 member months. What is the practice's shared savings payment?

  1. $150,000
  2. $270,000
  3. $600,000
  4. $300,000 Correct answer.

Explanation

Savings of $30 per member month equal 6 percent, which clears the 3 percent threshold of $15. The practice keeps 50 percent, or $15 per member month, and $15 times 20,000 member months equals $300,000.

Question 26Business and Financial Management

In practice financial management, how is contribution margin defined?

  1. Gross charges minus contractual allowances
  2. Total revenue minus fixed costs
  3. Net revenue minus variable costs Correct answer.
  4. Net revenue minus all operating expenses

Explanation

Contribution margin is the amount remaining after variable costs that is available to cover fixed costs and then contribute to profit. It is a key input for break-even and profitability analysis because it isolates the portion of each visit's revenue that changes with volume.

Question 27Business and Financial Management

Which item is typically classified as a fixed cost for an ambulatory practice?

  1. Annual malpractice insurance premium Correct answer.
  2. Locum tenens physician paid per clinic day worked
  3. Billing service fee charged per claim submitted
  4. Clinical supply cost that rises with each visit

Explanation

A fixed cost remains constant in total over the relevant range of volume, at least within the policy or budget period. An annual malpractice premium is owed regardless of how many patients are seen.

Question 28Business and Financial Management

What does a practice's balance sheet report?

  1. Projected patient volumes and payer mix for the coming year
  2. Revenue, expenses, and net income over an accounting period
  3. Assets, liabilities, and equity at a date Correct answer.
  4. Cash received and cash paid during an accounting period

Explanation

The balance sheet is a snapshot of financial position at a specific date and follows the accounting equation: assets equal liabilities plus owners' equity. It reports what the practice owns, what it owes, and the residual interest of owners.

Question 29Business and Financial Management

The statement of cash flows classifies cash activity into which three categories?

  1. Operating, investing, and financing activities Correct answer.
  2. Current, fixed, and intangible asset categories
  3. Direct, indirect, and accrued expense categories
  4. Operating, capital, and owners' equity activities

Explanation

The statement of cash flows separates cash movements into operating activities, investing activities, and financing activities. This classification helps readers see whether cash is generated by core operations or by borrowing, asset sales, or owner contributions.

Question 30Business and Financial Management

A practice buys equipment for $120,000 that is expected to generate $30,000 of net cash inflow each year. Using the payback method, what is the payback period?

  1. 2.5 years
  2. 4.0 years Correct answer.
  3. 3.0 years
  4. 5.0 years

Explanation

Payback period equals the initial investment divided by the annual net cash inflow: $120,000 divided by $30,000 equals 4.0 years. The method measures how long it takes to recover the cash invested and ignores cash flows after the payback point.

Question 31Business and Financial Management

A service line produces $60,000 of operating income on $400,000 of invested assets. What is its return on investment?

  1. 6.7 percent
  2. 25 percent
  3. 15 percent Correct answer.
  4. 40 percent

Explanation

Return on investment equals operating income divided by invested assets: $60,000 divided by $400,000 equals 15 percent. It expresses how efficiently the assets committed to the service line generate operating profit.

Question 32Business and Financial Management

A practice has total liabilities of $600,000 and total equity of $400,000. What is its debt-to-equity ratio?

  1. 0.40
  2. 2.5
  3. 0.67
  4. 1.5 Correct answer.

Explanation

The debt-to-equity ratio equals total liabilities divided by total equity: $600,000 divided by $400,000 equals 1.5. It indicates how much debt the practice uses relative to owners' capital and is a common measure of financial leverage.

Question 33Business and Financial Management

Fixed costs are $240,000 and the contribution margin ratio is 40 percent. What is the break-even point in revenue dollars?

  1. $96,000
  2. $240,000
  3. $400,000
  4. $600,000 Correct answer.

Explanation

Break-even revenue equals fixed costs divided by the contribution margin ratio: $240,000 divided by 0.40 equals $600,000. At that revenue level, contribution margin exactly covers fixed costs and profit is zero.

Question 34Business and Financial Management

What distinguishes zero-based budgeting from incremental budgeting?

  1. Only capital equipment requests are included in the budget
  2. The prior year's budget is adjusted upward only for inflation
  3. Every budget line is justified from a zero base Correct answer.
  4. The budget is held at zero until cash is received from payers

Explanation

Zero-based budgeting requires each activity and cost to be justified and prioritized from a zero starting point rather than carrying forward the prior year's amounts. It can improve cost control but is more labor-intensive than incremental budgeting.

Question 35Business and Financial Management

How does the step-down method allocate support department costs?

  1. Allocates only direct costs to encounters and ignores all support department costs
  2. Allocates support costs in sequence without reopening closed departments Correct answer.
  3. Uses one organization-wide rate for all patients and services
  4. Allocates overhead equally to every department regardless of the services used

Explanation

The step-down, or sequential, method allocates each support department's costs to other departments in a defined order. Once a department's costs are allocated, that department is closed and does not receive costs back from later departments.

Question 36Business and Financial Management

A practice holds $180,000 in cash and has annual operating expenses of $1,095,000. Assuming 365 days per year, what is its days cash on hand?

  1. 90 days
  2. 60 days Correct answer.
  3. 45 days
  4. 30 days

Explanation

Days cash on hand equals cash divided by average daily operating expenses. Daily expenses are $1,095,000 divided by 365, or $3,000, and $180,000 divided by $3,000 equals 60 days.

Question 37Business and Financial Management

A practice has earnings before interest and taxes of $300,000 and annual interest expense of $50,000. What is its times interest earned ratio?

  1. 7.0 times
  2. 6.0 times Correct answer.
  3. 0.17 times
  4. 5.0 times

Explanation

Times interest earned equals earnings before interest and taxes divided by interest expense: $300,000 divided by $50,000 equals 6.0 times. The ratio shows how many times operating earnings cover the interest obligation.

Question 38Business and Financial Management

A project requires a $200,000 initial investment and has a present value of future cash flows of $260,000. What is its profitability index?

  1. 1.30 Correct answer.
  2. 0.77
  3. 1.00
  4. 0.30

Explanation

The profitability index equals the present value of future cash flows divided by the initial investment: $260,000 divided by $200,000 equals 1.30. A value above 1.0 indicates that the project's present value exceeds its cost.

Question 39Business and Financial Management

Which statement best describes the weighted average cost of capital?

  1. The average interest rate paid on all short-term borrowing and lines of credit
  2. A blended required return on debt and equity capital Correct answer.
  3. The maximum rate a practice may charge commercial payers
  4. The rate Medicare uses to update its physician fee schedule each year

Explanation

The weighted average cost of capital blends the after-tax cost of debt and the cost of equity in proportion to their shares of the capital structure. It represents the minimum return a practice must earn on investments and is commonly used as the discount rate in capital budgeting.

Question 40Business and Financial Management

Which arrangement best demonstrates segregation of duties over cash receipts?

  1. Cash handling, recording, and reconciliation are split among employees Correct answer.
  2. All cash receipts are held until month-end to reduce trips to the bank
  3. The employee who reconciles the bank statement also records cash receipts
  4. The same employee opens mail, posts payments, and prepares the deposit

Explanation

Segregation of duties separates custody of cash, recording of transactions, and reconciliation so that no single person controls an entire transaction cycle. This reduces both the risk of error and the opportunity for fraud.

Question 41Compliance and Risk Management

A patient calls to reschedule an appointment, and the front-desk coordinator opens the patient's complete clinical record to confirm the new date. Under the HIPAA Privacy Rule, this action most directly implicates which standard?

  1. Notice of privacy practices
  2. Authorization for research
  3. Accounting of disclosures
  4. Minimum necessary Correct answer.

Explanation

The minimum necessary standard requires covered entities to make reasonable efforts to limit the use, disclosure, and request of PHI to what is needed to accomplish the purpose. Confirming an appointment requires only limited demographic and scheduling information, not the full clinical record.

Question 42Compliance and Risk Management

The federal Anti-Kickback Statute prohibits knowingly and willfully offering or paying remuneration to induce referrals for items or services that are payable by:

  1. Private commercial insurers only
  2. Medicare Part A only
  3. State Medicaid programs only
  4. Any federal health care program Correct answer.

Explanation

The statute reaches remuneration intended to induce referrals of items or services reimbursable by any federal health care program, a category that includes Medicare, Medicaid, TRICARE, and VA programs. Private payers are generally outside the statute, though state laws may apply.

Question 43Compliance and Risk Management

Under the physician self-referral law (Stark), a physician with a financial relationship with an entity may not refer Medicare patients for designated health services to that entity unless:

  1. The entity is in the same state as the physician
  2. The entity is accredited by a national accrediting body
  3. The patient signs a consent for the referral
  4. A specific statutory or regulatory exception applies Correct answer.

Explanation

Stark is a strict liability prohibition: if no exception applies, the referral and resulting claim are prohibited regardless of intent. Patient consent or accreditation does not satisfy the law; only compliance with a recognized exception protects the arrangement.

Question 44Compliance and Risk Management

Which of the following is one of the seven elements of an effective compliance program identified by the OIG?

  1. Annual board certification of the compliance officer
  2. Mandatory arbitration of patient grievances
  3. Written standards of conduct and policies and procedures Correct answer.
  4. Independent audit of every claim before submission

Explanation

The OIG's seven elements include written standards and procedures, a designated compliance officer and committee, training and education, open communication lines, internal monitoring and auditing, consistent enforcement and discipline, and prompt response and corrective action. These elements are voluntary guidance but are used as a benchmark in enforcement.

Question 45Compliance and Risk Management

A covered entity discovers a breach of unsecured protected health information on March 1. Absent unusual circumstances, notice to affected individuals must be provided no later than:

  1. April 30, which is within 60 days Correct answer.
  2. March 31, which is within 30 days
  3. March 8, which is within 7 days
  4. May 30, which is within 90 days

Explanation

The breach notification rule requires notice to affected individuals without unreasonable delay and in no case later than 60 days after discovery. Discovery is treated as occurring when the entity knows or by reasonable diligence would have known of the breach.

Question 46Compliance and Risk Management

Under EMTALA, a hospital with an emergency department must provide which of the following to every person who presents requesting examination or treatment, regardless of ability to pay?

  1. Free follow-up care for 30 days
  2. An appropriate medical screening examination Correct answer.
  3. Transfer to the nearest public hospital
  4. A referral to a specialist chosen by the patient

Explanation

EMTALA requires a medical screening examination sufficient to determine whether an emergency medical condition exists, without regard to insurance status or ability to pay. If an emergency condition exists, the hospital must stabilize or appropriately transfer the patient.

Question 47Compliance and Risk Management

What is the purpose of an Advance Beneficiary Notice of Noncoverage (ABN)?

  1. It tells the patient in advance that Medicare will likely deny payment Correct answer.
  2. It authorizes release of records to Medicare
  3. It certifies that the service meets medical necessity
  4. It moves the claim to a Medicare Advantage plan

Explanation

An ABN informs a Medicare beneficiary before a service is furnished that Medicare is expected to deny payment as not reasonable and necessary. When properly completed and signed, it allows the practice to bill the patient for the denied item or service.

Question 48Compliance and Risk Management

An individual who files a qui tam action under the False Claims Act on behalf of the federal government is called a:

  1. Relator Correct answer.
  2. Whistleblower ombudsman
  3. Guardian ad litem
  4. Special master

Explanation

The private person who brings a qui tam suit alleging fraud against the government is the relator. The relator may share in a portion of any recovery, and the government may intervene in the case.

Question 49Compliance and Risk Management

The HIPAA Security Rule requires covered entities to conduct an accurate and thorough assessment of potential threats and vulnerabilities to electronic protected health information. This activity is known as:

  1. Sanction policy review
  2. Contingency planning
  3. Access certification
  4. Risk analysis Correct answer.

Explanation

Risk analysis is a required implementation specification under the Security Rule's administrative safeguards; it identifies threats, vulnerabilities, and the resulting potential for unauthorized access to ePHI. Its output drives the risk management plan and safeguard selection.

Question 50Compliance and Risk Management

A practice wants an outside billing company to create and submit claims on its behalf. Before any protected health information is shared, the practice must:

  1. Execute a written business associate agreement Correct answer.
  2. Post the company's name in the patient waiting room
  3. Execute a data use agreement limited to research
  4. Obtain a separate patient authorization for each claim

Explanation

A billing company that creates, receives, or maintains PHI on behalf of the practice is a business associate, and a written business associate agreement must be in place before disclosure. The agreement must describe permitted uses, require safeguards, and address breach reporting and termination.