AHM-520

AHM-520 practice questions, page 3 of 9, with answer review and explanations.

Question 11

The Atoll Health Plan must comply with a number of laws that directly affect the plan's contracts. One of these laws allows Atoll's plan members to receive medical services from certain specialists without first being referred to those specialists by a primary care provider (PCP). This law, which reduces the PCP's ability to manage utilization of these specialists, is known as _________.

  1. A due process law
  2. An any willing provider law
  3. A direct access law
  4. A fair procedure law

Question 12

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%. One difference between the RI method and the ROI method is that:

  1. The RI method demands greater goal congruence from Puma's managers than does the ROI method
  2. The RI method favors Puma's small investment centers more than does the ROI method
  3. Only RI can lead to decisions that improve Puma's short-term profits at the expense of its long-term objectives
  4. Only RI is useful to Puma for comparing investment centers of different sizes

Question 13

The following transactions occurred at the Lane Health Plan: Transaction 1 — Lane recorded a $25,000 premium prior to receiving the payment Transaction 2 — Lane purchased $500 in office expenses on account, but did not record the expense until it received the bill a month later Transaction 3 — Fire destroyed one of Lane’s facilities; Lane waited until the facility was rebuilt before assessing and recording the amount of loss Transaction 4 — Lane sold an investment on which it realized a $14,000 gain; Lane recorded the gain only after the sale was completed. Of these transactions, the one that is consistent with the accounting principle of conservatism is:

  1. Transaction 1
  2. Transaction 2
  3. Transaction 3
  4. Transaction 4

Question 14

The Jade Health Plan used a profitability index (PI) to rank the following capital proposals: Proposal PI - A0.45 - B1.05 - This information indicates that, of these two projects, Jade would most likely select:

  1. Proposal A, and the PI indicates that the net present value (NPV) for this project is less than zero
  2. Proposal A, and the PI indicates that the net present value (NPV) for this project is greater than zero
  3. Proposal B, and the PI indicates that the net present value (NPV) for this project is less than zero
  4. Proposal B, and the PI indicates that the net present value (NPV) for this project is greater than zero

Question 15

One true statement about capital and surplus ratios for health plans is that:

  1. This ratio is calculated by dividing a health plan's total liabilities by its capital and surplus
  2. A health plan's capital and surplus position would be likely to weaken because of reserve valuation changes that reduce the health plan's reserves
  3. The primary purpose of these ratios is to compare a health plan's obligations to its ability to meet those obligations
  4. An increase in the value of a health plan's capital and surplus ratio most likely indicates that the health plan's financial position has strengthened