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HPM 743

Health Care Finance II

(Credit Hours: 3)

Department of Health Policy and Management School of Public Health

Spring, 2011 Syllabus Class Location (MHRC 003) Meeting Times (W 2:00-4:50) Faculty: George H. Pink, PhD Office: Room 1105D McGavran-Greenberg Hall Email: [email protected] Phone: 843-2728 Office Hours: Mondays, Wednesdays

Office: Room 348 725 Martin Luther King Jr. Blvd. Email: [email protected] Phone: 966-1457 Office Hours: Tuesdays, Thursdays, Fridays

Course Overview

This course is the second of a two-course sequence in health care finance. The course focuses on financial management, analysis and decision-making and the use of spreadsheets to help make better financial decisions. The course includes capital allocation, financial condition analysis and forecasting, and other topics. After completion of the course, students should have an operational knowledge of financial management theory and concepts and be able to apply these ideas to real world healthcare settings.

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Learning Objectives and HPM Competencies

Course Learning Objective 1 Demonstrate an understanding of how organizations make investment decisions and allocate capital among competing investment opportunities Demonstrate an understanding of financial accounting systems and how managers use financial information and budgets to evaluate and control organizations Demonstrate an understanding of the function of the chief financial officer in the management of healthcare organizations Demonstrate an understanding of how organizations use business and financial plans to manage growth and create value Demonstrate an understanding of how organizations finance the daily production of goods and services Demonstrate an understanding of capital markets and how organizations use these markets to acquire capital used to finance operations Demonstrate an understanding of the payment methods used to reimburse health service providers and the associated operational implications Demonstrate an ability to analyze complex, practical problems in health care financial management Competencies 3. Analytical thinking 7. Financial skills 3. Analytical thinking 7. Financial skills 3. Analytical thinking 7. Financial skills 3. Analytical thinking 7. Financial skills 3. Analytical thinking 7. Financial skills 3. Analytical thinking 7. Financial skills 3. Analytical thinking 7. Financial skills 3. Analytical thinking 7. Financial skills 25. Team dynamics

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Resources

Website

HPM 743 has its own website using Blackboard software. (See http://blackboard.unc.edu.)

Text

Understanding Healthcare Financial Management (UHFM) Sixth Edition, Louis C. Gapenski and George H. Pink, AUPHA Press / Health Administration Press, 2010, ISBN 13: 978-1-56793-362-8, 727 pages. As errors are identified, AUPHA Press / Health Administration Press make corrections so that subsequent printings are correct. Your copy of UHFM may or may not have the following errors: Page Currently Reads Should Read

A spreadsheet model for each UHFM chapter can be downloaded from the ACHE website: http://www.ache.org/pubs/hap_companion/book.cfm?pc=WWW1-2164 Cases in Healthcare Finance (CIHF) Fourth Edition, Louis C. Gapenski, AUPHA Press / Health Administration Press, 2010, ISBN 978-1-56793-342-0, soft cover 245 pages. As errors are identified, AUPHA Press / Health Administration Press make corrections so that subsequent printings are correct. Your copy of CIHF may or may not have the following errors: Page Currently reads Should Read

A spreadsheet model for each CIHF case can be downloaded from the ACHE website: http://www.ache.org/pubs/hap_companion/chapters.cfm?chap=174.

Articles

A variety of articles will be distributed by the instructor throughout the course.

Web Sources

A variety of web sources are provided in the "External Links" folder on the Blackboard site for the course.

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Requirements and Expectations

Readiness Assurance Tests (RATs):

RATs consist of five true-false and five multiple choice questions about the key concepts from the UHFM chapter. A RAT is open-book, focuses on foundational concepts, and does not require calculations. Although I have modified them, the RAT questions are drawn from a test bank for a text in corporate finance originally written by Lou Gapenski. The questions are designed to test nuance of understanding. They push you by asking questions that are logical extensions of the content, not just what the textbook says. The questions have been validated on thousands of undergraduate business and MBA students. Pre-Class Activities Individuals read the UHFM chapter. In-Class Activities Individuals are given twenty-five (25) minutes to complete a RAT and then they turn in their answers. Next, teams retake the same test, but this time as a group. Teams are given twentyfive (25) minutes to complete a RAT - members must reach agreement on each test question. The individual RATs are scored after class and results are usually available on Blackboard by 200pm on Thursday. As soon as the team RATs are completed, they are scored in-class so that each team has immediate feedback. Finally, the instructor provides a brief, focused review if there is any remaining confusion about the concepts covered in the UHFM chapter. Individuals and teams can appeal a grade if they believe the wording of a question is inexact or misleading. If the instructor agrees, all individuals are given full credit for the question.

Mini-Cases

Chapters 3-17 of UHFM have mini-cases, each one in a separate Excel file. All of the minicases are downloaded from the Assignments folder on Blackboard. Pre-Class Activities Individuals practice calculations in the UHFM Chapter model. In-Class Activities A team leader and a scribe are identified for each mini-case. These roles are rotated among team members so that each individual serves as team leader and scribe at least once during the course. The role of a team leader is to ensure that students work collaboratively until the correct solution is achieved. Before leaving class, a team leader explicitly asks each team member whether they have a full understanding about the solution. Teams do not leave class until all team members have their questions answered. The role of the scribe is to accurately record the team solution to the mini-case and to email the solution to all members of the team. The instructor circulates among teams to ensure progress toward the correct solution.

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Practice Problems:

Chapters 1 and 3-18 of UHFM have practice problems, each on a separate worksheet within an Excel file. All of the practice problems can be downloaded from the Assignments folder on Blackboard. The expectation is for students to attempt to answer the practice problems ­ correct answers to the practice problems are not expected. Practice problems with correct answers are a valuable resource for the final exam. Post-Class Activities Individuals email their Excel files with answers to the practice problems to the instructor before 500pm on the Monday after the relevant lecture. Any set of practice problems not submitted by 500pm on Monday receives 0 percent. The instructor posts practice problem solutions at 500pm on Monday.

Cases

Cases in CIHF have a set of questions, each one in a separate Word file. All of the sets of questions can be downloaded from the Assignments folder on Blackboard. The sets of questions on Blackboard differ from those in the casebook. Please ensure that you answer the case questions that are posted in the Assignments folder and NOT the ones in the casebook. Pre-Class Activities Individuals review cases and case spreadsheets. This includes selecting preliminary input data and "playing" with the spreadsheet to get a sense of how it works and its sensitivity to changes in input data values. Individuals should come to a case analysis with an understanding of the case, preliminary input data for a spreadsheet, and some thinking about the conceptual issues. In-Class Activities All cases must be completed using the spreadsheets available from the ACHE website. Separate tabs should be used for each question (first tab for question 1, second tab for question 2, etc.) A team leader and a scribe should be identified for each case. These roles should be rotated among team members so that each individual serves as team leader and scribe at least once during the course. The role of the team leader is to ensure that students work collaboratively until the solution is achieved. The role of the scribe is to accurately record the team solution and to email the solution to the instructor and all team members by 415pm. At 415pm, the assigned team presents their solution to the case. Teams can challenge each other's decisions, defend their own thinking and examine other teams' as well as their own decision making process. The discussion often focuses on the thinking behind the decisions (assumptions, method and conclusions), rather than the correctness of a given choice. At the end of the discussion if there are any outstanding questions, the instructor summarizes any salient points, general rules that may have emerged and points of view that were not considered to reinforce what has been learned.

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Team Contribution and Participation

Team contribution is assessed by peer evaluation. The mid-term peer evaluation provides individuals and teams with feedback about their performance during the first half of the course to help them improve during the second half. The end-of-term peer evaluation provides feedback about their performance during the entire course and a numerical basis for assignment of individual grades for team contribution. Mid-term Peer Evaluation (no credit) In the middle of the term, the Mid-term Peer Evaluation form (below) is completed by every individual.

HPM 743 Healthcare Finance II Mid-term Peer Evaluation

Please rate each team member (excluding yourself) on each item using the following scale: Always Most of the time Some of the time Seldom or never 4 3 2 1

Please submit electronically using the following file extension: your name peer evaluation.xls Team member Team member Team member Team member Team member

Preparation: Attends team meetings Is prepared for team meetings Contribution: Participates in team discussion Does fair share of team work Respect: Cooperates and respects others Listens to others' points of view Flexibility: Is willing to do different tasks Shares in calculations / scribe work Overall: Improves quality of team work Is a good team member, overall 0 0 0 0 0

How can the team inprove its performance? All comments will be shared with all members of your team.

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The instructor prepares a summary of the mid-term peer evaluations for each individual, including all of the comments made by all team members. The summary for a particular individual is provided to the individual only and the source of all ratings and comments is anonymous. An example of the mid-term feedback each individual receives appears below: ______________________________________________________________________________ Average mid-term peer ratings for Jane Smith:

Team Average 3.5 3.4 3.6 3.3 3.6 3.6 3.5 3.4 3.5 3.6 35.0 40.0 87.5%

Jane Smith Preparation: Attends team meetings Is prepared for team meetings Contribution: Participates in team discussion Does fair share of team work Respect: Cooperates and respects others Listens to others' points of view Flexibility: Is willing to do different tasks Shares in calculations / scribe work Overall: Improves quality of team work Is a good team member, overall Total Maximum Percent 3.5 3.9 2.9 3.7 3.7 3.8 3.6 3.9 3.8 3.8 36.6 40.0 91.5%

Comments by team members: We have a great team! Our team would work better if everyone read the case before class. I think more people should participate in team discussion. Michael, please try to get to class on time! Ashley, it would be great if you could help with the calculations more often. _____________________________________________________________________________ The average peer ratings tell Jane Smith that she is a good team member but she should try to participate more in the discussion. The comments tell the team the types of behavior changes that would improve team performance.

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End-of-term peer evaluation (5% of course grade) At the end of the term, the End-of-term Peer Evaluation form (below) is completed by every individual.

HPM 743 Healthcare Finance II End-of-term Peer Evaluation

Please assess the contribution of each team member to the work of the group. This contribution should reflect your opinion about: Preparation Contribution Respect Flexibility Overall Were they prepared when they came to class? Did they contribute productively to team discussion and work? Did they respect others' points of view? Were they willing to do different tasks? Were they a good team member?

Please rate each team member (excluding yourself) on each item using the following scale: Always Most of the time Some of the time Seldom or never 4 3 2 1

Please submit electronically using the following file extension: your name peer evaluation.xls Team member Team member Team member Team member Team member

Preparation Contribution Respect Flexibility Overall Total

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Do you have any comments that you would like to share with your team? All comments will be shared with all members of your team.

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The instructor prepares a summary of the end-of-term peer evaluations for each individual, including all of the comments made by team members. The summary for a particular individual is provided to the individual only and the source of all ratings and comments is anonymous. An example of the end-of-term feedback each individual receives appears below: ______________________________________________________________________________ Average end-of-term peer ratings for Jane Smith:

Team Average 3.6 3.3 3.4 3.5 3.6 17.4 20.0 87.0% 4.35

Preparation Contribution Respect Flexibility Overall Total Maximum Percent Grade out of 5

Jane Smith 3.7 3.3 3.5 3.6 3.7 17.8 20.0 89.0% 4.45

Comments by team members: I think our team improved during the term. More people came to class prepared which helped our grades. Jane is smart ­ I wish she would talk more. Michael, thanks for not being late. Ashley, you were a great help in getting our cases together. ______________________________________________________________________________ The peer ratings (excluding the individual's self-rating) on the end-of-term peer evaluation are used to calculate the grade for team contribution. The peer evaluation for Jane Smith is (17.8 / maximum of 20) X 5% = 4.45 out of 5. Participation (5% of course grade) At the end of the term, the instructor assigns a grade for in-class participation based on the quantity and quality of the contribution of each individual during the course.

Final Examination

The final exam is three-hours in duration, in-class, open-book, and covers the entire course. The exam consists of problems that are similar to the in-class problems, RATS, mini-cases, and practice problems throughout the course.

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Evaluation Method

Grade Components

Component Team grade: 6 Team Readiness Assurance Tests 6 case analyses Subtotal Individual grade: 6 Individual Readiness Assurance Tests 6 sets of practice problems Team contribution and participation Final examination Subtotal TOTAL % of Grade 12% 24% 36%

12% 18% 10% 24% 64% 100%

Team Evaluation 6 Team Readiness Assurance Tests evaluate whether teams can explain theory and concepts of healthcare finance. 6 case analyses evaluate whether teams can analyze, perform calculations, and develop solutions to practical healthcare finance problems. Individual Evaluation 6 Individual Readiness Assurance Tests evaluate whether individuals can explain theory and concepts of healthcare finance. 6 sets of practice problems evaluate whether individuals can analyze, perform calculations, and develop solutions to practical healthcare finance problems. Team contribution and participation evaluates the extent to which individuals contribute to team performance and class discussion. Final examination evaluates whether individuals can apply what they have learned in the course to practical healthcare finance problems.

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Bonus Points Bonus points are available to students who identify errors in the following course materials: Understanding Healthcare Financial Management (UHFM) Chapter models (Excel spreadsheets) to accompany UHFM Chapter overheads (PowerPoint slides) to accompany UHFM Chapter practice problems (Excel spreadsheets) to accompany UHFM Cases in Healthcare Finance (CIHF) Case models (Excel spreadsheets) to accompany CIHF 0.5 point is awarded for typographical errors and 1.0 point for calculation or interpretation errors. Only the first individual to report an error to the instructor is eligible for the bonus points. For the record, I do not gain financially or in any other way through identification of errors in the teaching materials by students. The sole purpose of the bonus points is to reduce student frustration of working with erroneous teaching materials. Missed Classes If a student misses a class with a case, the team has to pick up the slack but the absent member still benefits from the team work. If the absent individual has a good reason for being gone, explains the reason to the team, and does their best to make amends, most teams will gladly extend the benefit. If, however, members have doubts about the reason for the absence, feel like the member is trying to "freeload" or both, then the absence is likely to be a black mark that may not be forgotten when the peer evaluations come around. So, if you have to be absent for a case, let your peers know in advance and make sure that you do your best to make up for it. If a student misses a class with an individual RAT and a team RAT, then the student may take the individual RAT at 900am on the Thursday, Friday, or Monday after the in-class RATs. If there is one individual only taking the RAT, the grade of the individual RAT is also assigned to the team RAT. If there are two or more people taking the individual RAT, they form an ad hoc team(s) and take the team RAT together.

Grading Scale

95 or above (H) 90-94 (H-) 85 to 89 (P+) 80 to 84 (P) 75 to 79 (P-) 70 to 74 (L+) 65 to 69 (L) 60 to 64 (L-) Below 60 (F) NOTE: The quality (not quantity) of a student's in-class comments and questions can move the student up one notch on the following scale (from, say, a P+ to an H-).

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Evaluation Criteria

Description A grade in this range is for exceptional work at the graduate level. The work must be exceptional in both its analytics and presentation. The analysis must show an exceptional understanding of the issues in the case and applicable methods. The written analysis must be insightful in perspective, be presented in an exceptionally clear manner, and conform to generally accepted writing conventions such as spelling and grammar. It identifies and clearly addresses all materially significant issues. Tables and charts, [though integrated into the paper], must stand-alone, provide clarity and/or insight to the point being made, and be exceptionally clear in their presentation. Tables and charts should be used to help the reader quickly and clearly understand major points. [Thus they should not be repeated in the text, but only introduced and their key points summarized.] The appendices should be pertinent to the reader's understanding of the points being made and be presented in a manner which is exceptionally easy to follow. The numerical analysis contained in the appendices must go beyond that generally expected, be appropriate and insightful, free of material errors and be presented in an exceptionally clear manner. In general, the written analysis has the following characteristics: problem definition is precise; all calculations are correct; all interpretations of calculations are appropriate; no major analyses are missing; the flow of analysis is logical; the narrative is succinct and comprehensible; comprehensive understanding of the problem and the solution is demonstrated; and there are no errors in grammar or spelling. A grade in this range is for generally acceptable work at the graduate level. The work must be acceptable in both its analytics and presentation. The written analysis must show a firm understanding of the issues in the case and the applicable methods, and communicate at a relatively high, but not exceptional level. The written analysis is logically presented and easy to follow, and conforms to the criteria given above in regard to the use of tables, appendices and generally accepted writing conventions. The methods used are appropriate and validly applied, free of any major errors, and presented in a clear manner. Though difficult to define, no major section should look like it needs at least one more draft to clearly communicate. A grade in this range is for a low level of work at the graduate level. Though it shows a basic acquaintance with the issues and methods, it has either a significant deficiency in one of the following areas or several smaller but cumulatively important deficiencies in several of the following areas: recognizing and addressing key points, identification and use of appropriate analytical tools, calculation errors and ability to clearly communicate through the use of prose, tables and graphics, and appendices. Below acceptable graduate level work.

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UNC Honor Code

The principles of academic honesty, integrity, and responsible citizenship govern the performance of all academic work and student conduct at the University as they have during the long life of this institution. Your acceptance of enrollment in the University presupposes a commitment to the principles embodied in the Code of Student Conduct and a respect for this most significant Carolina tradition. Your reward is in the practice of these principles. Your participation in this course comes with the expectation that your work will be completed in full observance of the Honor Code. Academic dishonesty in any form is unacceptable, because any breach in academic integrity, however small, strikes destructively at the University's life and work. If you have any questions about your responsibility or the responsibility of faculty members under the Honor Code, please consult with someone in either the Office of the Student Attorney General (966-4084) or the Office of the Dean of Students (966-4042). Read "The Instrument of Student Judicial Governance" (http://instrument.unc.edu).

Course Evaluation

The Department of Health Policy and Management participates in the Carolina Course Evaluation System (CES), the university's new online course evaluation tool, enabled at the end of each semester. Your responses will be anonymous, with feedback provided in the aggregate; open-ended comments will be shared with instructors, but not identified with individual students. Your participation in CES is a course requirement, as providing constructive feedback is a professional expectation. Such feedback is critical to improving the quality of our courses, as well as providing input to the assessment of your instructors.

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