AHM-520 Free Practice Test

- (Topic 1)
This concept, which holds that a company should record the amounts associated with its business transactions in monetary terms, assumes that the value of money is stable over time. This concept provides objectivity and reliability, although its relevance may fluctuate.
From the following answer choices, choose the name of the accounting concept that matches the description.

1. A. Measuring-unit concept
2. B. Full-disclosure concept
3. C. Cost concept
4. D. Time-period concept

Correct Answer: A

- (Topic 1)
The Newfeld Hospital has contracted with the Azalea Health Plan to provide inpatient services to Azalea's enrolled members. The contract calls for Azalea to provide specific stop-loss coverage to Newfeld once Newfeld's treatment costs reach $20,000 per case and for Newfeld to pay 20% of the next $50,000 of expenses for this case. After Newfeld's treatment costs on a case reach $70,000, Azalea reimburses the hospital for all subsequent treatment costs.
The maximum amount for which Newfeld is at risk for any one Azalea plan member's treatment costs is

1. A. $10,000
2. B. $14,000
3. C. $30,000
4. D. $34,000

Correct Answer: C

- (Topic 2)
The Column health plan is in the process of developing a strategic plan.
The following statements are about this strategic plan. Three of the statements are true, and one statement is false. Select the answer choice containing the FALSE statement.

1. A. Human resources most likely will be a critical component of Column's strategic plan because, in health plan markets, the size and the quality of a health plan's provider network is often more important to customers than are the details of a product's benefit design.
2. B. Column's strategic plan should only address how the health plan will differentiate its products, rather than where and how it will sell these products.
3. C. Column most likely will need to develop contingency plans to address the need to make adjustments to its original strategic plan.
4. D. Column's information technology (IT) strategy most likely will be a critical element in successfully implementing the health plan's strategic plan.

Correct Answer: B

- (Topic 1)
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

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

Correct Answer: D

- (Topic 2)
The HMO Model Act sets certain requirements that an entity that wishes to operate as an HMO must meet. These requirements include:

1. A. Having an initial net worth of at least $5 million
2. B. Maintaining a net worth equal to at least 5% of premium revenues for the first $150 million in premium revenue
3. C. Using a prospective method to estimate future risk
4. D. Obtaining a certificate of authority (COA) before beginning operations

Correct Answer: D