Question

1. What are contractual adjustments? What are examples of other deductions from revenue? How do they impact an organization's profit and loss statement?
   
2. Complete the chart using the following information. Physician office revenue for visit code 99215 has a billed charge of $102.00. The contracted rates for six payers are listed. This grid is based upon a one person visit and is designed to show the student how much the provider may have to discount charges based upon an individual insurance plan.
   

   Payer	Billed Charge	Contracted Rate	Contractual Adjustment
   FHP	$102.00	$35.70
   HPHP	$102.00	$58.85
   MC	$102.00	$54.90
   UND	$102.00	$60.40
   CCN	$102.00	$92.00
   ANA	$102.00	$102.00

3. Define and give two healthcare examples of each of the following: direct cost, indirect cost, joint cost, and responsibility center.

Answer 1

Answer-

Contractual adjustments is an agreement between the provider, patient and the insurance company in which the provider agrees to waive of charges on behalf of patient. It is the difference between the full charges and the amount received from the payer.

The examples from other deductions from revenue other than contractual adjustments are  bad debts, uncompensated care, courtesy, and policy discounts. Some of the deductions are written off and some of the are treated as loss in income statements.

Payer	Billed Charge	Contracted Rate	Contractual Adjustment
FHP	$ 102.00	$ 35.70	$ 66.30
HPHP	$ 102.00	$ 58.85	$ 43.15
MC	$ 102.00	$ 54.90	$ 47.10
UND	$ 102.00	$ 60.40	$ 41.60
CCN	$ 102.00	$ 92.00	$ 10.00
ANA	$ 102.00	$ 102.00	$ 0.00

Contractual Adjustment = Billed Charge - Contracted rate
For example FHP it is = $ 102.00 - $ 35.70 = $ 66.30

Q) Define and give two healthcare examples of each of the following: direct cost, indirect cost, joint cost, and responsibility center.

Direct cost- Direct costs are costs which are assigned to the products and services in treatment. Examples are Physician and procedure staff services and services related to equipment costs.

indirect costs- These are costs due to stoppage or reduction of work or treatment due to mortality or death due to disease. the two examples are replacement of worker and reduction of work productivity due to illness.

Joint cost- These are costs that include pricing purposes or cost-effectiveness purposes. the examples are  blood component production and research process.

Responsibility center- it is the center which is headed by a manager and has certain goals, staff and policies and procedures and the manager is responsible for all the activities and results of that center. examples are the revenue earned and expenses incurred for activities in that center.