In calculating NPR, what does 'contractual adjustments' refer to?

• A. Reductions in billed charges due to negotiated payer contracts.
• B. Increases to charges based on provider performance.
• C. Amounts collected from patients at point of service.
• D. Bad debt write-offs.

Answer: (A)

Contractual adjustments are the reductions in billed charges that come from negotiated payer contracts. When a provider bills a patient or payer, the contract with insurers sets a predefined reimbursement amount or rate. The difference between the charged amount and the contractually allowed payment is recorded as a contractual adjustment, lowering the gross charges to reflect the expected reimbursement. This is a normal part of calculating Net Patient Revenue because NPR represents what the facility expects to actually collect after payer agreements. It’s not an increase to charges, nor the amount collected at the point of service from patients, and it’s not bad debt, which reflects amounts deemed uncollectible after attempts to collect.