Net patient revenue components when deriving NPR from gross charges: which items are included?

• A. Allowances, discounts, charity care, and bad debt.
• B. Inventory, depreciation, and interest.
• C. Operating expenses, salaries, and rent.
• D. Investment income and other gains.

Answer: (A)

Net Patient Revenue represents what a hospital expects to collect from patient charges after subtracting amounts that reduce what will actually be collected. When deriving NPR from gross charges, you subtract the adjustments that lower the amount billed to patients and payers: allowances (contractual adjustments tied to negotiated payer rates), discounts, charity care, and bad debt. These reduce gross charges to the net figure the hospital expects to realize from patient services.

Items like inventory, depreciation, and interest are not part of NPR because they relate to assets and financing rather than patient-revenue adjustments. Operating expenses, salaries, and rent are costs, not reductions to revenue. Investment income and other gains are non-operating revenues and similarly not included in NPR.