Net patient revenue equals patient service revenue less provision for bad debts. Which statement is true?

• A. Net patient revenue is calculated by subtracting the provision for bad debts from patient service revenue.
• B. Net patient revenue equals patient service revenue before any allowances.
• C. Net patient revenue includes bad debts as a revenue item.
• D. Net patient revenue is the same as total revenue.

Answer: (A)

Net patient revenue reflects what the organization expects to actually collect from patient services after reducing revenues for amounts that won’t be received. Subtracting the provision for bad debts from patient service revenue captures this adjustment, which is why this choice is correct. Bad debts are not recorded as revenue; they reduce projected collections. Net patient revenue is also only a portion of total revenue, since total revenue includes other income sources beyond patient services, so it isn’t the same as total revenue. Finally, net patient revenue includes the effect of uncollectibles via the deduction, not as a separate revenue item.