Which statement about revenues is most correct?

• A. Net patient revenue equals patient service revenue less provision for bad debts.
• B. Net patient revenue equals patient service revenue plus provision for bad debts.
• C. Net patient revenue equals total revenue from all payers.
• D. Net patient revenue includes charity care.

Answer: (A)

Net patient revenue reflects what the hospital actually expects to collect from patient services. You start with patient service revenue and subtract the provision for bad debts because that provision represents the portion of billed revenue that is not expected to be collected. The result is the amount the hospital realistically takes in from patient services.

Charity care is care provided without charge and is not counted as revenue in this calculation; it is typically shown as a separate deduction or expense. That’s why net patient revenue focuses on patient service revenue minus uncollectible amounts, not on charity care. It’s also not the total revenue from all payers, since other revenue streams and non-patient-service sources are tracked separately. For example, if patient service revenue is 200 and the provision for bad debts is 15, net patient revenue would be 185.