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  • Contractual Adjustments A Portion of A Hospital's Revenue Is Collectible From Third Party Payors, Such As The Philhealth and

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    The document discusses contractual adjustments in hospital revenue. A contractual adjustment is the difference between what a hospital bills for a service and the agreed upon amount with an insurance company like Philhealth. The document provides an example where a hospital billed $1,200,000 but only expects to collect $1,060,000 due to contractual adjustments, employee discounts, charity care, and uncollectible accounts. After accounting for these adjustments, the hospital's net patient service revenue is $1,280,000.

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    The document discusses contractual adjustments in hospital revenue. A contractual adjustment is the difference between what a hospital bills for a service and the agreed upon amount with an insurance company like Philhealth. The document provides an example where a hospital billed $1,200,000 but only expects to collect $1,060,000 due to contractual adjustments, employee discounts, charity care, and uncollectible accounts. After accounting for these adjustments, the hospital's net patient service revenue is $1,280,000.

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    10 views2 pages

    Contractual Adjustments A Portion of A Hospital's Revenue Is Collectible From Third Party Payors, Such As The Philhealth and

    Uploaded by

    yes yesno
    The document discusses contractual adjustments in hospital revenue. A contractual adjustment is the difference between what a hospital bills for a service and the agreed upon amount with an insurance company like Philhealth. The document provides an example where a hospital billed $1,200,000 but only expects to collect $1,060,000 due to contractual adjustments, employee discounts, charity care, and uncollectible accounts. After accounting for these adjustments, the hospital's net patient service revenue is $1,280,000.

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    Journal entry

    Repairs and Maintenance 30,000


    Contributions Revenue-unrestricted support 30,000

    Contractual Adjustments
    A portion of a hospital’s revenue is collectible from third party payors, such as the Philhealth and
    other health insurance providers.
    A Contractual adjustment is the difference between what the hospital considers a fair price for a service
    rendered versus an agreed upon amount for the service with the insurance company.

    Illustration : Hospital transactions


    San Pedro Hospital, an NPO, bills P1,200,000 for services rendered to patients, 1,000,000 of which is
    charged to Philhealth. It is estimated that only 1,060,000 will be collected. Of the 140,000 difference,
    70,000 represent contractual adjustments with Philhealth, 10,000 for employee discounts, 40,000 for
    charity care, and 20,000 for uncollectible accounts.
    How much is the net patient service revenue?

    Gross patient service revenue 1,400,000


    Less: Contractual Adjustments (70,000)
    Employee discounts ( 10,000)
    Charity Care ( 40,000)
    Net Patient Service Revenue 1,280,000

    Journal Entries
    Account Receivable- patients 200,000
    Account Receivable –Philhealth 1,000,000
    Patient Service revenue 1,200,000
    To accrue patient service revenue

    Patient service revenue 70,000


    Account Receivable- Philhealth 70,000
    To recognize the contractual adjustment representing amounts not expected to be collected from
    philhealth

    Patient Service Revenue 10,000


    Account Receivable-Patients 10,000
    To reduce patient service revenue for special discounts allowed to employee

    Patient Service Revenue 40,000


    Account receivable-Patients 40,000
    To reduce patient service revenue for charity care

    Bad debts Expense 20,000


    Allowance for doubtful accounts 20,000
    To accrue uncollectible accounts
    DF

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