The difference between a hospital's established billing rate and the amount paid by a third-party payer is referred to as:

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The difference between a hospital's established billing rate and the amount paid by a third-party payer is referred to as a contractual adjustment. It is the amount that the hospital agrees to write off as part of their contract with the third-party payer. The hospital and third-party payer negotiate the contractual adjustment in advance, so it is not considered bad debt. Capitation agreements and charity allowances are different types of payment arrangements.

The Difference Between a Hospital's Established Billing Rate and the Amount