Q:

What is a contractual adjustment?

A:

According to the St. Bernardine Medical Center, a contractual adjustment is part of the bill that a hospital has agreed not to charge a patient because of billing agreements with the patient's insurance company. It is the most common type of adjustment made by medical providers.

A contractual adjustment shows up on a billing statement as an adjustment required, and it decreases the balance. When a medical provider accepts an insurance plan, the contract includes details such as the amount the insurance company pays the provider for certain procedures. Since the provider charges more than what the insurance company agrees to pay, the amount that is paid by the company is known as an allowable amount, and the amount above that is the reduction, made by the provider, called contractual adjustment. Providers that participate in this agreement believe that the broader access to members is worth the contracted rates on services. Additionally, it ensures that providers are paid a significant portion of the fee, which patients without insurance cannot afford.

Contractual agreements are only made on services covered by the insurance company. A patient who undergoes a procedure that is not covered must pay the full amount charged by the medical provider without any contractual agreement to limit the cost.


Is this answer helpful?

Similar Questions

  • Q:

    How do you file an insurance claim for hail damage to a roof?

    A:

    According to the National Storm Damage Center, to file an insurance claim for hail damage to a roof, the insured must contact his or her insurance company after verifying that the roof has hail damage. It is best to have the damaged verified by at least three reputable roofing companies.

    Full Answer >
    Filed Under:
  • Q:

    What is total valuation in a car insurance claim?

    A:

    A total loss valuation in a car insurance claim happens when an insurance company determines that a vehicle is damaged beyond repair. It can also happen when an insurance company determines that it would cost more to repair the vehicle than the car is worth at current market value.

    Full Answer >
    Filed Under:
  • Q:

    What is "out-of-pocket maximum"?

    A:

    "Out-of-pocket maximum" is an insurance term referring to the maximum expenditures an insured person can have in a year before the insurance company pays 100 percent of services. HealthCare.gov indicates the 2015 max for an individual Marketplace plan is $6,600 and $13,200 for a family. Out-of-pocket maximums vary significantly, but BlueCross/BlueShield notes that in 2014 they typically range from $1,000 for an individual policy to $11,000 maximum for a family.

    Full Answer >
    Filed Under:
  • Q:

    What is a subrogation claim?

    A:

    A subrogation claim is made by an insurance company to get reimbursement from the party responsible for a loss it has already paid out on a claim. It applies when a person other than the claimant is responsible for some or all of the damages from a submitted claim.

    Full Answer >
    Filed Under:

Explore