Finance, Reimbursement, and Contracting
Following the dollar
Finance questions require fluency in how providers are paid and how risk is allocated. A candidate must know the major payment methodologies: fee-for-service, prospective payment (DRG, APC, RUG), capitation, and value-based arrangements including shared savings and bundles. Understand cost reporting for cost-based reimbursement, the charity care and bad debt distinction, and the Medicare cost-to-charge ratio as the basis for outlier and bad-debt calculations.
Concepts to master
Know the components of the revenue cycle: eligibility, coding, charge capture, claim submission, denial management, and collections. Understand payer mix, contractual allowances, and the difference between gross and net revenue. Know managed care contracting terms: allowed amount, discount off charges, per diem, case rates, stop-loss, and carve-outs. Understand risk arrangements - withholds, capitation, and shared savings - and how they shift utilization risk to the provider.
Traps
The most common trap is confusing charges, cost, and payment. A question may give a charge and a contractual adjustment and ask for net revenue; the answer is neither gross charges nor cost. Another trap: assuming a per-diem contract pays the same regardless of length of stay - many include stop-loss or tiering. Watch for questions that treat capitation as pure profit; it transfers risk and requires reserves.
Worked example
A hospital bills $40,000 in charges. The payer contract allows 60% of charges, and the patient has a $2,000 copay. Allowed amount = $24,000. Payer payment = $22,000; patient responsibility = $2,000. The contractual allowance is $16,000 and is not revenue. If the question asks for net revenue, the answer is $24,000 - not $40,000 and not $22,000.