CHFD key terms

Revenue a provider expects to collect for patient care after contractual allowances and discounts are deducted from gross charges. It reflects the realizable amount under payer agreements rather than billed prices.

The difference between gross charges and the amount a payer has agreed to pay. It is recorded as a reduction of revenue, not as a bad debt expense, because the shortfall is contractually determined.

Care provided free or at reduced charge to patients who qualify under a provider's financial assistance policy. It is excluded from revenue and disclosed separately rather than reported as bad debt.

A reduction in the amount a provider expects to collect that arises from its own collection practices and patient inability to pay, rather than from an explicit contract. It reduces revenue at the outset.

A contra-asset estimate of receivables expected to be uncollectible. In healthcare it generally covers patient responsibility balances after insurance, and changes flow through bad debt expense.

The proportional share of a provider's volume or revenue coming from each payer type, such as Medicare, Medicaid, commercial insurance, and self-pay. It drives realized rates and margin volatility.

The practice of charging commercial payers more to offset shortfalls from government payers and uncompensated care. It raises commercial rates and is constrained by market leverage and transparency rules.

Revenue remaining after variable costs are subtracted, which is available to cover fixed costs and generate profit. Per-unit contribution margin divided into fixed costs yields break-even volume.

A calculation of the volume or revenue at which total revenue equals total cost, producing zero profit. In healthcare it is often run per case, per visit, or per covered life.

A cost that stays fixed across a range of activity but jumps to a new level once that range is exceeded, such as adding a nursing shift. It behaves like a series of fixed plateaus.

The band of activity volume over which a cost's assumed behavior, fixed or variable, remains valid. Cost estimates and break-even results are only reliable inside this range.

A costing method that assigns overhead to services based on the activities they consume, using multiple cost drivers instead of a single volume measure. It improves accuracy where service complexity varies widely.

A measurable factor that causes a cost to change, such as patient days, surgical minutes, or number of claims. Selecting appropriate drivers is central to allocating overhead fairly.

The process of distributing indirect costs across departments, service lines, or payers using a defined basis. Allocation choices materially affect reported profitability of individual services.

A cost that can be traced specifically and unambiguously to a service, patient, or department, such as a surgeon's supplies. It contrasts with costs that must be allocated.

A budgeting approach in which every proposed expenditure must be justified from a base of zero rather than from the prior year's level. It forces periodic re-evaluation of all activities and their cost.

A budgeting method that starts from the prior period's budget or actuals and adjusts for expected changes. It is efficient but can perpetuate historical inefficiencies.

The comparison of actual results with budgeted or standard amounts, decomposed into volume and rate or price components. It identifies where performance diverged and whether the cause is controllable.

A budget that is recalculated at the actual volume achieved, so that variable costs adjust with activity. Comparing actuals to a flexible budget isolates spending performance from volume effects.

The portion of a budget difference caused by performing more or fewer units of service than planned, valued at the standard rate. It is separated from price and efficiency effects.

A measure of how long, on average, billed balances remain unpaid, calculated as net receivables divided by average daily net revenue. Rising days signal collection or denial problems.

The percentage of claims accepted on first submission without rejection or missing data. It is a leading indicator of front-end revenue cycle accuracy and cash velocity.

The proportion of claims or billed dollars refused by a payer, whether for clinical, eligibility, coding, or timeliness reasons. High denial rates increase rework cost and delay cash.

A formal request that a payer reconsider a denied or underpaid claim, supported by clinical documentation or coding evidence. Tracking appeal success rates reveals recoverable revenue.

Payment of less than the contracted or expected amount for a service rendered, often due to incorrect coding or payer error. Systematic detection requires comparing remittances to contract terms.

A reimbursement model in which a fixed amount is set in advance for a defined episode, such as a DRG, regardless of actual cost. It shifts financial risk for utilization to the provider.

A relative measure of the average clinical complexity and resource intensity of a provider's patient population. Higher values generally correspond to higher expected reimbursement and cost.

The sum of a project's expected cash flows discounted at a required rate, minus its initial investment. A positive result indicates the project adds value at that discount rate.

The discount rate at which a project's net present value equals zero. It is compared with a hurdle rate to decide whether to proceed, but can mislead when cash flows are unconventional.

The rate used to convert future cash flows into present value, reflecting the time value of money and project risk. In healthcare it often approximates the organization's weighted average cost of capital.

The blended after-tax cost of a organization's debt and equity, weighted by their proportions in the capital structure. It commonly serves as the minimum acceptable return on investments.

The time required for cumulative cash inflows to recover an initial investment. It is simple and intuitive but ignores cash flows after the cutoff and the time value of money.

An internal control that divides incompatible tasks, such as authorizing, recording, and safeguarding assets, among different people. It reduces the risk that one person can both cause and conceal an error or fraud.

The policies, procedures, and monitoring an organization uses to safeguard assets, produce reliable reports, and comply with laws. In healthcare it spans financial reporting and clinical billing integrity.

The ethical culture and example set by senior leadership that shapes how seriously the whole organization treats controls and compliance. Weak tone undermines even well-designed procedures.

A federal statute restricting physician referrals of Medicare patients to entities in which the physician or an immediate family member has a financial relationship, absent an exception. Penalties are strict-liability civil sanctions.

A federal criminal law prohibiting knowingly offering or receiving remuneration to induce referrals of items or services payable by federal healthcare programs. Safe harbors protect certain arrangements.

A federal law imposing civil liability for knowingly submitting false or fraudulent claims to government programs. Its qui tam provisions let whistleblowers sue and share recoveries.