The allowable charge represents the maximum amount that a payer is willing to reimburse for a specific medical service or procedure. It is predetermined by factors such as the payer's fee schedule, contractual agreements, and the provider's negotiated rates.
An allowed amount is the maximum amount your health insurance plan will pay for a covered service. It is also sometimes called an “eligible expense,” “negotiated rate,” or “payment allowance.” The purpose of an allowed amount is to standardize the costs of medical services so you don't get price-gouged.
Contractual allowance is a term commonly used in healthcare revenue cycle management (RCM) to refer to the difference between the amount charged for a healthcare service and the amount that the healthcare provider is contractually allowed to collect from the patient or the patient's insurance company.
OVERVIEW OF STANDARDIZED ALLOWED CALCULATION
The standardized allowed amount for a service is the sum of the core cost of that service, any add-ons or deductions directly related to resource use, and any applicable outlier payments.
For example, if the provider's charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider may not balance bill you for covered services. Refer to glossary for more details.
Allowed Amount – This is the maximum payment the plan will pay for a covered health care service. May also be called “eligible expense,” “payment allowance,” or “negotiated rate.”
Anything billed above and beyond the allowed amount is not an allowed charge. The healthcare provider won't get paid for it, as long as they're in your health plan's network. If your EOB has a column for the amount not allowed, this represents the discount the health insurance company negotiated with your provider.
Billed amount: what the provider billed. Allowed amount: what the insurer allows for the service (sometimes shown as an "insurer discount" - i.e., if the billed charge is $50 higher than the insurer's allowed amount, the insurer discount would be $50), Paid amount: what the insurer paid the provider.
Example: Diagnostic facility charges $150 for a test. Your insurance thinks that particular test should only cost $100, which is their "allowable" amount. So they'll pay you 30% of $100, or $30. So you're out $120.
It is entirely due to the rates negotiated and contracted by your specific insurance company. The provider MUST bill for the highest contracted dollar ($) amount to receive full reimbursement.
Claims are deemed allowed if they are scheduled (§ 501, Bankruptcy Code) or filed (§ 502, Bankruptcy Code), unless a party in interest (such as the debtor or the creditors' committee) objects.
The maximum benefit limits are the highest amount an individual is paid by a health insurance plan for health services over a specific period. The limits are expressed as a fixed dollar amount, a percentage of the expense covered, or combined total benefits for all covered services.
An allowable cost is one that is permitted under the terms and conditions of the sponsored agreement. Examples of terms and conditions include costs must be incurred within the project effective dates and must be in accordance with the approved project budget.
If a child is covered under both parents' health plans, a provision known as the “birthday rule” comes into play, guiding how the coordination of benefits will work. The birthday rule says that primary coverage comes from the plan of the parent whose birthday (month and day only) comes first in the year.
Maximum Allowable Amount means the maximum amount that the Plan will allow for Covered Services You receive. For more information, see the “Claims Payment” section.
Explanation: The charge: It is the total amount a healthcare provider bills for a medical service or procedure. The allowable charge: It is the maximum amount an insurance company will cover for a specific service or procedure.
Allowable Charge. -also referred to as the Allowed Amount, Approved Charge or Maximum Allowable.
Allowed Amount = Total charges less Contractual Adjustments If no contractual adjustment is posted then total charges equals the allowed amount. Denial adjustments are excluded from the calculation as denials do not impact allowed amount.
The golden rule of healthcare billing and coding departments is, “Do not code it or bill for it if it's not documented in the medical record.” Providers use clinical documentation to justify reimbursements to payers when a conflict with a claim arises.
That's where the 8-Minute Rule comes in: Per Medicare rules, in order to bill one unit of a timed CPT code, you must perform the associated modality for at least 8 minutes. In other words, Medicare adds up the total minutes of skilled, one-on-one therapy (direct time) and divides the resulting sum by 15.
Many people have heard an old wives' tale that you can just pay $5 per month, $10 per month, or any other minimum monthly payment on your medical bills and as long as you are paying something, the hospital must leave you alone. But there is no law for a minimum monthly payment on medical bills.
Allowable expenses are costs that are essential and directly related to running your business. These expanses can be deducted from your taxable income, reducing your overall Income Tax liability. Allowable expenses do not include money taken from your business to pay for personal purchases.
Allowable charges (UCR charges) - the amounts an insurance carrier is willing to pay for a specific service. Co-payment - the amount a patient is required to pay for a visit/service to a physician/provider. Example: Doctor Visit.
For out-of-network providers, the allowed amount is what the insurance company has decided is the usual, customary, and reasonable fee for that service. However, not all insurance plans, like most HMO and EPO plans, cover out-of-network providers.