Cracking the Code: Understanding Contractual Allowances in Arkansas Hospitals

In the world of hospital accounting, the amount billed for patient care is called “total patient revenue,” even though nothing approaching that sum will be received. Instead, insurance discounts called “contractual allowances” are applied to the billed amount, and the result is called “net patient revenue.” That’s what this week’s list of 95 Arkansas hospitals is ranked by.

Contractual discounts vary widely, although they typically average more than 50% of the initial billed amount. Only 14 of 95 hospitals discounted by less than 50% in the most recent fiscal years reported to the federal Centers for Medicare & Medicaid Services, and they are mainly rehabilitation hospitals. Only the Arkansas State Hospital had no contractual allowances, while allowances ate up 90% of total patient revenue at National Park Medical Center in Hot Springs.

Here are Arkansas hospitals ranked by contractual allowances as a percentage of billed patient services:

Arkansas Hospitals Ranked by Contractual Allowances

Source: Centers for Medicare & Medicaid Services cost reports