Chapter 18, Problem 24P

To determine

Identify the correct option out of the given statements.

Answer to Problem 24P

Option c. The amount of Patient service revenues is $600,000; net patient service revenue is $300,000 in the given case.

Explanation of Solution

Net patient service revenue is the value that is remained after charging provision for bad debts, contractual adjustments, charity care and denials from insurer from the patient service revenue.

$\begin{array}{c}\text{Patient service revenue = service charged }–\text{ charity care}\\ \$600,000=\$1,000,000–\$400,000\end{array}$

Particular	Amount
Patient service revenue	$     600,000
Less:
Bad debts	$    (100,000)
Contractual adjustments	$    (200,000)
Charity care	$    (400,000)
Net patient service revenue	$     300,000

Table: 1

a.

$Patientservicerevenues=\$1million;netpatientservicerevenues=\$300,000$: It is the incorrect option because of the calculation done in the table: 1.

b.

$Patientservicerevenues=\$1million;netpatientservicerevenues=\$400,000$: It is incorrect option because it has not considered bad debts.

c.

$Patientservicerevenues=\$600,000;netpatientservicerevenues=\$300,000$: It is correct because it matches the calculation done in the table: 1.

d.

$Patientservicerevenues=\$600,000,netpatientservicerevenues=\$400,000$: It is incorrect option because patient service revenue is $600,000 and net patient service revenue is $300,000.