A Hospital Entered into a Retrospective Billing Arrangement with a Third-Party

question 17

Multiple Choice

A hospital entered into a retrospective billing arrangement with a third-party payer,calling for interim billing rates,subject to final settlement after the year's end.Final settlement was to be based on the hospital's submission of costs and audit by the third-party payer.During the year,the hospital provided services to patients covered by this third party,billing for $4.8 million at the hospital's established rates.However,the hospital's services at the interim billing rates were 25 percent less than the established rates.Before issuing its financial statements for the year,the hospital analyzed its costs and estimated that the rates charged to the third-party payer were $300,000 too high.For this third party,how much was the total contractual adjustment for the year?

• A)$300,000
• B)$1,200,000
• C)$1,500,000
• D)$1,700,000

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Definitions:

Periaqueductal Gray Matter

A region of the midbrain involved in modulating pain perception and in coordinating fight or flight responses.

Semicircular Canals

Three looped tubes in the inner ear that are filled with fluid and help with maintaining balance by detecting head rotation.

Action Potentials

Brief electrical impulses that serve as the fundamental signals by which information is transmitted along nerve cells.

Endolymph

A fluid contained in the inner ear, playing a critical role in translating the movements of the head into neural signals for the brain to interpret balance and spatial orientation.