What is the term used to describe the difference between the charge and the allowable charge?

The term that describes the difference between the charge and the allowable charge is known as the contractual allowance. This concept is foundational in healthcare reimbursement processes, particularly in relation to how insurance companies negotiate payment rates with healthcare providers.

When a healthcare provider sets a charge for a service, that amount may be reduced based on the agreements they have with insurers. The allowable charge is the maximum amount an insurer has agreed to pay for a particular service, which might be less than the provider's original charge. The difference between these two amounts represents the contractual allowance, essentially a discount or adjustment that reflects the negotiated rate between the provider and the insurer. This allowance is important as it impacts the overall revenue for healthcare providers and the amount that patients may ultimately owe after other cost-sharing elements, such as copayments or deductibles, are factored in.

Understanding this term is crucial for healthcare administration professionals, especially those involved in billing, coding, and financial management, as it directly relates to the revenue cycle of healthcare organizations.