The billed amount is the charge submitted. The allowed amount is the basis for allocating responsibility, and the paid amount records money received from a particular party. The example below follows one service through all three figures.
Give each amount a clear job
Read the figures from left to right before deciding whether anything needs follow-up. This simple example assumes one payer, a reviewed allowance and a known patient share. It leaves out coordination of benefits and special payment rules.
| Number | Example | What it answers |
|---|---|---|
| Billed charge | $400 | What did the practice charge? |
| Allowed amount | $180 | What amount is used for this responsibility split? |
| Patient responsibility | $36 | What share has been allocated to the patient? |
| Expected payer responsibility | $144 | What remains for this payer after that allocation? |
| Payer payment received | $144 | What money from this payer has been recorded? |
Read the two gaps separately
The charge-to-allowance gap is $400 − $180 = $220. In this example it is a contractual reduction. The allowance-to-payment gap is $180 − $144 = $36, the allocated patient share. Those are different explanations; they are not one payer debt.
The correct payer comparison is $180 − $36 − $144 = $0. Subtracting $144 from $400 instead produces $256, but it does not tell you what the payer still owes. Nor does it mean the patient should be billed that difference.
What changes when the payer sends less?
Keep the same allowance and allocation, but suppose the payer sends $134. The expected payer share stays $144. The comparison is now $144 − $134 = $10 to check.
Start with the record: was a payment left out, was the allocation different, or does the expected allowance need correcting? A subtraction identifies a question. The supporting documents determine the explanation. If the payer later sends another $10 for the same item, count that additional payment once; the open comparison then becomes zero.
Make sure the numbers belong together
A billed figure for a visit, an allowance for one service line and a bank deposit covering many claims cannot be compared as though they were the same unit. Label the service or group and the point in the payment history you are reviewing. A partial payment and a completed payment tell different stories.
Also distinguish the allowance reported on the remittance from the allowance independently expected from the applicable terms. Using one value on both sides cannot test whether the rate itself was correct. Use the allowance-source check when those two values differ.
A quick sense check
- Compare the same service, party and observation point.
- Separate a charge reduction from patient responsibility.
- Keep expected values distinguishable from reported values.
- Count each payment, supplement and reversal only once.
- Do not treat a zero difference as validation of every underlying rule.
Choose the next question
If you need to calculate the payer share, continue with expected reimbursement. If the arithmetic is clear but the explanation is not, read how to separate adjustments from possible underpayments.
Put this check to work
Related reading
Sources
Check the agreement and payment records for the case you are reviewing.
- Allowed amount
- Health Care Payment and Remittance Advice
- Coordination of Benefits
- Payment, remittance advice and EFT transactions
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