Question

For hospitals, contractual adjustments to 3rd party payers, such as insurance companies, are recorded with a debit to Contractual Adjustment expense and a credit to Accounts Receivable. T/F

Answer 1

In hospitals, contractual adjustments to 3rd party payers are recorded as a debit to Accounts Receivable and a credit to Contractual Adjustment.

Step-by-step explanation:

The statement is False. In hospitals, contractual adjustments to 3rd party payers, such as insurance companies, are recorded as follows: a debit to Accounts Receivable and a credit to Contractual Adjustment. This is because when insurance companies pay hospitals for the medical services provided to patients, the actual amount received by the hospital may be less than the original amount billed. The difference between the original amount billed and the amount received is the contractual adjustment.