What is a payment adjustment in medical billing?

A payment adjustment in medical billing is fundamentally an alteration based on contractual agreements or errors. This means that when services are rendered, the reimbursement amount can change due to previously negotiated contracts between the healthcare provider and the insurance companies. These adjustments ensure that the healthcare provider receives the correct payment based on the agreed-upon rates for various services.

For example, if a provider has a contract with an insurance company that stipulates a specific rate for a procedure, any differences due to billing errors, service changes, or changes in coverage will be reflected as payment adjustments. Additionally, these adjustments can be made to correct mistakes, ensuring accuracy in billing and compliance with policies.

Understanding payment adjustments is crucial for healthcare providers to manage their revenue cycle effectively and maintain positive relationships with payers.