Netting the A/R

July 1, 2004

What are the advantages or disadvantages to billing a commercial insurance company our negotiated rate according to our fee schedule with them, as opposed to billing our regular, higher rate?

Question: What are the advantages or disadvantages to billing a commercial insurance company our negotiated rate according to our fee schedule with them, as opposed to billing our regular, higher rate?

Answer: Charging the payer only its allowable is called "netting the A/R" or "netting the charges" and it creates three problems:

  • It misrepresents your usual and customary fee, meaning the insurance carriers will start loading in lower fees.
  • It might cause you to miss an opportunity for a higher payment if you guess at the allowable or if the carrier has changed it.
  • Your gross charges become meaningless, so reporting on this data point is difficult.

Some practices do indeed net the charge, but it's rare.