Certified Revenue Cycle Representative (CRCR) Practice Exam

What type of account adjustment occurs when a patient refuses to pay a self-pay balance?

1. Patient refund adjustment

2. Administrative adjustment

3. Bad debt adjustment

4. Credit adjustment

The correct answer is: Bad debt adjustment

When a patient refuses to pay a self-pay balance, the situation is appropriately categorized as a bad debt adjustment. This type of adjustment reflects the reality that the amount owed is unlikely to be collected. Bad debt adjustments are essential in financial reporting as they allow healthcare providers to properly account for losses on accounts that are considered uncollectible. By creating a bad debt adjustment, the organization recognizes that despite efforts to collect the account balance, the patient has chosen not to pay. This action impacts the revenue cycle by providing a more accurate representation of the financial health of the organization, ensuring that revenue is reported in accordance with expected collections. Other types of adjustments, such as patient refunds, administrative adjustments, or credit adjustments, do not apply in this context. Patient refunds involve returning excess payments, administrative adjustments might relate to errors or policy changes, while credit adjustments typically account for overpayments or corrections to billing errors. In this case, since it's a refusal to pay rather than a transaction error or overpayment, the situation clearly aligns with bad debt.