Certified Nurse Manager and Leader (CNML) Practice Test

How is net revenue calculated in a healthcare setting?

1. Gross Revenue + Deductions from Revenue

2. Gross Revenue - Deductions from Revenue

3. Gross Revenue - Operating Costs

4. Gross Revenue + Total Patient Days

The correct answer is: Gross Revenue - Deductions from Revenue

Net revenue in a healthcare setting is calculated by subtracting deductions from gross revenue. This approach provides a more accurate reflection of the actual income that a healthcare organization can expect to receive after accounting for various adjustments such as contractual adjustments with insurers, bad debts, and charity care. By using this method, healthcare facilities can gauge their financial performance more effectively and make informed decisions regarding budgeting and resource allocation. In contrast, adding deductions to gross revenue, as suggested in one of the other choices, would incorrectly inflate the revenue figures instead of giving a clear picture of net income. Similarly, subtracting operating costs from gross revenue reflects expenses rather than revenue, while adding total patient days provides information on service utilization rather than financial performance. Consequently, the right approach to understanding net revenue is to directly deduct the relevant deductions from gross revenue.