Paying a bill or have a question about your account? Make a paymentConsumer help

CareersContact

Home/Learn/Glossary/Revenue cycle
Glossary

What do common revenue cycle terms mean?

Your billing team, your vendors and your auditors all use these words, sometimes in different ways. Here are 24 revenue cycle terms in plain English, each with its primary source and the rule status where one applies.

Got a letter or call from TSI about your own account? Go to the Consumer Support Hub or make a payment.
Short answerLast reviewed Nov 5, 2026

This glossary defines 24 terms hospitals and physician groups use from billing through collections, from AR days and denials to 501(r) and the No Surprises Act. Each entry links its primary source, and entries that state a rule show where that rule stands and when it was last checked.

Jump to: A · B · C · D · E · F · G · M · N · P · R · S · T · U

Accounts receivable days (AR days)

Accounts receivable days (AR days) is the number of days of revenue a provider has waiting to be collected: net patient accounts receivable divided by average daily net patient service revenue. HFMA's MAP Keys call it net days in accounts receivable, a trending indicator of overall AR performance.

Net AR is after credit balances, allowances for uncollectible accounts, charity care discounts and contractual allowances. Gross AR days use charges before those deductions, so the two numbers aren't comparable.

Example: $30 million of net AR against $600,000 of average daily net patient service revenue is 50 AR days.

Source: HFMA, MAP Keys, Net days in accounts receivable (FM-1)

Related terms: cost to collect, clean claim, claim denial

Learn more: How to evaluate a healthcare RCM partner

Amounts generally billed (AGB)

Amounts generally billed (AGB) are the amounts a tax-exempt hospital generally bills people who have insurance for emergency or other medically necessary care. Section 501(r) uses AGB as a cap: a patient eligible under the hospital's financial assistance policy can't be charged more than AGB for that care.

Hospitals calculate AGB with a method the regulations allow, such as a look-back at claims allowed by Medicare and private insurers, expressed as a percentage of gross charges.

Example: with an AGB percentage of 40%, the most a patient eligible for financial assistance can be charged for $10,000 of gross charges for emergency care is $4,000.

Where the rule stands

StageIn effect
Date
Final regulations released Dec 29, 2014; apply to tax years beginning after Dec 29, 2015
Source
Treasury regulations, 26 CFR 1.501(r)-5; IRS, Section 501(r) page (updated Jul 2, 2026)
What applies today
Tax-exempt hospitals limit charges to FAP-eligible patients for emergency and medically necessary care to AGB
Next trigger
None scheduled: the Treasury-IRS 2025-2026 Priority Guidance Plan lists no 501(r) project
Last checked
TSI Marketing, Nov 5, 2026

Source: Treasury regulations, 26 CFR 1.501(r)-1(b)(1) and 1.501(r)-5, current text

Related terms: financial assistance policy, chargemaster, section 501(r)

Bad debt (hospital)

Bad debt, in a hospital's books, is the expense for patient balances it doesn't expect to collect, usually after self-pay collection efforts end. HFMA's MAP Keys measure it as the bad debt deduction on the income statement divided by gross patient service revenue, and note that it's different from the amount written off from AR.

Bad debt is separate from charity care. IRS instructions for Schedule H say financial assistance doesn't include bad debt. Balances written off to bad debt are often placed with a collection agency.

Example: a patient who didn't qualify for assistance and didn't pay after several statements is written off and placed with a bad-debt agency.

Source: HFMA, MAP Keys, Bad debt (AR-7)

Related terms: charity care, early out, uncompensated care, placement (collections glossary)

Learn more: Early-out and bad debt: what they cost and what they recover

TSI service: Patient bad debt recovery

Chargemaster

A chargemaster, or charge description master, is a hospital's master list of prices for every item and service it bills. The prices on it are gross charges: the hospital's full established price before discounts.

Insurers usually pay negotiated rates instead, and financial assistance rules cap what eligible patients can be charged. Federal price transparency rules define a gross charge as the charge for an item or service on the hospital's chargemaster, absent any discounts.

Example: an imaging study listed at $2,400 on the chargemaster may be paid at a lower negotiated rate by a commercial insurer, and billed at no more than AGB to a patient eligible for financial assistance.

Source: HHS, Hospital price transparency, 45 CFR 180.20, current text

Related terms: amounts generally billed, remittance advice, uncompensated care

Charity care

Charity care is free or discounted care a provider gives patients who meet its financial assistance criteria and can't pay all or part of their bill. IRS instructions for Schedule H, the form tax-exempt hospitals file, define financial assistance this way and leave out bad debt, Medicaid shortfalls and self-pay or prompt-pay discounts.

HFMA tracks it as charity care on the income statement divided by gross patient service revenue. It's decided before collection: an account that qualifies shouldn't go to bad debt.

Example: a patient whose income falls under the hospital's policy threshold gets a full discount, and the balance never reaches a collection agency.

Source: IRS, Instructions for Schedule H (Form 990)

Related terms: financial assistance policy, bad debt, uncompensated care

Learn more: Eligibility and coverage discovery

Claim adjustment reason code (CARC)

A claim adjustment reason code (CARC) is a standard code a health plan puts on a remittance to explain why a claim or service line was paid differently than it was billed. X12, the standards body that maintains the list, describes the codes that way.

Each CARC comes with a group code that says who bears the adjustment, such as CO (contractual obligation) or PR (patient responsibility). Denial teams sort their work by CARC to find root causes.

Example: CARC 1 is "Deductible Amount," so a line marked PR-1 moves that amount to the patient's balance.

Source: X12, Claim Adjustment Reason Codes

Related terms: remittance advice, patient responsibility, claim denial

Learn more: What a denied claim costs to work

Clean claim

A clean claim is a claim with no defect, missing documentation or special circumstance that would hold up payment. The definition comes from the Medicare statute.

HFMA's clean claim rate measures the share of claims that pass billing edits with no manual intervention, a trending indicator of the quality of the data a provider collects. A low rate means more rework before claims go out and, often, more denials after.

Example: 9,200 of 10,000 claims pass edits untouched in a month, a clean claim rate of 92%.

Source: U.S. Code, 42 U.S.C. 1395h(c)(2)(B), current text; HFMA, MAP Keys, Clean claim rate (CL-1)

Related terms: claim denial, timely filing limit, AR days

Learn more: What a denied claim costs to work

Cost to collect

Cost to collect is what a provider spends on its revenue cycle for each dollar of patient service cash it collects: total revenue cycle cost divided by total patient service cash collected. HFMA's MAP Keys define it and updated the definition in August 2025.

The cost side counts salaries and benefits, management, vendors, outsourced arrangements, purchased services and software. Because vendor fees and internal staff both land in it, it's a fair way to compare in-house work with outsourcing.

Example: $4 million of revenue cycle cost against $200 million of patient service cash collected is a cost to collect of 2%.

Source: HFMA, MAP Keys, Cost to collect (FM-6)

Related terms: AR days, denial write-off, early out

Learn more: How to evaluate a healthcare RCM partner

Claim denial

A claim denial is a health plan's decision not to pay all or part of a claim as billed. HFMA's remittance denial rate divides claims with a denial code on the remittance by claims remitted, and counts "actionable denials," the ones a provider can address and correct.

That count leaves out denials for patient responsibility, duplicate claims and plan benefit exclusions. It includes both first denials and denied appeals.

Example: a claim denied for a missing authorization is actionable. The team finds the authorization record and appeals.

Source: HFMA, MAP Keys, Remittance denial rate (AR-5)

Related terms: denial write-off, CARC, clean claim

Learn more: What a denied claim costs to work

TSI service: Insurance claim denial management

Denial write-off

A denial write-off is the amount a provider gives up on a denied claim after appeals are exhausted or it decides not to pursue payment. HFMA's MAP Keys track denial write-offs as a percentage of net patient service revenue, a trending indicator of the final disposition of lost reimbursement.

It measures the denials that stuck. The denial rate counts denials that may still be overturned, so the 2 numbers answer different questions.

Example: $1.2 million written off as denials in a year against $400 million of net patient service revenue is 0.3%.

Source: HFMA, MAP Keys, Denial write-offs as a percentage of net patient service revenue (AR-6)

Related terms: claim denial, timely filing limit, cost to collect

Learn more: What a denied claim costs to work

Early out

Early out is outsourced work on a provider's open patient balances before they're written off to bad debt, usually in the provider's name. HFMA describes it as a provider choosing "to outsource some or all of its open accounts to a business affiliate to service the accounts as an extension of the provider's patient accounting department," and notes it's also called pre-collection.

Accounts that early-out work doesn't resolve move to bad debt under the provider's own policy.

Example: self-pay balances go to an early-out vendor with the first statement and come back after 120 days if they're still unpaid.

Source: HFMA, Medical Accounts Resolution Process FAQs

Related terms: extended business office, bad debt, self-pay

Learn more: EBO, early-out and bad debt: the difference

TSI service: Early-out self-pay follow-up

Extended business office (EBO)

An extended business office (EBO) is an outsourced team that works a provider's insurance follow-up and patient balances as an extension of its own business office, in the provider's name. Patients and payers see the provider's name throughout, and the vendor works under the provider's policies and a HIPAA business associate agreement.

EBO is vendor language. HFMA's nearest term is early out, which usually means the patient-balance part. Some pages expand EBO as "early out billing," which blurs the 2.

Example: a hospital sends insurance balances older than 45 days and all self-pay balances to an EBO partner.

Source: HFMA, Medical Accounts Resolution Process FAQs

Related terms: early out, self-pay, claim denial

Learn more: EBO, early-out and bad debt: the difference

TSI service: Extended business office and insurance follow-up

Extraordinary collection action (ECA)

An extraordinary collection action (ECA) is a collection step that section 501(r) lets a tax-exempt hospital take only after reasonable efforts to find out whether the patient qualifies for financial assistance. ECAs include selling the debt, reporting adverse information to credit bureaus, deferring or denying care over unpaid bills, and actions that need a legal or judicial process, such as liens, garnishment or lawsuits.

The hospital is held accountable for ECAs taken by agencies collecting for it or buyers of its debt.

Example: before an agency reports a hospital account, the hospital confirms the 120-day notification period has passed and the patient got written notice at least 30 days earlier.

Where the rule stands

StageIn effect
Date
Final regulations released Dec 29, 2014; apply to tax years beginning after Dec 29, 2015
Source
IRS, Billing and collections, Section 501(r)(6), page updated Jul 2, 2026
What applies today
Reasonable efforts, a 120-day notification period and a 240-day application period; the hospital answers for its agencies' ECAs
Next trigger
None scheduled: the Treasury-IRS 2025-2026 Priority Guidance Plan lists no 501(r) project
Last checked
TSI Marketing, Nov 5, 2026

Source: IRS, Billing and collections, Section 501(r)(6), page updated Jul 2, 2026

Related terms: section 501(r), financial assistance policy, credit reporting (collections glossary)

Financial assistance policy (FAP)

A financial assistance policy (FAP) is a tax-exempt hospital's written policy on who qualifies for free or discounted care and how to apply. Section 501(r) requires one for each hospital facility, covering emergency and other medically necessary care.

The FAP must include the eligibility criteria, the basis for calculating amounts charged, how to apply and, if there's no separate billing and collections policy, what the hospital may do if a bill isn't paid. Collection vendors need the current FAP so they can screen accounts and route applications.

Example: an agency receives a patient's assistance application during the application period and sends it to the hospital, which pauses any ECA while it decides.

Where the rule stands

StageIn effect
Date
Final regulations released Dec 29, 2014; apply to tax years beginning after Dec 29, 2015
Source
Treasury regulations, 26 CFR 1.501(r)-4; IRS, Section 501(r) page (updated Jul 2, 2026)
What applies today
Each tax-exempt hospital facility keeps a FAP with the required contents and publicizes it widely
Next trigger
None scheduled
Last checked
TSI Marketing, Nov 5, 2026

Source: Treasury regulations, 26 CFR 1.501(r)-4(b), current text

Related terms: charity care, amounts generally billed, extraordinary collection action

Learn more: Eligibility and coverage discovery

Good faith estimate (GFE)

A good faith estimate (GFE) is a provider's notice of expected charges for a scheduled or requested item or service, given to patients who are uninsured or who won't use their insurance for that care. Under the No Surprises Act rules, providers usually must give one when care is scheduled at least 3 business days ahead, or when the patient asks.

If the bill comes in at least $400 more than the estimate, the patient may be able to dispute it.

Example: a self-pay patient books an MRI a week out and receives a written estimate before the visit.

Where the rule stands

StageIn effect
Date
Took effect Jan 1, 2022
Source
HHS, 45 CFR 149.610; CMS, No Surprises Act consumer page (updated Sep 23, 2026)
What applies today
Providers give uninsured and self-pay patients a GFE for scheduled care or on request; bills $400 or more over the estimate may be disputed
Next trigger
None scheduled
Last checked
TSI Marketing, Nov 5, 2026

Source: HHS, 45 CFR 149.610, current text

Related terms: No Surprises Act, self-pay, chargemaster

Learn more: Eligibility and coverage discovery

Medicaid retroactive coverage

Medicaid retroactive coverage pays for covered care a person received in the months before they applied, if they'd have been eligible then. The baseline has been up to 3 months before the month of application.

For applications made on or after Jan 1, 2027, the period for the Medicaid adult (expansion) group drops to 1 month before the month of application, and other enrollees get 2 months. A shorter window leaves more dates of service uninsured, and those balances become self-pay.

Example: an expansion adult treated in October who applies in January 2027 is covered back to December only, so the October visit stays self-pay.

Where the rule stands

StageFinal, not yet in effect
Date
Applies to applications made on or after Jan 1, 2027
Source
CMS Center for Medicaid and CHIP Services, Informational Bulletin, Nov 18, 2025
What applies today
Up to 3 months of retroactive coverage
Next trigger
Jan 1, 2027
Last checked
TSI Marketing, Nov 5, 2026

Source: CMS Center for Medicaid and CHIP Services, Informational Bulletin, Nov 18, 2025

Related terms: self-pay, charity care, timely filing limit

Learn more: Medicaid retroactive coverage in 2027

Medicare bad debt

Medicare bad debt is unpaid Medicare deductible and coinsurance that a provider couldn't collect and that Medicare may reimburse through the cost report. To be allowable, the debt must come from covered services, the provider must show reasonable collection efforts, the debt must be uncollectible when claimed as worthless, and sound business judgment must show no likelihood of recovery.

For a patient who isn't indigent, collection efforts must be similar to those for comparable non-Medicare balances, including any agency working for the provider.

Example: a provider bills a Medicare patient's coinsurance, works it like any other balance, and claims it on the cost report only after collection efforts end.

Where the rule stands

StageIn effect
Date
Current text; last amended Sep 18, 2020 (85 FR 59023), with billing rules for cost reporting periods beginning on or after Oct 1, 2020
Source
CMS, 42 CFR 413.89
What applies today
The 4 allowability criteria and the reasonable collection effort rules apply
Next trigger
None scheduled
Last checked
TSI Marketing, Nov 5, 2026

Source: CMS, 42 CFR 413.89(e), current text

Related terms: bad debt, patient responsibility, early out

Learn more: Early-out and bad debt: what they cost and what they recover

No Surprises Act

The No Surprises Act is a federal law that protects patients from unexpected out-of-network medical bills and gives patients who don't use insurance the right to a good faith estimate. It took effect Jan 1, 2022.

Its surprise-billing protections cover emergency room visits; non-emergency care related to a visit to an in-network hospital, hospital outpatient department or ambulatory surgical center; and air ambulance services. Providers and plans settle their out-of-network payment disputes through a federal independent dispute resolution process.

Example: an uninsured patient scheduling surgery gets a good faith estimate, and a final bill $400 or more above it can be disputed.

Where the rule stands

StageIn effect
Date
Took effect Jan 1, 2022
Source
CMS, No Surprises Act: medical bill rights, page updated Sep 23, 2026
What applies today
Surprise-billing protections for the listed services; good faith estimates for uninsured and self-pay patients
Next trigger
None scheduled
Last checked
TSI Marketing, Nov 5, 2026

Source: CMS, No Surprises Act, page updated Sep 10, 2026

Related terms: good faith estimate, self-pay, patient responsibility

Learn more: Eligibility and coverage discovery

Patient responsibility

Patient responsibility is the part of a claim the patient owes after the health plan pays, such as a deductible, coinsurance or copay, or a service the plan doesn't cover. On a remittance, it's marked with the group code PR, which X12 labels "Patient Responsibility."

It becomes the patient's balance and, if unpaid, moves through statements, early out and possibly bad debt under the provider's policies. A contractual adjustment (group code CO) is different: the provider writes it off under its payer contract.

Example: CARC 2 is "Coinsurance Amount," so a $300 line marked PR-2 goes on the patient's statement.

Source: X12, Claim Adjustment Group Codes

Related terms: CARC, self-pay, remittance advice

Learn more: Early-out and bad debt: what they cost and what they recover

Remittance advice (835)

A remittance advice is a health plan's explanation to a provider of what it paid on each claim and why, sent electronically as the X12 835 transaction or on paper. HIPAA's transaction standards name it: the payment and remittance advice transaction includes an explanation of benefits or remittance advice sent from a health plan to a provider.

It carries the claim adjustment reason codes and group codes that posting and denial teams work from. HFMA counts denials from remittances, including 835s, that contain a denial code.

Example: a payment poster matches the 835 to the bank deposit, posts the payment and sends the denied lines to the denial queue.

Source: HHS, HIPAA transaction standards, 45 CFR 162.1601, current text

Related terms: CARC, claim denial, patient responsibility

Learn more: What a denied claim costs to work

Section 501(r)

Section 501(r) is the part of the Internal Revenue Code that sets extra requirements for tax-exempt hospitals, facility by facility. It covers 4 areas: a community health needs assessment; a financial assistance policy and emergency medical care policy; limits on charges; and billing and collections.

The billing and collections rules are the ones vendors live with. The IRS holds a hospital accountable for extraordinary collection actions taken by third parties collecting for it or buying its debt.

Example: a nonprofit hospital's agency contract names which ECAs, if any, the agency may take, and requires the dates that start the 501(r) clocks with every account placed.

Where the rule stands

StageIn effect
Date
Final regulations released Dec 29, 2014; apply to tax years beginning after Dec 29, 2015
What applies today
All 4 requirement areas apply to each hospital facility
Next trigger
None scheduled: the Treasury-IRS 2025-2026 Priority Guidance Plan lists no 501(r) project
Last checked
TSI Marketing, Nov 5, 2026

Source: IRS, Requirements for 501(c)(3) hospitals under the Affordable Care Act, Section 501(r), page updated Jul 2, 2026

Related terms: extraordinary collection action, financial assistance policy, amounts generally billed

Self-pay

Self-pay is a balance a patient pays directly: care for a patient with no insurance, a patient who chooses not to use it, or the part left after insurance pays. For good faith estimates, federal rules define an uninsured (or self-pay) individual as someone with no coverage for the service, or with coverage who doesn't seek to have a claim submitted.

Self-pay accounts are where coverage screening, financial assistance, early out and bad debt all happen.

Example: a patient between jobs has an outpatient visit with no coverage, and the hospital screens for Medicaid and charity care before the first statement goes out.

Source: HHS, 45 CFR 149.610(a)(2), current text

Related terms: charity care, good faith estimate, Medicaid retroactive coverage, early out

Learn more: How to screen self-pay accounts for coverage and eligibility and coverage discovery

Timely filing limit

A timely filing limit is the deadline for submitting a claim to a health plan, after which the plan can deny it. For Medicare, a claim for services furnished on or after Jan 1, 2010 must be filed no later than the close of the period ending 1 calendar year after the date of service, with limited exceptions.

Commercial plans and Medicaid programs set their own limits in contracts and state rules, so each payer's limit belongs in the billing team's rules.

Example: a Medicare claim for a Mar 3, 2026 visit must be filed within 1 calendar year of that date of service.

Where the rule stands

StageIn effect
Date
Applies to services furnished on or after Jan 1, 2010
Source
CMS, 42 CFR 424.44(a)
What applies today
Medicare claims are filed within 1 calendar year after the date of service, with the exceptions in the rule
Next trigger
None scheduled
Last checked
TSI Marketing, Nov 5, 2026

Source: CMS, 42 CFR 424.44, current text

Related terms: clean claim, denial write-off, claim denial

Learn more: What a denied claim costs to work

Uncompensated care

Uncompensated care is the total a provider doesn't collect from patients because of uninsured discounts, charity care and bad debt. HFMA's MAP Keys measure it as the sum of those 3, divided by gross patient service revenue.

Tracking the total beside each part shows when balances move between buckets, for example from bad debt to charity care after better screening.

Example: $6 million of uninsured discounts, $8 million of charity care and $10 million of bad debt on $1 billion of gross patient service revenue is 2.4%.

Source: HFMA, MAP Keys, Uncompensated care (FM-4)

Related terms: bad debt, charity care, self-pay

Learn more: Early-out and bad debt: what they cost and what they recover

General information, current as of Nov 5, 2026. It isn't legal advice. Rules change and differ by state, so check the sources linked here and talk to your own counsel before you act on it.

Price your denials before you appeal them

The Denials Economics Sprint takes one payer and one denial class, sets a baseline and returns overturn rate, paid yield, cost per claim and the economic threshold.

Revenue recovery, reimagined.
TSI Virtual Assistant
How can I help you today?
|
×