What is the difference between gross revenue and net revenue?

The distinction between gross revenue and net revenue is foundational in understanding financial reporting in the healthcare industry. Gross revenue refers to the total amount billed for services rendered to patients, without accounting for any deductions. This includes all charges irrespective of whether they are ultimately collected.

On the other hand, net revenue is derived after subtracting adjustments such as discounts, contractual allowances, and bad debt from the gross revenue. Thus, net revenue provides a more accurate picture of the money actually expected to be collected from patients and third-party payers.

This understanding emphasizes how gross revenue illustrates the overall billing capacity and potential income, while net revenue reflects the realized income for the healthcare organization. It is essential knowledge for anyone involved in healthcare finance or revenue cycle management, as these figures fundamentally drive strategic decisions regarding budgeting, resource allocation, and operational effectiveness.