Allowed Amount vs Paid Amount vs Contracted Rate

A practice manager opens a remit, sees a 99214 paid at $41, and remembers the contract says $141. Underpaid by $100? Almost certainly not. A different line shows 99214 paid at $98 against the same $141. That one might be.

The difference is which numbers you compare. A remittance line carries three that sound alike, and only one pairing tells you whether the payer honoured your rate.

The short version

• Contracted rate: what your agreement with the payer says a code pays.
• Allowed amount: what the payer priced this particular claim at.
• Paid amount: what the payer actually sent you, after the patient's share.

To find an underpayment, compare the allowed amount with the contracted rate. Never the paid amount.

The contracted rate

This is the number in your agreement: the rate exhibit attached to the contract, or the payer's fee schedule the contract points to, or a percentage of Medicare. It is the same for every claim for that code under that contract, until the contract changes.

Most practices can't put their hands on it quickly. The exhibit is years old, or it says rates follow a schedule nobody kept. Since 2022, the federal Transparency in Coverage rules have required commercial payers to publish their in-network rates for each provider, by billing code, and to update them monthly, so the payer's own statement of your rate is public even when your copy of the contract isn't. How to find your contracted rate covers all three places it lives.

The allowed amount

HealthCare.gov defines the allowed amount as the maximum amount a plan will pay for a covered service, and notes it is also called the eligible expense, payment allowance or negotiated rate. On a remit it is what the payer priced this claim at.

You won't usually see a field called "allowed". You see your billed charge and then an adjustment that brings it down. For an in-network claim that adjustment is normally CO-45: group code CO, contractual obligation; reason code 45, charge exceeds fee schedule or maximum allowable or contracted fee arrangement. Billed charge minus CO-45 is the allowed amount. CMS's guide to reading remittance advice describes a CO amount as one the provider is liable for, which the patient may not be billed.

The paid amount

The payer doesn't pay the allowed amount. It pays the allowed amount minus what the patient owes under their plan, and those amounts appear as patient-responsibility adjustments, group code PR:

In a plan with a high deductible, the payer can allow your full rate and pay nothing at all, because the whole allowed amount went to the deductible. That claim was paid exactly right.

One remit line, three numbers

An illustration, with made-up figures, of a 99214 at an in-network office visit under a contract that pays $141:

The payment is $100 below the contracted rate, and nothing is wrong. Now the second line from the opening:

The payment is higher, and this is the claim worth a look: the payer allowed $13 less than the contract says. The extra $13 sits inside the CO-45 line, where it looks like every other contractual adjustment, and the claim closes at a zero balance like any other.

Which comparison finds what

When allowed below contracted isn't an underpayment

Before calling a gap an underpayment, rule out the ordinary reasons a claim is correctly allowed below the base rate for its code:

• A modifier that changes payment. Professional or technical component (26, TC), bilateral (50), multiple procedures (51), reduced or discontinued services (52, 53), assistant-at-surgery modifiers (80, 81, 82, AS) and others all reduce the allowed amount by design. Modifiers such as 25 and 59 don't change the rate.
• Bundling and multiple-procedure edits. A code bundled into another, or reduced as a second procedure, is allowed below its standalone rate.
• Place of service. A facility rate and an office rate for the same code differ. Compare office claims with the office rate.
• Your charge was below the rate. Many contracts pay the lesser of your charge and the rate. If your charge is lower, the allowed amount is your charge, and the fix is your own fee schedule, not an appeal.
• Another payer was primary. Secondary and coordination-of-benefits claims price differently.
• The rate changed. An amendment, or a contract tied to Medicare's annual update, moves the rate on its effective date. Compare each claim with the rate in force on its date of service.

What's left after those checks is worth taking to the payer. The usual first step is a reprocessing request or appeal citing the contract and the claims; the AMA publishes a sample claims underpayment letter to start from.

Doing it for more than one claim

Line by line, this is slow. The practical version works on totals: export allowed amounts from your practice management system grouped by CPT code, modifier and place of service, with a claim count, and hold each group against the rate for that code. A gap that shows up across every claim for a code, at one payer, is a pattern rather than a one-off, and is both easier to raise and worth more.

To do it in a spreadsheet, the underpayment audit template has the columns and the rules built in: a $1 tolerance, and payment-changing modifiers set aside.

The honest limit: the comparison is only as good as the rate you compare against. A contract exhibit can be out of date. A payer's published file reflects its rates as of that month's file, and a rate the file marks "derived" is the payer's estimate rather than the contracted figure. When the two sources disagree, check effective dates first.

The RateBench underpayment check does this comparison for you. Upload your allowed amounts by code, with no patient data, and it holds each one against the rate the payer published for your practice on your fee schedule. It sets aside claims with payment-changing modifiers, and shows the codes allowed below the rate, the claims affected and the gap, worst first. It's on every paid plan, from $99 a month.