Allowed Amount
The allowed amount is the maximum a payer will recognize for a covered service under its fee schedule or contract — the ceiling that payment and patient responsibility are calculated from. The gap between your billed charge and the allowed amount is written off as a contractual adjustment for in-network care.
- Also called
- Allowable, approved amount, eligible amount
- Set by
- Payer fee schedule or your contract
- Splits into
- Payer payment + patient responsibility
- Billed minus allowed
- Contractual adjustment (CO-45)
What is the allowed amount?
The allowed amount is the number every other figure on a remittance hangs off. Your billed charge is what you asked for; the allowed amount is what the payer's fee schedule says the service is worth. Payment, coinsurance, deductible credit, and the contractual adjustment are all computed from it — never from your charge.
Payers label it differently — "allowable," "approved amount," "eligible amount," "maximum allowable charge" — but on the ERA it is the same field doing the same job.
How does the math work on a real claim?
Take a 99214 office visit, in-network commercial plan, deductible already met, 20% coinsurance:
- Billed charge: $180.00
- Allowed amount: $92.40
- Contractual adjustment (CO-45): 180.00 − 92.40 = $87.60 written off
- Patient coinsurance: 20% × 92.40 = $18.48
- Payer payment: 92.40 − 18.48 = $73.92
Check it: 73.92 + 18.48 + 87.60 = 180.00. If those three numbers do not reconcile to the billed charge on your posting, something was keyed wrong or the payer took an adjustment you should be questioning.
How does network status change the allowed amount?
In-network, the allowed amount is contractual: you agreed to it, you write off the difference, and balance billing the patient beyond their cost share is prohibited. Out-of-network, the payer still sets an allowed amount — often based on a percentage of Medicare or a "usual, customary, and reasonable" database — but it is not binding on you, so the patient can be exposed to the balance except where the No Surprises Act blocks it (emergencies and most out-of-network care at in-network facilities).
How do you catch allowed-amount underpayments?
- Load every contract's fee schedule into your PM system as expected-allowed values, and update on each contract anniversary.
- Run a monthly variance report: expected allowed vs actual allowed, by payer and CPT. Chase anything over a few dollars that repeats.
- For Medicare, verify against the published rates — the Medicare fee calculator gives you the locality-adjusted allowed amount for any CPT.
- Dispute in writing with the contract page attached. Payer reps fix documented fee-schedule variances far faster than verbal complaints.
Frequently asked questions
No. The allowed amount is the total the payer recognizes for the service. It then splits between the payer and the patient: the payer pays its share and the patient owes copay, coinsurance, or deductible against the same allowed amount. Insurance payment plus patient responsibility should equal the allowed amount.
Because billed charges come from your chargemaster, which is set above every contract rate on purpose, while the allowed amount comes from the negotiated fee schedule. The difference is not lost revenue in-network — it is a contractual adjustment you agreed to when you signed the contract, reported on the ERA as CO-45.
Not in-network. Your contract prohibits balance billing beyond the allowed amount; the patient owes only their cost share. Out-of-network, balance billing may be possible but is restricted by the federal No Surprises Act for emergency care and certain facility-based services.
Sources & further reading
Reviewed by the ImmediCare Solutions RCM team
Certified billers and coders handling claims across 50+ specialties nationwide. This entry is reviewed against current payer policy and CMS rules. Last review: Jul 5, 2026.
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