Certified Rehabilitation Registered Nurse (CRRN) Practice Exam

Which of the following best defines cross-subsidization?

1. The practice of overcharging for all patients

2. Assigning some patients more costs than they incur and others less

3. Offering discounts to indigent patients

4. Balancing hospital budgets at the end of the year

The correct answer is: Assigning some patients more costs than they incur and others less

Cross-subsidization is best defined as assigning some patients more costs than they incur and others less. This practice occurs when a healthcare provider charges certain patients or groups of patients higher fees than their services cost, allowing them to offset losses incurred from other patients who may be charged lower fees or who do not cover their costs. This financial strategy is often implemented to maintain the overall financial health of the healthcare organization, ensuring that it can continue to provide services to all patients, including those who might not be able to pay full price. For instance, insurers or patients with good coverage might be charged more to help support the care of uninsured or underinsured patients, effectively redistributing the costs among different patient populations. The other options do not accurately describe cross-subsidization. Overcharging for all patients implies a uniform pricing strategy rather than a differentiated one. Offering discounts to indigent patients represents an altruistic approach to pricing rather than an internal cost redistribution strategy. Balancing hospital budgets at the end of the year is a general financial management practice and does not specifically relate to the nuances of charging patients differently based on their ability to pay or the cost of their care.