DIFFERENCE BETWEEN WRITE OFF AND ADJUSTMENTS IN MEDICAL BILLING

What is a write-off?

A write-off refers to an amount deducted by the provider from a medical bill and does not expect to collect payment owned by patients or payers. Write-offs are a common practice in the billing system. Primarily, write-offs can be bifurcated into two categories; approved and other write-offs. This depends upon the practice philosophy. However, if chosen to be further mentioned, some of the most frequent types include charity, small balances, no insurance, and contractual adjustment.

Let us learn about them individually.

• Charity write-offs- These are a professional courtesy between the fee schedule and the amount collected. You can also call them a reasonable attempt towards financial assistance to the community under policy adherence.
• Small balance write-offs- These come into consideration when small balances under $10 or $15 are considered uncollectible on the patient’s account. Practitioners will not send a bill in small amounts but try to collect it when the patient returns to the clinic, which happens in the primary care settings.
• No insurance and prompt payment write-offs- These are mostly offered by well-run offices that offer write-offs to patients paying in full at the end of the treatment or remain uninsured.
• Contractual write-offs- These are the difference between the fee-for-service and the maximum allowable in the patient’s portion that you have agreed through a contractual adjustment.

What are other write-offs?

There are some write-offs in which errors such as missing insurer’s deadline, diagnosis coding issues, illegible claims, incorrect patient numbers, registration issues can lead to unnecessary write-offs that otherwise can be avoidable. A few examples are;

• Timely filing write-offs- Filing a claim past the insurer’s deadline can result in write-offs of the patient’s portion of the bill.
• Collection agency write-offs- If the unpaid balance remains above $100 or so, it gets transferred to the collection agency to collect on your behalf.
• Uncredentialed provider write-offs- In it, the provider remains uncredentialed with the payer and filing a claim.
• Administrative write-offs- There may be circumstances where a manager will approve a write off if the patient had an unsatisfactory experience with the care. Also, if the practice turns out not in-network, there is a written-off policy that manages such instances.
• Bad debt – Then there is also the matter of forgiving the balances forever for whatever reason. These are called bad debts.

Contractual Adjustment in Medical Billing?

A contractual adjustment is a discounted insurance rate or allowable payment based on the contract with the insurance company. It is adjusted from the patient’s account.

Let’s say for example if the charge for a procedure is $80 and the insurer pays $70, the remaining $10 will be a contractual adjustment from the final payment if the patient has an insurance plan. By this way, it ensures that the provider gets paid at least 80% of their fee as without insurance can be a significant cost-sharing burden.

Claim Adjustments Group Codes

The below group codes are applicable when the office charges exceed the reasonable and customary amount for the rendered service.

• Contractual Obligation (CO)- It is a Joint contractual agreement between the payee and the payer resulting in an adjustment.
• Other Adjustments (OA)- It is permitted to be used when no other group code is applicable for managing such write-offs.
• Payer initiated reductions (PI)- According to the payer when the patient is not financially viable for the adjustment, and there is no supporting contract between the provider and the payer.
• Patient responsibility (PR)- An adjustment sent out to the patient or insured portion of a bill. For deductibles and copays, this group code can pose.