A write-off is an amount Cardiology Medical Group deducts from a charge and does not expect to collect, thereby “writing it off” the accounts receivable or list of monies owed them by payers or patients.
Necessary or Approved Write-offs
Necessary or Approved Write-offs are write-offs that you have agreed to, either in the context of a contract, or in terms of your practice philosophy. These include the following:
•Contractual write-offs are the difference between the practice fee schedule and the allowable fee schedule you have agreed to accept.
•Charity write-offs are the difference between the practice fee schedule and anything collected. Charity write-offs may be in accordance with a community indigent care effort, a policy adhered to in a faith-led health care system, or a financial assistance program.
•Small balance write-offs are amounts left on the patient’s account that may not warrant the cost of sending a bill, which has been estimated to cost about $12.00 each when you take into account the statement process, as well as the cost to receive the check, post it, and deposit it. Office writes off the small balance (usually $15 or less) and collects it when the patient returns.
•Prompt payment discounts and self-pay (no insurance) discounts are write-offs for patients paying in full at time of service, and/or patients who receive a discount off the retail price because they do not have insurance coverage.
Unnecessary Write-offs
These are write-offs that you have not agreed to, but you reluctantly reduce the charge based on billing mistakes or situations that you should have been able to control. These include the following:
•Timely filing write-offs are caused by filing the claim past the date required by the payer. Medicare requires that claims be filed no later than 12 months after the date of service to be paid. Medicaid varies from state-to-state. Commercial payers usually have very tight timely filing limits and most average three months. Make sure you know your timely filing limits for each payer.
•Uncredentialled physician write-offs are those caused by filing a claim for a physician before they are credentialed with the payer.
•Administrative write-offs are those approved by the manager based on service issues. For example, if the practice assures the patient that they are participating with the patient’s insurance, then it turns out that the practice is not in-network, the manager may approve a write-off based on the practice’s error. If the patient has a very bad experience in the practice, the manager may want to discount the service or to write-off the charge completely.
Note If you do discount the service, remember to submit the claim for the altered fee, as you cannot discount the fee to patient and charge the payer the full fee.
•Bad debt write-offs are balances that you have decided to write-off and not pursue further. These are balances that for whatever reason, you are forgiving forever.
•Collection agency write-offs are those that are written off the main A/R (accounts receivable) and transferred to a third-party collection agency to collect on your behalf. These balances are not forgiven. Some PM (practice management) systems maintain a separate collection bucket or A/R and others do not maintain collection accounts in the system. Most practices do not schedule appointments with patients that have a collection balance until that balance is satisfied or the patient is committed to a reasonable payment plan.
Guidelines for Managing Write-offs
Staff do not need to get approval for items in the “Necessary or Approved Write-offs” section above.
Review all write-off categories monthly and pay attention to unusual spikes as well as creeping trends. If you raise your fees and do not renegotiate your contracts, your contractual write-offs are going to escalate, and you must account for that difference in your evaluation.
Audit write-offs periodically to make sure that they are being done correctly.