The Right Way to Do Write-offs

A write-off is an amount that a practice 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.

There are lots of reasons why write-offs are taken, and it is common practice to divide write-offs into two major categories.

Necessary or Approved Write-offs

These are write-offs that you have agreed to, either in the context of a contract, or in terms of your practice philosophy.

Contractual write-offs are the difference between the practice fee schedule and the allowable fee schedule you’ve 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 healthcare 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, taking into account the statement process, as well as the cost to receive the check, post it, and deposit it. Many practices write off the small balance (usually $15 or less) and collect it when the patient returns. Others run a special small balance statement run once a quarter.

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 and you reluctantly reduce the charge based on billing mistakes or situations that you should have been able to control, but were not.

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.)

Uncredentialed provider write-offs are those caused by filing a claim for a provider before they are credentialed with the payer.

Administrative write-offs are those approved by the manager based on service issues. For instance, 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. 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.


Some guidelines for managing write-offs

  1. Start with the basic write-offs but add write-off categories as the need arises.
  2. Decide which write-offs require managerial approval. Do not make staff get approval for routine write-offs, but do not completely relinquish approval for all write-offs as this is one place where staff could abuse their authority. Make sure write-offs are addressed in your compliance plan so staff understand their responsibilities.
  3. Review all write-off categories monthly and pay attention to unusual spikes as well as creeping trends. Keep in mind that if you raise your fees and don’t renegotiate your contracts, your contractual write-offs are going to escalate, and you’ll need to account for that difference in your evaluation.
  4. Audit write-offs periodically to make sure that they are being done correctly. Staff will know that their work is being checked and you can be sure the numbers you are making business decisions on are sound.
  5. Best practices for unnecessary write-offs are no more than 5% of your total expected collections. The formula for expected collections is gross charges minus necessary/approved write-offs.

Posted in: Collections, Billing & Coding, Compliance

Leave a Comment (81) ↓


  1. Suzanne April 22, 2014

    In closing a medical practice, can you write off balances or must they be maintained until the collection process is complete? And, if in external collection, can you stop that process as well? Thanks.

  2. Latoya April 24, 2014

    Hi Mary Pat,

    Is it illegal for a provider render services to a patient and then bill the visit as a No Charge, and the patient has commerical insurance that we are contracted with? The provider does a full work up and then decides not to bill the patient just because. It’s just very frustrating because the front office collects the copay before the patient goes back to see the provider and then the front office is having to refund the patient their copay because the provider decides not to charge the patient. I was just wondering if we had to bill the patient’s insurance if we are contracted with the insurance company unless the patient asked us not to bill their insurance.
    Thank you for any help you may provide.

  3. Mary Pat Whaley May 3, 2014


    I would do everything you can to get the remit fixed, as it goes to the patient as well. You do not want the patient confused or thinking you are somehow cheating them.

    Best wishes,

    Mary Pat

  4. Mary Pat Whaley May 3, 2014

    Hi Suzanne,

    You may write off balances at any point and you can withdraw accounts from third-party collection if you want to.

    Best wishes,

    Mary Pat

  5. Mary Pat Whaley May 3, 2014

    Hi Latoya,

    A provider can make the decision when to or not to charge the patient for any service. You are under no requirement to charge and bill the insurance plan, contracted or not, for a service the provider deems a no charge visit.

    Best wishes,

    Mary Pat

  6. Margaret May 8, 2014

    My provider has a few payers that she is out of network with (no contract). For these patients, my provider charges $155 for services and sends the bill to the payer for the patient. My provider then has the patient sign a waiver that says that she will accept a total of $100 for this service i.e., if the payer pays less than $100 then the patient will be responsible for the outstanding amount up to $100 and will write off everything else. Is this legal? If she will accept $100 for this service is it legal for her to send in a claim to the carrier for $155

  7. Mary Pat Whaley May 29, 2014

    Hi Margaret,

    I have chewed over this question for several weeks! Yes, it is correct to put on the claim what the “true” charge to the patient is, but is it really the “true” charge if you have a pre-arrangement that negates that charge?

    On one hand, if there is no contract, it should not matter what you charge, however insurance companies have argued that you can’t give them one charge, then agree on a different charge with the patient. Practices are doing this, however.

    So, I don’t really have a good way to answer this question. There is a different answer for what is right, what is fair and what presents a risk to your practice.

    Best wishes,

    Mary Pat

  8. Annie June 6, 2014

    I am currently trying to set up our small balance policy. In a past job the small balances were adjusted off for governmental payers 1.99 and under (both debits and credits) and for everyone else it was 5.00 and under (debits and credits).. Can anyone give me some examples on how your Medical company handles the small balances?

    Thank You

  9. Cindy June 24, 2014

    was wondering if contracted with an insurance company is it allowed to bill a patient for services that the insurance company writes off due to multiple procedure rules for ex: patient received 5 modalities and insurance only pays for three so the insurance company wrote off the other two can we bill the patient for these services if insurance does not pay for them.

  10. Laila June 27, 2014

    Hi Mary,

    A couple of questions.

    If the company is not contracted with Medicaid but accepts Medicare allowed amount, can they still charge the patient for the remaining coinsurance or deductible after Medicare processes the claim?

    Also, is it legal to write off balances for services rendered to the staff, family or friends of the providers who do business with the company? not on a regular basis but occasionally-and not sure if the write off goes through the same process as other write offs due to service issues or financial issues. Thanks

  11. Mary Pat Whaley July 13, 2014

    Hi Laila,

    Your first question is a little confusing so I hesitate to guess what you mean, however Medicare states “For services that are covered under Medicare, you cannot bill a Qualified Medicare Beneficiary (QMB), even if your office does not accept Medicaid. A QMB is someone whose income does not exceed 100% of the Federal Poverty Limit and who is eligible for Medicaid to pay Medicare premiums, deductibles, and coinsurance for both Part A and B. Even if the person signs a document accepting liability for any treatment costs, you still cannot bill them, as QMBs cannot waive this right under Medicare. Providers who bill a QMB for costs above the Medicare and Medicaid payments (even when Medicaid pays nothing) are subject to sanctions.”

    Your second question is clear. You can definitely offer staff and their families service discounts as an employment benefit (make sure and administer this benefit consistently), however you cannot offer discounts to friends of the providers who do business with the company. If the providers want to offer discounts to specific people, they should not charge for the services at all and not file the claims. It is fraud to discount or waive fees to patients based on relationships as opposed to financial need.

    Best wishes,

    Mary Pat

  12. Mary Pat Whaley July 13, 2014

    Hi Cindy,

    You must abide by the payment rules of any payer you are contracted with as you have signed a contract saying you will. You may not bill the patient for any amounts that the payer has determined will not be paid. This is not the same as other types of denials (non-covered services, for instance) where you have informed the patient that their plan does not cover the service and that they will be responsible for paying the charge in full.

    Best wishes,

    Mary Pat

  13. Mary Pat Whaley July 16, 2014

    Hi Annie,

    You are allowed to set a small balance write-off at the level you see fit, however, I suggest you note these details in your financial policy so the patient is aware of them.

    What is your policy, readers?

    Best wishes,

    mary Pat

  14. Pam July 29, 2014

    If you are contracted with a patient’s primary and secondary insurance, which fee level do you abide by?

  15. Annie August 6, 2014

    If a patient has two insurance companies that are paying primary and we are contracted with both insurance companies; do we have to take the contractual write off from both policies?

  16. Amber August 7, 2014

    Question? I worked at a medical practice for 6 years and the doctor had her billing office write off all the copays on mine my kids and husband as courtesy. Today 6 months after I no longer work there she sends a bill for copays back to 2011 for all my kids and husband. Now these were written off as a loss at the end of each year and claimed on her taxes. Is there anything I can do from a legal stand point its almost 1000 dollars.

  17. Mary Pat Whaley August 13, 2014

    Hi Annie,

    You need to refund the company that paid primary erroneously and make sure they pay you correctly as secondary. This will catch up to you sooner or later!

    Best wishes,

    Mary Pat

  18. Mary Pat Whaley August 13, 2014

    Hi Amber,

    I’ve never heard this one before. I do suggest you speak to a lawyer about it as it is beyond my scope of practice.

    Best wishes,

    Mary Pat

  19. Mary Pat Whaley August 13, 2014

    Hi Pam,

    The primary insurance allowables will rule how they pay. The secondary will have their own rules about only paying what was identified as the patient’s responsibility, or if their allowables are higher, if they will pay some of that as well. it is different from payer to payer.

    Best wishes,

    Mary Pat

  20. Renee August 16, 2014

    Mary Pat,
    This has been an on going battle in my office. Our Doctor is very unique with a surgery he does. He is actually doing two surgeries in one. The second half of the surgery we bill under an unlisted code. The insurance companies are telling us we have to write if off as bundled. My Doctor spends a lot of his time in a surgery, on a 6 hour surgery we get paid for 2 by the insurance company. Our thought was to have the patient sign a waiver they would be responsible for the cost of the unlisted code. Can we pass it on to the patient if the insurance company tells us to write it off or even if they only pay half if we are contracted but have a waiver?

  21. Mary Pat Whaley August 21, 2014

    Hi Renee,

    Have you submitted documentation to the payer about the procedure with the unlisted code to discuss why it is being done and what is involved? Depending on what the second surgery is, you should be able to compare it to something that has a code and have them pay a part of the second code. You might also need to document the numbers the insurance company would have to pay if the two procedures were performed at two different times, helping them to see that the two surgeries at the same time saves them money and is much better for the patient. I would go to mat for this one unless the second surgery is something very, very simple.

    In the meantime, you cannot have the patient sign an ABN and pay for the second surgery unless the second surgery is a non-covered procedure. The way you described, it sounds as if the procedure is bundled and not non-covered. Again, I would really get a dialogue going with the insurer, particularly the medical director.

    Best wishes,

    Mary Pat

  22. Ash M October 27, 2014


    I am wondering if I can write off on my taxes the services that patients don’t pay for. For example, I work at a private hospital and send bills to the insurance company. I often do not charge the patient the copay or any left over amount. I am out-of-network for almost all insurances. Also, I get uninsured patients who never pay. If i keep a record and send a bill, can I write off in my taxes for the services that were not paid?

  23. Mary Pat Whaley November 6, 2014

    Hi Ash,

    You cannot write off any monies that patients don’t pay you if you are on a cash basis of accounting, which most practices are. Check with your CPA if you are not sure if you are on cash or accrual accounting.

    Best wishes,

    Mary Pat

  24. Dan November 10, 2014

    Hi Mary Pat,

    If I notice in an old visit documentation that we provided a service to a patient that was never billed to insurance and would now be past timely filing, are there any options to recover some amount of payment for it? Is it legal to charge the patient any portion of the previously unbilled item?

  25. Mary Pat Whaley November 25, 2014

    Hi Dan,

    You can still charge the patient for the portion of the service that they were responsible for (co-pay, co-insurance), however, you cannot charge them for anything the insurance plan may/may not have been responsible for, for example, the deductible.

    Best wishes,

    Mary Pat

  26. Joy December 8, 2014

    Hello Mary,

    We are a non-network provider with an insurance but we are able to bill as a non-network. The insurance will reimburse at non-network price and a portion will be applied to patient’s responsibility. Because we are a non-network provider, is it wrong to not bill the patient for their portion?

  27. Whitney December 10, 2014

    If an office lists a write off do they bill the total before the write off to the insurance or bill the amount after the write off? ie: fee=$199 write off:$65; do they bill $199 to insurance or the remaining $134?

  28. Mary Pat Whaley December 13, 2014

    Hi Whitney,

    Hospitals typically write off the contractual on the front end and practices usually do it when they are paid. The difference is the amount that shows on the claim. Most insurance plan contracts say they will pay you the lesser of your charge or the allowable. If you show the allowable on the claim form, they may consider it your regular charge and try to cut your fees – after all, they’ve negotiated a contract where you discount your fee for the volume of their subscribers they will send your way. I suggest that even though it inflates your A/R, do not write off the contractual on the front end.

    Best wishes,

    Mary Pat

    Best wishes,

    Mary Pat

  29. Mary Pat Whaley December 13, 2014

    Hi Joy,

    I think what you are saying is that even though you are out of network, patients with this plan have out of network benefits. Since you do not have a contract with the payer, they cannot consider you in breach of the contract by not collecting the patient’s portion. I think it is wrong not to collect the patient’s portion from a financial standpoint, but maybe you think you attract more patients with this strategy. I do wonder if other payers found out you were doing this if … fill in the blank.

    Best wishes,

    Mary Pat

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