When Should a Practice Write off a Balance?

When Is It Right to Write off a Balance?

Write a balance off when nobody can still owe it or be made to pay it: every payer route is used or closed, the patient is not liable, and the collection effort your policy requires is done and recorded. Until all three are true, the balance is still accounts receivable, not a loss.

A write-off removes a balance from A/R without payment. It is a financial decision with a reason, so each one needs an approver and a note. The same step done for the wrong reason, or done routinely for patient cost sharing, can create a compliance problem, covered below.

What Kinds of Write-Off Are There?

Four reasons cover most write-offs, and each has a different test. Keep them in separate adjustment codes so the monthly report shows which one is growing.

Medicare has its own rule for hospitals. Under 42 CFR 413.89(c)(2)(ii), for cost reporting periods beginning on or after October 1, 2020, Medicare bad debts must not be written off to a contractual allowance account and are recorded as an implicit price concession that reduces revenue. The criteria and the 120-day collection steps are in how hospitals report Medicare bad debt.

What Do You Check Before You Write a Balance Off?

Run the same five checks on every balance above your small-balance limit, in this order.

1. Is another payer liable? Look for a secondary, a different primary or a liability payer, and bill them before anything else.
2. Is any payer route still open? Check corrected claim, appeal and reopening deadlines against today's date. The timely filing limits by payer page lists filing limits, and Medicare's rules for Medicare claims are on the payer guide.
3. Who owes the balance? Group code PR means the amount is the patient's, and CO means it is not. Do not move a CO amount to the patient.
4. Has the required effort been made and written down? Dates, channels and results belong in the account.
5. Is the approval in place? The approver is not the person who worked the claim.

Can You Bill the Patient After a Denial for Late Filing?

Not for a Medicare claim you filed late. Chapter 1, section 70.4, of the Medicare Claims Processing Manual says that where the provider is responsible for not filing a timely claim, the provider may not charge the beneficiary for the services except for the deductible and coinsurance that would have applied had Medicare paid.

So a Medicare timely filing denial is a write-off of the program's share, not a patient balance. The CO-29 page covers exceptions worth testing first. For other payers, read the contract: it can bar billing the member for any denial the provider caused, and your policy should say so.

Can You Forgive Patient Copays as a Routine Write-Off?

No. Routinely waiving Medicare copayments and deductibles is the practice the HHS Office of Inspector General warned about in its Special Fraud Alert on routine waiver of copayments or deductibles under Medicare Part B, issued in May 1991 and republished in the Federal Register on December 19, 1994.

The alert says providers may forgive a copayment for a particular patient's financial hardship, but that the exception must not be used routinely, and that otherwise a good faith effort to collect deductibles and copayments must be made. It adds that its silence on other payment methods should not be read as approving routine waivers for them.

The regulation says the same thing in definition form. Under 42 CFR 1003.110, remuneration does not include a waiver of coinsurance and deductible amounts if the waiver is not offered as part of any advertisement or solicitation, the person does not routinely waive them, and the person waives them after determining in good faith that the individual is in financial need or after reasonable collection efforts fail. Three tests, all required.

How Do You Document a Write-Off?

Keep one record per write-off that a stranger could read and understand. For Medicare bad debt, 42 CFR 413.89(e)(2)(i)(A)(6) lists what a hospital must keep for its contractor: the collection policy covering Medicare and non-Medicare patients, the patient account history with the dates of each bill, letter and call, and the patient's file with the bills and notices. It makes a sound template for any write-off.

• Patient, claim number, date of service, payer and the amount.
• The adjustment reason code, chosen from a fixed list.
• The route that was closed and its date: the denial, the last appeal, the deadline that passed.
• The collection touches for a patient balance: each date, channel and result.
• The policy section that supports the decision.
• The approver's name, the date and the approval tier.

Set approval tiers by amount and write the limits into policy. The limits are yours to set. Report write-offs by reason and payer every month, because a rising denial write-off figure points back to a cause. HFMA's Denial Write-offs as a Percentage of Net Patient Service Revenue (AR-6) is a published definition if you want one: net dollars written off as denials, net of recoveries, divided by average monthly net patient service revenue.

What Does a Short Write-Off Review Look Like?

Two of five were write-offs. The aging work that gets balances to this point is in how to work aged A/R over 90 days.

How Does Nucleus Align Handle Write-Offs?

We separate contractual, denial, bad debt and assistance write-offs, require an approval and a reason on each, and keep the route history on the account. Denials are worked within 48 hours so balances reach review with their deadlines known. See our patient billing service, the family medicine billing page, the denial management playbook, more on the blog, or book a call.