Difference between Write off and adjustment in medical billing?

Write off vs. adjustment: What's the difference?

Write offs and adjustments are two common ways to correct mistakes or discrepancies in medical billing. But there are some key differences between the two that you need to be aware of.

Write offs

Write offs are used when a claim has been denied by the insurance company and there is no way to recover the money. This can happen for a variety of reasons, such as:

* The patient did not have coverage for the service.

* The service was not medically necessary.

* The claim was filed incorrectly.

When a claim is written off, the medical provider absorbs the loss. This can have a negative impact on the practice's finances, so it's important to try to avoid write offs whenever possible.

Adjustments

Adjustments are used when there is a mistake in the amount of money that was billed for a service. This can happen for a variety of reasons, such as:

* The provider billed the wrong amount for the service.

* The insurance company paid the wrong amount for the service.

* There was a discount or promotion that was not applied to the bill.

Adjustments are usually made by the medical provider, but they can also be made by the insurance company. When an adjustment is made, the difference between the original amount billed and the adjusted amount is either refunded to the patient or credited to their account.

Which one should I use?

The decision of whether to use a write off or an adjustment depends on the specific circumstances of the case. If the claim has been denied by the insurance company, then a write off is the only option. However, if there is simply a mistake in the amount that was billed, then an adjustment can be made.

It's important to note that write offs and adjustments can have different implications for the medical provider's taxes. Write offs are generally considered to be a loss, while adjustments are not. This means that write offs can reduce the practice's taxable income, while adjustments do not.

If you have any questions about whether to use a write off or an adjustment, you should consult with your accountant or tax advisor.

Here is a table summarizing the key differences between write offs and adjustments:

| Feature | Write off | Adjustment |

|---|---|---|

| Definition | Claim denied by insurance company | Mistake in amount billed |

| Reason for use | No way to recover money | Correction of mistake |

| Impact on practice finances | Negative | Neutral |

| Tax Implications | Reduces taxable income | Does not affect taxable income |