What is a write-off in medical billing?

A write-off in medical billing refers to the difference between the provider's actual charge and the allowable charge set by insurance companies or government payers. When a healthcare provider renders services, they may bill patients the full amount for their services. However, the insurance company or payer determines what portion of that billed amount is acceptable based on their contracted rates. The amount that is not reimbursed by the payer is considered a write-off. This amount is also not owed by the patient, as it has been agreed upon in the provider's contract with the insurer.

Understanding write-offs is crucial in medical billing because they impact the overall revenue cycle. Properly recording and managing write-offs helps healthcare facilities accurately reflect their income and ensure compliance with financial regulations. Ultimately, this process ensures that patients are only responsible for the amount they are liable for after insurance adjustments have been made.