What is a write-off in medical billing?

A write-off in medical billing refers to the amount that a provider forgives due to contractual agreements with payers, such as insurance companies. When a healthcare provider enters into a contract with an insurance company, they agree to accept certain reimbursement rates for services rendered. This often results in a difference between the amount billed and the amount that is reimbursed by the insurance. The difference is known as a write-off because it is essentially written off the provider's books, meaning the provider will not pursue this amount from the patient.

This practice is an essential component of the revenue cycle management in healthcare, as it helps to keep billing transparent and ensures that patients are only responsible for the agreed-upon costs after an insurance payment has been processed. Understanding what a write-off is and how it impacts both providers and patients is crucial in managing healthcare costs and maintaining financial sustainability within a medical practice.