Write-off vs adjustment in dental billing
An adjustment is any ledger entry that changes what a patient owes without a payment. A contractual write-off is one kind: the difference between the office fee and the amount a network contract allows, which the practice agreed never to collect. Every other adjustment, such as a courtesy discount, a small balance or bad debt, is money given up.
Also calledContractual write-offContractual adjustmentPPO write-offLedger adjustment
By Dr. Maya Arnaout, DDS, VP of RevenuePublished 4 min read
What is a contractual write-off?
When a practice joins a PPO network, it agrees to accept the plan’s fee schedule as payment in full. The difference between the office’s own fee and the plan’s allowed amount is written off, and the patient cannot be billed for it.
On an ERA or EOB it usually shows as CO-45: group code CO, contractual obligation, with reason 45, the charge exceeds the fee schedule. CARC and RARC codes covers the rest.
Charge
D2392 two-surface back tooth filling, office fee
+$210.00
Insurance payment
Sample Dental Plan, from the ERA
-$112.00
Contractual write-off
CO-45: over the plan’s fee schedule
Comes out of production-$70.00
Patient payment
Paid by card after the statement
-$25.00
Small balance adjustment
The last $3.00, cleared rather than billed
Lowers the net collection rate-$3.00
Net collection rate on this procedure: $137.00 ÷ ($210.00 − $70.00) = 97.9%. The $3.00 adjustment is the only part not collected.
What other adjustments are there?
| Adjustment | What it is | Effect on net collection rate |
|---|---|---|
| Contractual write-off | The office fee minus the allowed amount, under a network contract | None: it comes out of production |
| Courtesy or professional discount | A reduction the practice chose to give, such as a family, staff or cash discount | Lowers it |
| Small balance write-off | A few dollars left on an account, cleared rather than billed | Lowers it |
| Denial write-off | A claim the payer will not pay, such as one filed after the deadline | Lowers it |
| Bad debt | A patient balance given up on, or sent to a collection agency | Lowers it |
| Correction | Reverses a charge or posting that was wrong | None: it fixes the record |
How do write-offs and adjustments hit the ledger?
Both lower the balance on the procedure, just as a payment does, but no money changes hands. Post each one against the procedure it belongs to, under its own adjustment type in the PMS, so reports can tell them apart.
That last part matters. If a courtesy discount is posted as a contractual write-off, or a PPO write-off as a general adjustment, every report built on those types is off: production, collections and the net collection rate.
Some practices post an estimated write-off when the procedure is completed and correct it when the EOB arrives; others post it from the EOB. Either works if the final write-off matches the EOB.
Why does the difference matter for the net collection rate?
The net collection rate divides payments by production minus contractual write-offs. The contractual write-off comes out because it was never collectible. Every other adjustment stays in, so it lowers the rate: a discount, a small balance or a denial written off is money the practice could have collected and did not.
A CO group code alone does not make a write-off contractual in this sense. A timely filing denial, CO-29, is written off under CO, but it is lost money, not a fee schedule difference. Post it as a denial write-off so it shows.
How ScoutIQ handles it
ScoutIQ reads every adjustment on each ERA and paper EOB, with its group and reason code, and posts it to your PMS against the right claim line, keeping the contractual write-off apart from what the patient owes. Denials and short pays are not quietly written off: they go to their own queue with the payer’s reason and the days left to appeal.
Insurance Billing Automation
ERAs and EOBs read; EFT, check and card payments reconciled.
See Insurance Billing Automation