How to Adjust Accounts for Contractual Write-Offs in a Dental Practice

Accurate account adjustments are crucial to maintaining financial clarity and regulatory compliance in any dental practice. One of the most common—and often misunderstood—adjustments is the contractual write-off. Dental teams that master this process are better equipped to maintain clean accounts receivable, ensure consistent cash flow, and improve insurance collections.

In this article, we’ll break down exactly how to handle contractual write-offs, step-by-step, with a clear focus on training your front office and billing staff for long-term success.

What Is a Contractual Write-Off?

A contractual write-off is the difference between your full office fee for a service and the amount you’ve contractually agreed to accept from an insurance company under a Preferred Provider Organization (PPO) plan. This write-off is not considered lost revenue—it is an adjustment made in accordance with your provider agreement.

Why It Matters

• Compliance: Incorrect write-offs can trigger audits and financial penalties.
• Reporting Accuracy: Write-offs affect how you track production, collection, and provider performance.
• Patient Communication: Posting incorrect adjustments may result in overbilling or underbilling patients.

Step-by-Step: How to Post Contractual Write-Offs Correctly

To ensure accuracy and consistency, follow these five essential steps:

1. Post the Full Office Fee First

Always begin by entering your usual and customary fee (UCF) into your practice management software, not the insurance-allowed amount.

Why this matters:

• Gives a true picture of what your services are worth.
• Ensures reports on production reflect actual value, not reduced PPO rates.

Pro Tip: Set up your software to default to full fees and apply adjustments afterward, rather than altering fees manually.

2. Post Insurance Payment Once the EOB Arrives

When you receive the Explanation of Benefits (EOB) from the insurance company, it will show:

• Billed Amount
• Allowed Amount
• Insurance Payment
• Patient Responsibility
• Write-Off/Adjustment

Enter the insurance payment exactly as stated in the EOB.

3. Apply the Contractual Adjustment as a Separate Line Item

Now enter the write-off amount as a negative adjustment, matching the contractual difference between your full fee and the allowed amount.

Example:

• Billed Fee: $200
• Allowed Amount: $150
• Insurance Pays: $120
• Patient Owes: $30
• Contractual Write-Off: $50 (entered as a -$50 adjustment)

Avoid rounding or estimating adjustments—only use the figures provided by the insurance carrier.

4. Post the Patient Responsibility

Enter the patient’s co-pay or deductible responsibility as the final part of the transaction. This amount should match what’s outlined in the EOB.

Important: Collect this amount from the patient at the time of service whenever possible to prevent aging balances and reduce follow-up calls.

Common Mistakes and How to Avoid Them

To keep your accounts clean and your A/R report trustworthy, be on the lookout for these common errors:

❌ Posting Adjustments Before Receiving EOB

Why it’s a problem: Carriers sometimes change allowed amounts without notice. Premature write-offs can distort revenue reports and lead to underbilling.

❌ Adjusting Based on “What We Usually Get”

Why it’s a problem: Each insurance plan can have different allowable amounts. Basing adjustments on past experiences can result in compliance issues.

❌ Combining Adjustments with Payments

Why it’s a problem: Combining the adjustment with the insurance payment confuses accounting and makes it difficult to track true write-offs.

How to Train Your Team for Consistent Adjustments

A well-trained team is your best defense against write-off errors. Here’s how to get everyone aligned:

✅ Standardize Your Adjustment Codes

• Use clear, specific adjustment codes like:
  • “PPO Write-Off”
  • “Insurance Adjustment”
  • “Prompt Pay Discount”
• Avoid vague codes like “Misc Adj” or “Manual Write-Off.”

✅ Create a Simple Adjustment Workflow

Use a checklist or digital SOP for every insurance payment posting. Include fields for:

• Full fee
• Insurance payment
• Contractual adjustment
• Patient portion

✅ Hold Regular Billing Audits

Audit accounts weekly or monthly to:

• Spot incorrect adjustments
• Verify EOB alignment
• Catch unposted patient balances

✅ Invest in Ongoing Training

Staying current on dental billing best practices is key. Learn more in our online training programs, including the Certified Dental Billing Specialist (CDBS) course. It’s a great way to ensure your team stays sharp and your revenue cycle stays healthy.

Tracking and Reporting Write-Offs

Proper tracking of write-offs isn’t just about bookkeeping—it’s a business strategy. Use your software’s reporting tools to track adjustments in ways that highlight trends and opportunities.

Key Reports to Run Monthly:

• Total Write-Offs by PPO Plan: Identify which carriers are affecting your bottom line the most.
• Write-Offs by Provider: Evaluate the impact of adjustments across team members.
• Adjustment to Production Ratios: Measure the health of your collections and fee structures.

Benchmarks: For most PPO practices, write-offs will range between 25%–45% of total production depending on fee schedules and plan mix. If your numbers are higher, consider renegotiating PPO contracts or shifting to fee-for-service models.

How Write-Offs Affect Your KPIs

Understanding write-offs is key to accurately tracking these essential performance indicators:

• Gross Production: This should always reflect your UCF, not reduced PPO fees.
• Net Production: Gross production minus all adjustments (contractual, discounts, bad debt).
• Collections Percentage: (Net Collections ÷ Net Production) x 100 — the truest measure of your collection efficiency.

Tools That Can Help

Several dental software platforms offer tools to automate or simplify the adjustment process:

• Dentrix, Eaglesoft, Open Dental: All allow separate line-item adjustments and EOB tracking.
• Automated Posting Services: Many clearinghouses now offer ERA (Electronic Remittance Advice) integrations for faster, more accurate adjustment posting.
• Third-Party Auditing Tools: Tools like Dental Intelligence or Jarvis can help identify missed revenue due to incorrect write-offs.

Before adding new tools, make sure your team is solid on the manual process—automation only works if the data is entered accurately to begin with.

Final Thoughts

Contractual write-offs are a normal part of operating within PPO networks—but they shouldn’t be a mystery or a mess. When you:

• Post full fees first
• Wait for EOBs to confirm adjustments
• Apply write-offs as clear, separate entries
• Train your team regularly

You create a clean, consistent billing process that supports the financial health of your practice.

To take your training to the next level, enroll in our Certified Dental Billing Specialist (CDBS) online course. It’s packed with tools and real-world guidance to help dental professionals manage billing and insurance with confidence.

Need help cleaning up your A/R or training your billing coordinator? Reach out—we’d love to support your success.