Home Forums Discussions General Discussion Forgiving patient debt...

When repeated bills, calls, and collection agencies fail to collect a significant debt from a patient ($500+), have any of you forgiven the debt and sent a 1099 to the patient to at least get a small tax break from the lack of payment?

I had an uninsured patient tell me that they got a 1099-C for unpaid medical bills in the past and was wondering if this is common.

Bamadoc,

We do this, but it is on a case by case basis. For instance, and others may disagree, but if it is a patient I just wouldn't want to lose, I will be very forgiving, others not so much. As an example, I took care of a patient for years with mitochondrial disease. Sadly, the patient passed away. I was just very close to this family, and there was no way I was going to dismiss this patient.

We do it all the time... Write off all or part of the charge... But we don't try to recoup anything. I just consider it charity but with no tax benefit. Be aware, however, of the risk of being accused of Medicare fraud. It is the big reason I opted out.

I am not sure if 1099 is going to accomplish anything, other than aggravate the patient. I suppose we all operate on cash basis and not on accrual basis. You can not deduct what you did not get in the first place, so to speak.

Unfortunately I believe EasyRider is accurate in that you can only get tax benefit if you do accrual basis for taxes - then you are paying tax on accounts receivable which I have never heard of anyone in private practice doing. I would love to send 1099 to pt who "stiff us" and never intend on paying any debt - I unfortunately am a softie and have continued to treat pt when they never paid just out of compassion.....one of the dilemnas of being a physician and a business person.

We also write off the debt and decide on keeping the patient over how it accumulated.

While this may turn into a horror stories thread, sorry, I remember an elderly lady who thought that she would save money by not paying for her Mutual of Omaha supplement to Medicare. It took us 4 Remicade infusions to realize the 20% wasn't going to be collected. Even worse, she didn't tell her husband until after he had an MI, 4 CABGs and a prolonged hospital stay. So the hospital probably owns their home. She is still a patient and I'm sure we are in the black now with her account.

It surprises me after 23 years how many new ways we can get into trouble on getting paid.

Dan,

This is way off topic, but your comment of 23 years made me think of of the changes you have seen with the DMARD's/biologics in your practice. I wonder what Renoir would have produced if you could have treated him. I was thinking of this as studying the MKSAP Rheumatology booklet, when was the last time you saw a laterally deviated disfigured rheumatoid patient? I can't remember the last time.

Back to the matter at hand. I lifted this from the IRS site to help define the difference.
Accrual method. If you use the accrual method of accounting, you generally report income as you earn it. You can only claim a bad debt deduction for an uncollectible receivable if you have previously included the uncollectible amount in income.

If you qualify, you can use the nonaccrual-experience method of accounting discussed later. Under this method, you do not have to accrue income that, based on your experience, you do not expect to collect.

Cash method. If you use the cash method of accounting, you generally report income when you receive payment. You cannot claim a bad debt deduction for amounts owed to you because you never included those amounts in income. For example, a cash basis architect cannot claim a bad debt deduction if a client fails to pay the bill because the architect's fee was never included in income.

I'm no expert, but I thought you can't deduct money from your yearly business that you never rec'd. Therefore it is a waste of time, energy, effort, and money to send out 1099 forms to dead-beats or even include that data in your tax information.
There really is a thing called " the cost of doing business ". It is up to the business owner to control costs. If you make bad purchases, keep on letting your bad debts grow, or provide a service not financialy efficient, then the gov'ment doesn't let you claim a smaller tax bill.
As a small business owner, physicians have control over these issues. But you have to take control.

Nate

Thanks for the info folks.

I had never heard of that being done before and it looks like it won't be an option given the info here.