Is it illegal to "write off" health insurance copays and deductibles?

I work for a professional office where a patient inquired if we can write off his/her copay. Can anyone provide documentation stating if this is legal or not? I appreciate your thoughts in advance.
--------------------
There are three words that people often misunderstand and misuse. They are: co-pay(ment), coinsurance, and deductible. A deductible is the amount a person MUST PAY before their insurance will begin processing claims for payment in any given year. The amount is applied to the first claim(s) that are received during the year, and the patient must make payment to the provider of service whenever an amount is applied to their deductible. Co-insurance is the amount that the insurance company does not pay, after the deductible has been met. Typically, the insurance will pay 80% of the allowable amount, and the insured member is responsible for the other 20%. Both of these concepts, deductible and co-insurance, are cost share obligations under a traditional indemnity, or fee-for-service health insurance plan. A co-payment is completely different, and pertains to a managed care plan. The co-pay is the managed care (HMO, MCO, etc.) cost share obligation. Managed care IS NOT INSURANCE! So laws that regulate insurance companies in regard to claims, benefits, etc., do not apply. Managed care is referred to as a "subscription plan," because it does not constitute the issuance of a certificate of insurance. Read the rules of managed care. The patient CANNOT see the doctor until they make their co-payment. Managed care is governed by federal law and is not open to interpretation. To "write-off" a co-pay, or to allow a patient in to see the doctor without collecting the co-payment, is against the law! This flies in the face of traditional indemnity insurance, and because so many people are not familiar with the laws governing managed care (including doctors and administrators) they believe that the same rules apply. They do not. Traditionally, even if an established patient owes the doctor money, we must still let them in to see the doctor. As opposed to managed care, where the patient cannot see the doctor until the co-payment has been made. Having said that, deductibles and co-insurance amounts cannot just be written off. IRS code demands that we do one of two things before we write it off. And understand, an adjustment is different from a write-off. You eat an adjustment. Write-offs can be included on your Schedule C, and be accounted toward your profit and loss statement for the year. The IRS demands that we either: 1.) Substantiate that the patient suffers a financial hardship; 2.) make a collection effort. A financial hardship is more laborious and time consuming, but offers better protection if you are audited. Basically, you must gather paycheck stubs, tax info, mortgage or rent info, car note info, utilities bills, and anything that will assist in documenting the fact that the patient suffers a financial hardship. This process must be repeated every 180 days. However, once established, you can simply write the amounts off that the patient would normally owe. Making a collection effort is defined by the IRS as sending a bill (statement) once each 30 days for a period of 90 days, followed by a demand letter on day 120. If funds are not received to reimburse us for that expense, we can then write it off. These are the rules as stated by the IRS when it comes to write off allowances. The managed care scenario is covererd by federal law, so please be careful what you do. There are no HIPAA police looking in our windows. There are no IRS police, either. But it only takes one patient to complain, and an audit can ensue. Hope that helps!
Source