Managing Credit Balance Volume in the Patient Account System

By Eric Boggs, Ryan Hartman, and Cory Herendeen
| 12/15/2015

hc-dec-15-260x187Credit balances are ubiquitous in healthcare, often the result of an increasingly complex system of public, private, and personal payments. The sheer magnitude of transactions on a single patient account (contractual adjustments, insurance payments, patient payments, administrative adjustments, etc.) can result in a credit balance. All of these credits in an organization’s patient accounting system often can represent up to two days of net patient revenue. These credit balances can be painful to resolve and often require commitment of the health organization’s already limited staff resources.

Fortunately, there is hope. By following a few simple guidelines, organizations can effectively address credit balances in the patient accounting system and verify that these liabilities are not overlooked and do not become unclaimed property.

  1. Draft a policy that clearly specifies a period of inactivity after which a credit balance must be reviewed and resolved. Many organizations have credit balances that have had no transaction activity for more than a decade. While failure to resolve credit balances may not always pose an immediate risk, the aging of accounts decreases the likelihood of returning the overpayment to the rightful owner and also increases any interest that may be assessed when the credit balance is reported as unclaimed property. Organizations should identify a reasonable inactivity time period (e.g., 12 to 24 months) and then develop reporting systems to facilitate the identification of the inactive credit balance accounts. This protracted period of inactivity should signal to an organization that the account balance likely will remain unchanged without further research to identify the source of the credit.
  2. Review inactive accounts monthly. The initial push to resolve credit balances likely will result in a significant one-time workload increase. Be sure to approach this initial volume of accounts in manageable chunks, setting achievable milestones to “catch up” the analysis of the aged credit balances. Once an organization has reviewed accounts beyond the time period defined in its credit balance policy, monthly analysis of the accounts will help to keep the overall volume low and keep the workload associated with the accounts manageable.
  3. Confirm the overpayment and issue a refund. The review process should include two important steps: (1) confirm the credit is the result of an overpayment rather than an incorrect contractual adjustment, denial posting, or other administrative adjustment; (2) if an overpayment is confirmed, issue a refund to the rightful owner. As might be expected, refund checks issued within a year of overpayment are much more likely to reach the owner than a statutory due diligence letter mailed two to four years later as the organization prepares to escheat the credit balance as unclaimed property. Timely review and refund of credit balances is the single best ongoing strategy to manage credit balance volume. Furthermore, it is typically easier to track outstanding refund checks as potential unclaimed property than it is to review aged credit balances in defunct legacy patient accounting systems.
  4. Create an accounts receivable unclaimed property general ledger liability account. Once a credit balance account has been reviewed and deemed inactive, the liability can be transferred out of the patient accounting system and into a general ledger account where it is held until the amount becomes dormant and can be escheated to the state. Patient and payer details (including address information) relating to the credit balance can be tracked in transaction notes or on a separate spreadsheet. This information will be necessary as the outstanding liabilities are included in unclaimed property reports, at which time the liability can be removed from the general ledger account. It can be helpful to create a new transaction code in the patient accounting system to be used specifically to transfer the liability into the general ledger account. The unique transaction code assists with future reporting efforts and can be used to track volume and count of credit balances removed from the patient accounting system.
  5. Apply unclaimed property aggregate thresholds to reduce workload if necessary. All 50 states define thresholds (typically $50, but organizations should check their state’s rules) below which account details do not need to be provided when escheating credit balances as unclaimed property. If the volume of credit balances in an organization is too extreme to allow for individual review of the accounts, the organization can ease the effort by deciding to escheat all credit balances below the aggregate threshold. This is not the ideal way to handle credit balances as unclaimed property because it inhibits the state from ever reuniting the funds with the owner, but it is statutorily compliant.

The guidelines provided here can be used independently or in tandem, but all will help an organization effectively manage credit balances. While the current payment system that causes credit balances is unlikely to simplify in the near term, organizations can work to reduce the volume of active credit balance accounts while simultaneously streamlining efforts to remain in compliance with unclaimed property laws.


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Eric Boggs
Eric J. Boggs
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