by Cheryl Nash

Credit balances are notoriously ignored in the daily operations of a medical office. With the priority placed on satisfying positive balances, the negative ones tend to be shoved to the side until a rainy day or the end of the year rolls around.


News flash- Do Not Do This!


Most providers don’t know or don’t understand that there are many regulations governing what should be done with those credits. To make matters more confusing, both the Federal govt. and the States have their own regulations on how to address these overpayments.


In the briefest language possible; you are required to refund these. What’s more, you are required to refund in a timely manner. In short, holding on to credits is illegal.


The following are the steps you should take to address overpayments and get those books clean.


One, all credits whether patient or insurance should be audited for accuracy. Incorrect posting can cause erroneous credits and these should be identified and corrected prior to working your refund list.


Two, separate out your true credits into categories for insurance and patient overpays as these have differing rules for amelioration.


Three, locate your state’s insurance statues for insurance overpayments, and also locate a copy of the state unclaimed property laws. You will need a working knowledge of each.



For patient overpayments: HIPPA requires these payments to be returned within 60 days of identification. Notify the patient of the credit on their account. You will need to send a letter to the patient’s last known address advising them of the credit amount. If they are still having treatment you can recommend they apply this credit for future balances. However, if there are no future visits to apply this credit to, or if the patient insists they would like the credit sent to them, then you must immediately refund the money.


Send a check with a brief explanation to the patient and be sure to record the transaction in the appropriate account.


If, however you cannot locate a party to send the overpay back to then the overpayment needs to be turned over to the state. Each state has differing escheat (unclaimed property) laws that dictate how this is to be sent to them. Some commonalities tend to be a waiting period before it can be considered unclaimed property, a threshold for how the amounts are reported, a form for sending with the relinquished funds, and timing for receipt of these funds. (for instance, the state of TX requires that unclaimed property to be sent prior to July 1st of each year).


For Insurance overpayments: the regulations will be slightly different for Federally funded entities vs. commercial payers.


Federal plans such as Medicare and Tricare should have any and all overpayments voluntarily returned immediately upon identifying the credit. Each contractor has a defined process for returning funds. Review their websites for overpayment policies and forms.


Commercial plans are governed first by the terms of your contract and then by the state statutes. Initially you will want to determine the reason for the overpayment. Once you are satisfied that credit is truly an error in processing then the payer should initiate a refund request. At that time the funds can be returned by either issuing a check or requesting an offset. Each payer is different so be sure to call to see what process they follow.


State statues also have a time limit for overpay recovery. This can be as short as a few months or have no limitation. This also applies to certain commercial plan products and doesn’t apply to others such as self-funded plans. Primary vs secondary rules also come into play here. The regulations are lengthy and must be adhered to. Most states provide helpful guidance on their websites. Either way, these overpays should be returned after the correct protocol has been followed.


Remember, not only is your practice required by law to return credits, it’s also simply the right thing to do!

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