It’s no secret that healthcare billing is complicated. If you’ve ever received a refund from a hospital or physician’s practice office months after a procedure or visit, that’s because credit balances are a frequent occurrence in the complex world of healthcare finance. While they’re all too common, credit balances need to be monitored closely to avoid numerous critical risks.
Credit Balance 101
Because healthcare isn’t as simple as a consumer transaction between two parties, it’s a process that’s far more complicated than say, buying the latest tech gadget on Amazon. With most healthcare encounters, there are multiple parties and multiple services involved – the patient, numerous providers (think surgeon, anesthesiologist, radiologist, pathologist, etc.), hospital, surgery center, primary insurance company, secondary payers, the list goes on. As health systems and payers do their best to collect payment up front, get bills out the door following services, process and post payments as quickly as possible – it’s clear to see that there are plenty of opportunities for error.
Credit balances are among the most common errors – a problem that occurs when the payments and/or adjustments posted to an account are higher than the posted charges. While most balances are relatively small on their own, when combined across a large health system, credit balances can easily add up to millions of dollars. According to the Healthcare Financial Management Association (HFMA), more than half of all credit balances occur due to the incorrect posting of allowances, with the majority of others occurring due to either duplicate payments or overpayments on the part of either the patient, the payer or payers, and sometimes both.
Unfortunately, failure to monitor and correct outstanding credit balances in a timely manner comes with significant liabilities and risks that all hospitals and health systems must work diligently to mitigate – including over- or under-stated profits, missed billing opportunities, Medicare penalties, as well as audit risk and/or fraud charges that could lead to a worst case scenario of heavy fines and potential law suits. Numerous large-scale cases for well-known systems have resulted in False Claims Act penalties nearing $5M. In a world of shrinking healthcare margins, no one can afford these risks.
Three Steps to Addressing Credit Balances
- Review – When it comes to reviewing accounts, attention to detail is essential. Creating a process for ongoing evaluation and monitoring is key. These hidden liabilities are buried deep within the accounts receivable (A/R) ledger, which means you need experts with hospital accounting backgrounds and strong analytical skills to identify and correct them. Regular credit balance auditing is part of the Medicare payment integrity review process required under the Recovery Audit Contractor (RAC) program – and with payers looking closely for overpayments and refunds, finding credits and resolving them in a timely manner is critical.
- Report – When an overpayment is uncovered, prompt action is key. First, the False Claims Act requires the provider to report the overpayment to either the Centers for Medicare and Medicaid Services (CMS) or the Office of the Inspector General (OIG). Providers have up to six months to identify/investigate overpayments. Meeting these requirements and other contractual obligations with payers will help health systems avoid stiff penalties and other serious consequences from government and commercial payers alike.
- Resolve – Getting the overpaid funds back to where they belong – whether it’s to the payer or to a patient is the final step. Repayments could involve either a refund, account credit, claims adjustment, take-back, or other means. For Medicare, CMS requires that overpayments be paid back within 60 days after identification. Resolving credit balances is a complex process that should involve timely and accurate communication among all parties for the most expeditious process.
In conclusion, keeping a watchful eye on accounts (both big and small) can help health systems avoid the many liabilities associated with failure to identify, report, and correct overpayments. Partnering with a third-party expert that can analyze all accounts on a routine basis is a proven way to avert the risks that come with failure to comply with the False Claims Act.
GeBBS Healthcare Solutions offers a wide range of credit balance resolution services. To learn more, visit www.gebbs.com.