accurate medical billing accounts receivables  in a mid-size independent medical practice is extremely important to ensure or generate consistent cash flow and earnings projections. However, patient and insurance credits and overpayments can cloud the otherwise clear picture of your practice performance. Keeping these credits and overpayments in check requires a regular and consistent strategy.

It is standard practice at most medical clinics to collect patient copays, coinsurance, and deductibles at the time of service or through statements and phone calls. Collecting from patients at the front desk can result in patient overpayment. This will result in a patient credit on your medical billing A/R.

Some patients may review their explanation of benefits and realize they have overpaid, which usually doesn’t make them happy. This can create a lack of trust if the patient does not understand why credits occur in the regular practice of medical billing. This is especially true for patients seeing multiple doctors and having their deductibles or co-insurance met by paying medical bills to multiple practices or specialists. For example, if a patient has a $1000 deductible and a 10% coinsurance and is seeing two providers a credit can easily occur. This is even more likely when collecting payments from patients with secondary and tertiary insurances.  The three main reasons for patient credits are:

  • Patient overpayment
  • Patient payment in addition to insurance payment
  • Patient payment and insurance payment after insurance initially denied and the encounter was moved to patient self pay

Patient credits can make your A/R appear lower than it really is. In addition, to clean up credits it will involve your staff’s time to identify the accounts and make sure the credit is correct. If the account is reviewed and there is in fact an overpayment, then a check must be issued, and the amount posted to the account. One of following actions can be applied to each account:

  1. Issue a refund: Issue a refund check for each patient that you do not expect to receive services at your clinic in the next 6 months. Verify all patients refunded with your billing office by sending copies of refund checks
  2. Leave/Maintain account credit balance: For patients with regular office visits, inform them that there is a credit balance that will be applied to the co-pay or to the patient responsibility portion of their bill. Inform your billing office of accounts that a credit balance will remain by noting the account
  3. Write off: Write off applies to deceased patients or for those you are unable to contact. Write-offs are not recommended for active patients. For write-offs, your billing office adjusts off the balance and notes that the account was in credit balance in the case that the patient/guarantor or patients family members later ass for a refund

Patient credits are a liability and we recommend taking regular monthly action. If you are unable to refund all patients at one time plan a schedule for completion. Once patient credit action is taken, your billing staff requires a record of payment, such as the refund check, to accurately adjust patient accounts.

Another type of account credit is insurance credits. As a general rule, medical billers expect the insurance company to take care of any insurance credits through a takeback on an EOB. The insurance company will typically reprocess any incorrect or inadvertent payments or send a formal letter requesting re-payment for a previously issued payment. Given this expectation, medical billers will not address insurance credits as they are received, rather a periodic review may take place. In some circumstances, this periodic review may be every year or never, as it is not on the list of priorities. This is even more salient for billing staff judged by their A/R performance as insurance credits can amount to thousands of dollars. Best practice is to review any outstanding credits that have had no action for 90 days on a quarterly basis. We recommend that the government payer accounts are reviewed quarterly. These insurance credits should be accounted for as a potential liability in your practice A/R.

The best way to prevent these credits from becoming unmanageable is by implementing a regular strategy and a proactive approach. Medical billing software will auto post payments when processing electronic EOBs. It is difficult to catch credits with auto-posting and so running a regular monthly patient credit report is the best strategy. The credit may be applied to other family members on the account or reviewed and noted as a patient credit.

Following best practices will ensure accurate A/R and help maintain good patient and payer relations. Keeping in communication with patients and having a consistent message is important. Being prepared to explain why a credit has occurred and seeing the issue from the patients point of view will go a long ways towards building trusting and loyal patients, as well as a strong and financial sound practice.

If you would like to find out more how Outsource Receivables provides these services and more to our clients contact Dan Smits. We can demonstrate how to turn policy and process into ROI for your clinic.

Speak With An Expert