Credit Balance Resolution

Get to know the role of Credit Balance Solution in Revenue Cycle Management and how it can help in your profitability of a healthcare facility and financial risks

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Credit Balance Resolution

Get to know the role of Credit Balance Solution in Revenue Cycle Management and how it can help in your profitability of a healthcare facility and financial risks

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Plutus Health

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Credit balance accounts form part of the reimbursement environment, and resolving these

credits is a huge task, and ignoring these credit balances can lead to larger problems.
Overpayments going unresolved, sitting on the Provider’s books means Providers have
inadequate staff to resolve these issues or challenges. In such scenarios, there is an acute
dependency on vendors to process the amounts owed to the Payers.

The credit balance is a liability that sits in the account receivable (A/R) folder and is considered
important as the liability carries with it serious and real, compliance and financial risks. It is
the responsibility of the medical billing service provider, to manage those risks. With the
greater emphasis on billing and collections, there are growing volumes of credit balances that
accumulate within A/R, and these unresolved credit balances represent a significant source of
medical expense recoveries to healthcare Payers, while also in some cases signifying
compliance risks and penalties.

It is often recommended, that Providers partner with a vendor to expedite and maximize credit
balance refunds. The Healthcare Financial Management Association (HFMA) estimates that a
small-to-medium-size Hospital generates approximately $2M in credit balances annually.

According to the Social Security Act, Section 1128J, any funds that a person/agency receives
or retains under Title XVIII or XIX to which the person, after applicable reconciliation, is not
entitled, constitutes an overpayment. These can include claims for services after benefits have
been exhausted, payment for non- medically necessary services, duplicate payments, and
payment of claims that exceeded a reasonable charge. These are usually caused by contractual
'over adjustments,' misapplication of payments, and overpayments.

Medical billing industry data shows that 35% plus of the credit balances are caused because of
incorrect allowances posting. Federal Register, issued rules on credit balancing in March 2016
and as per the rules:

 Healthcare Providers should repay the Medicare overpayments within (60) sixty days
of finding the overpayment, but they can take up to six months to investigate and
confirm suspected overpayments.
 Providers are responsible for repaying the identified overpayments that have occurred
in the past six (6) years.
 Refunds claim adjustments, credit balance, etc., can be used to repay overpayments.

The Healthcare Financial Management Association (HFMA) says credit balances occur due to
3 major reasons:

55% incorrect posting of allowances

35% duplicate payments and overpayments by patients and payers

10% missed-postings

Selecting a Vendor
While choosing a credit balance vendor, the vendor must be given access to the Provider’s
business offices across locations and a collaborative working relationship must be established
with the administrative staff. The vendor should be equipped to provide online, on-demand
reporting which includes, drill-down capabilities, error code analysis, and Provider trending.
The vendor will need to compare results with in-depth root-cause analytics to uncover systemic
problems, so they can be resolved and discontinued. The vendor must be capable to assure that
all data and communications are secure and compliant with HIPAA regulations.

Planning an effective strategy

To develop a solid strategy for resolving overpayments and preventing errors, the credit
balance team needs to have an in-depth understanding of both internal processes and specific
business objectives with the overall flexibility to customize an approach that fits an
organization’s specific needs.One of the primary roles of a credit balance vendor is to examine
billing data to pinpoint erroneous patterns that lead to overpayments. The most effective way
to deal with credit balances is to identify the root cause of errors to prevent them from recurring.

Best Practices

Highlighted below are few pointers which are summarized as best practices:

1. Identify true overpayments

2. Work balances from the oldest to newest

3. Analyze credit balances using:

 Patient admissions forms

 Payer remittance advice
 Patient A/R details

4. Identify if patient is an eligible medical beneficiary

5. Check if medical payment rules apply

6. Identify Primary payer and other liable insurers

7. Verify that all credit balances are due and refundable

8. Monitor staff compliance with policies/procedures

9. Identify preventable causes of credit balances

10. Seek professional outsourcing assistance, in case existing staff cannot handle credit balance
resolutions

Role of Revenue Cycle Management (RCM)

RCM is a core component of fiscal responsibility. RCM credit balance review includes the
identification and resolution of any credit balances that may have accrued during a billing
cycle. A credit balance review is required and regulated by law and helps clean up unnecessary
open accounts on the A/R. The RCM process ensures that every payment, credit, and
adjustment is checked systematically across the entire A/R spectrum. Review of coding errors,
incorrect billing or payment duplication is necessary to identify the source and close it.

Resolving credit balances can prove to be a costly and time-consuming activity. However,
automation is the best way to improve workflow and make the best use of human resources.
Most organizations may or may not have the automation technology or proper staff to take
advantage of such technologies. It is best advised that healthcare organizations should
consider engaging with third party specialists to handle it. These vendors will take a
comprehensive look at patient records, make the transition to a technology-based credit
balance management process and improve the resolution and bring in more efficiencies to
healthcare organizations.

Looking for Revenue Cycle Management solution? We Plutus Health provide end-to-end
RCM Business Solutions for U.S. healthcare providers and revenue cycle management
companies. Contact us at [email protected]