Common Causes of Credit Balances & How to Prevent Them

Revenue cycle management is a complex challenge for just about every healthcare provider. One common (yet often overlooked) source of stress for medical billing/revenue cycle professionals is credit balances. Credit balances occur for a variety of reasons and can result in delayed reimbursements, audits, fines & penalties, and more. For that reason, it is imperative providers have a clear understanding of the most common causes of credit balances and how to prevent them.

What Are the Most Common Causes of Credit Balances?

In this article, we will explore the most common root causes of credit balances based on internal analysis using Crossroads Health’s proprietary credit balance resolution software, Crossfire™ - then provide actionable insights on how to avoid them.

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Changes in Billing

Changes in billing occur when a bill is audited, resulting in a charge being added or removed from a bill. A charged being added or removed can result in a change to the reimbursement of a claim. When a refund is due to changes in billing, the payer has already paid the claim based on the original charges.

How to Prevent

1. Improve up front billing and coding practices.

2. Establish strict policies and procedures for verifying and updating billing information. This includes verifying patient information such as name, date of birth, and insurance information, as well as ensuring that the billing address and other contact information for the patient and insurance carrier are accurate and up-to-date.

Other measures that can help prevent unauthorized changes to billing information include:

Limiting access to billing information: Only authorized personnel should have access to sensitive billing information. This can be achieved through secure login credentials, access controls, and restricted physical access to paper records.

Regularly auditing billing records: Regularly reviewing billing records can help detect any discrepancies or unauthorized changes to billing information. This can be done through internal audits or by hiring an external auditing firm.

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Registration Errors

Registration errors lead to Coordination of Benefits issues, which occur when there is confusion about which health insurance plan is responsible for paying for a particular healthcare service.

When patients are checked into a hospital, they typically present their insurance card to the registration clerk. There may be times when a patient has two insurance carriers, but is not aware of how the benefits should be coordinated. Claims can then be billed out incorrectly. For example: Both the primary and secondary policy could get billed as primary because of an oversight. Often, insurance information is updated after a claim has been billed.

Another scenario would be that the patient was simply registered with the incorrect information. Even a single payer registration could be subject to errors such as data entry, incorrect effective dates, failure to verify current eligibility, etc.

How to Prevent

Educate patients: It is essential to educate patients on their health insurance plans and the importance of providing accurate and up-to-date insurance information at registration. This can be done through patient education materials, signage in the registration area, or a dedicated staff member to answer questions.

Verify insurance coverage: Before scheduling appointments or providing services, it is important to verify the patient's insurance coverage. This involves checking the patient's primary and secondary insurance plans, coverage periods, and benefits. Insurance verification can be done online, through phone calls, or by reviewing the patient's insurance card.

Collect accurate insurance information: During registration, staff should collect accurate insurance information from patients, including policy numbers, group numbers, and the names of primary and secondary insurance providers. This information should be entered into the patient's electronic health record (EHR) or practice management system accurately.

Use electronic eligibility verification tools: Many EHR systems and practice management tools offer electronic eligibility verification tools that can help prevent COB errors. These tools can check insurance coverage in real-time and alert staff to potential issues, such as overlapping coverage or missing information.

Train staff: Staff should be trained on the importance of accurate insurance verification and how to prevent COB errors. This includes educating staff on how to use electronic eligibility verification tools, how to communicate with patients about insurance information, and how to identify potential COB issues.

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Contracted Payers Paying by Incorrect Rates

Providers contract with insurance payers to pay negotiated rates for various services. When these contracts expire, an insurance company may pay following an expired contract.

How to Prevent

Implement robust contract management tools: Providers should have a team dedicated to ensuring contracts are current and accurately being applied in the EMR.

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Overpayment by the Patient or Insurance Company

This happens when a patient pays more than their portion of the bill or when an insurance company pays more than the allowed amount.

How to Prevent

Implement coding & billing best practices: Accurate coding and billing are essential to preventing overpayments. Healthcare providers should establish best practices for coding and billing, such as regular staff training, using standardized coding guidelines, and using software that can help identify coding errors.

Regularly review billing records: Regularly reviewing billing records can help identify potential overpayments. Providers can conduct internal audits of their billing records or hire an external auditing firm to review their billing practices.

Verify patient eligibility & benefits: Verifying patient eligibility and benefits can help prevent overpayments due to incorrect or outdated insurance information. Providers should verify patient insurance information at the time of service and regularly update their patient information databases.

Negotiate reimbursement rates: Negotiating reimbursement rates with payers can help prevent overpayments by ensuring that providers are being paid at the appropriate rates for their services. Providers should negotiate reimbursement rates with payers based on the cost of providing services and the local market rates.

Monitor payment trends: Providers should monitor payment trends to identify any patterns of overpayments or underpayments. This can be done by comparing payment data over time or by using software that can help identify payment discrepancies.

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Duplicate Payments

Duplicate payments occur when a healthcare provider is paid more than once for the same service or procedure. This can happen due to errors in coding or billing, or due to a lack of communication between healthcare providers and payers.

How to Prevent

Use electronic claims processing: Electronic claims processing can help prevent duplicate payments by automatically flagging claims that have already been paid or processed. This can be done by using software that can check for duplicate claims before payment is made.

Establish clear policies and procedures: Healthcare providers should establish clear policies and procedures for identifying and preventing duplicate payments. This includes establishing guidelines for staff on how to identify duplicate claims, how to report and correct errors, and how to communicate with payers to prevent duplicate payments.

Monitor payment trends: Providers should monitor payment trends to identify any patterns of duplicate payments. This can be done by reviewing payment data over time or by using software that can help identify payment discrepancies.

Verify patient eligibility and benefits: Verifying patient eligibility and benefits can help prevent duplicate payments due to incorrect or outdated insurance information. Providers should verify patient insurance information at the time of service and regularly update their patient information databases.

Use payment tracking software: Payment tracking software can help providers identify when payments have been made and ensure that duplicate payments are not made. This software can track payments from multiple payers and flag any duplicate payments.

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Incorrect Billing

Sometimes, a medical provider may bill for a service or procedure that was not actually performed, for example, resulting in a credit balance.

How to Prevent

Accurate coding: One of the most important steps in preventing incorrect billing is to ensure accurate coding of services and procedures. Medical billing professionals should be well-versed in coding guidelines and use coding resources to ensure that codes are assigned correctly.

Clear documentation: Clear and detailed documentation is essential in medical billing. Providers should ensure that documentation is complete, accurate, and supports the codes being billed. This will help prevent errors or discrepancies in billing.

Regular audits: Regular audits of billing processes and claims can help identify errors or discrepancies before they result in incorrect billing. Providers should conduct regular internal audits and consider hiring an external auditor to review their billing processes.

Ongoing education: Medical billing professionals should stay up-to-date with changes in coding guidelines, regulations, and compliance requirements. Ongoing education and training can help ensure that they are knowledgeable about the latest developments in medical billing.

Use of technology: Many medical billing software solutions have built-in features that can help prevent incorrect billing, such as automatic code validation and claim scrubbing. Providers should consider implementing these tools to help catch errors before they result in incorrect billing.

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Adjustments or Refunds

If a patient or insurance company disputes a bill and a refund is issued, it can result in a credit balance.

How to Prevent

Accurate eligibility verification: Before providing services, it's important to verify patient eligibility and benefits. This will help prevent services from being provided to patients who are not covered by insurance or who have exceeded their benefit limits.

Clear communication with patients: Medical providers should communicate clearly with patients about the services being provided and any potential out-of-pocket costs. This will help prevent surprises and disputes over billing.

Timely and accurate billing: Providers should submit claims in a timely manner and ensure that they are accurate and complete. This will help prevent delays or denials in payment and reduce the need for adjustments or refunds.

Regular monitoring of accounts: Medical billing professionals should regularly monitor accounts for any discrepancies or potential issues. This will help identify and resolve issues before they result in adjustments or refunds.

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Unapplied Payments

If a payment is made but not properly applied to the correct account or service, it can result in a credit balance.

How to Prevent

Accurate payment posting: One of the most important steps in preventing unapplied payments is to ensure that payments are accurately posted to the correct account and service. Medical billing professionals should be diligent in ensuring that payments are properly allocated and recorded.

Clear communication with patients: Providers should communicate clearly with patients about their bills and any payments that have been made. Patients should be informed of their account balances and any payments that have been made should be acknowledged and recorded.

Automation of payment posting: Many medical billing software solutions offer automated payment posting, which can help prevent errors in payment allocation. Providers should consider implementing these tools to streamline payment processing and reduce the risk of unapplied payments.

Regular account reconciliation: Medical billing professionals should regularly reconcile accounts to ensure that payments have been properly applied and allocated. This will help identify and correct any errors or discrepancies in payment posting.

Ongoing education and training: Medical billing professionals should stay up-to-date with the latest developments in medical billing and payment processing. Ongoing education and training can help ensure that they are knowledgeable about best practices and compliance requirements.

Automation must always be applied surgically, otherwise it can lead to errors on a massive scale much faster than human input can.

Timing of Payments

Sometimes, a payment may be received after a service or procedure has been fully paid for, resulting in a credit balance.

How to Prevent

Clear communication with patients: Providers should communicate clearly with patients about the timing of payments and any payment deadlines. Patients should be informed of their financial responsibilities and given ample time to make payments.

Timely billing: Providers should submit claims in a timely manner to ensure that patients are billed promptly and have sufficient time to make payments.

Use of payment plans: Providers should consider offering payment plans to patients who may have difficulty making full payments. This can help prevent improper timing of payments and reduce the risk of delinquent accounts.

Regular monitoring of accounts: Medical billing professionals should regularly monitor accounts for any potential issues with payment timing. This will help identify and resolve issues before they result in delinquent accounts or missed payment deadlines.

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Insurance Adjustments

Insurance companies may adjust the amount they pay for a service or procedure, which can result in a credit balance.

How to Prevent

Accurate eligibility verification: Before providing services, it's important to verify patient eligibility and benefits. This will help ensure that claims are submitted only for covered services and that benefit limits are not exceeded.

Accurate coding and documentation: Accurate coding and documentation are crucial to ensuring that claims are paid correctly the first time. Providers should ensure that codes are assigned correctly and that documentation supports the codes being billed.

Timely billing: Providers should submit claims in a timely manner to avoid any potential delays or denials in payment. This will also help prevent the need for adjustments or appeals.

Use of automated tools: Many medical billing software solutions offer automated claim scrubbing and coding validation, which can help prevent errors in coding and billing. Providers should consider implementing these tools to streamline billing processes and reduce the risk of insurance adjustments.

Regular audits: Providers should conduct regular internal audits and consider hiring an external auditor to review their billing processes. This will help identify and correct any issues before they result in insurance adjustments or denials.

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Coordination of Benefits

If a patient has multiple insurance policies, coordination of benefits can result in overpayment and a credit balance.

How to Prevent

Accurate verification of patient information: It's important to verify patient information, including insurance coverage and coordination of benefits information, before providing services. This will help ensure that claims are submitted accurately and to the correct payer.

Clear communication with patients: Providers should communicate clearly with patients about their insurance coverage and any coordination of benefits requirements. Patients should be informed of their financial responsibilities and given guidance on how to navigate coordination of benefits.

Use of electronic eligibility verification: Many medical billing software solutions offer electronic eligibility verification, which can help identify any coordination of benefits requirements and prevent errors in billing.

Accurate coding and documentation: Accurate coding and documentation are crucial to ensuring that claims are paid correctly the first time. Providers should ensure that codes are assigned correctly and that documentation supports the codes being billed.

Regular audits: Providers should conduct regular internal audits and consider hiring an external auditor to review their billing processes. This will help identify and correct any issues before they result in coordination of benefits errors.

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Change in Coverage

If a patient's insurance coverage changes, it can result in a credit balance if payments were made under the previous policy.

How to Prevent

Accurate verification of patient information: Before providing services, it's important to verify patient information, including insurance coverage and any changes in coverage. This will help ensure that claims are submitted accurately and to the correct payer.

Clear communication with patients: Providers should communicate clearly with patients about any changes in their insurance coverage and how it may impact their billing. Patients should be informed of their financial responsibilities and given guidance on how to navigate any changes in their coverage.

Timely billing: Providers should submit claims in a timely manner to avoid any potential delays or denials in payment due to changes in coverage. This will also help prevent the need for adjustments or refunds.

Use of automated tools: Many medical billing software solutions offer automated claim scrubbing and coding validation, which can help prevent errors in coding and billing. Providers should consider implementing these tools to streamline billing processes and reduce the risk of credit balances caused by changes in coverage.

Regular audits: Providers should conduct regular internal audits and consider hiring an external auditor to review their billing processes. This will help identify and correct any issues before they result in credit balances caused by changes in coverage.

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Medicare Overpayments

Medicare may overpay for a service or procedure, resulting in a credit balance that must be refunded.

How to Prevent

Accurate eligibility verification: Before providing services, it's important to verify patient eligibility and benefits. This will help ensure that claims are submitted only for covered services and that benefit limits are not exceeded.

Accurate coding and documentation: Accurate coding and documentation are crucial to ensuring that claims are paid correctly the first time. Providers should ensure that codes are assigned correctly and that documentation supports the codes being billed.

Use of automated tools: Many medical billing software solutions offer automated claim scrubbing and coding validation, which can help prevent errors in coding and billing. Providers should consider implementing these tools to streamline billing processes and reduce the risk of Medicare overpayments.

Regular audits: Providers should conduct regular internal audits and consider hiring an external auditor to review their billing processes. This will help identify and correct any issues before they result in Medicare overpayments.

Compliance with regulations: Medical providers should ensure that they are in compliance with all relevant regulations and CMS guidelines. This will help prevent potential legal issues that could result in Medicare overpayments.

Education and training: Providers and billing staff should be educated and trained on Medicare billing guidelines and requirements to ensure accuracy in billing and avoid overpayments.

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By now you have likely noticed a trend, most of the common causes of credit balances can be alleviated by prioritizing patient communication, leveraging purpose-built software, tools and vendors, billing in a timely/accurate manner, and by regularly auditing your billing procedures to identify the root causes of credits and tackle them head on.

Crossroads Health is on a mission to eliminate the billions of dollars in waste associated with credit balances. One of the primary ways we’re accomplishing this is not only by resolving credits, but by identifying and preventing their root causes with our provider clients around the country. Learn more at www.CrossroadsHealth.com.