Medical Credit Balances - Are You Over-Refunding?

Overpayments and subsequent refunds are an unavoidable consequence of our ever-complex healthcare system, and every single provider must manage them. The problem is revenue cycle teams frequently find themselves bombarded with a growing backlog of credits and refund requests and are not sure which are true overpayments deserving a refund.

Are You Over-Refunding Credit Balances?

In all likelihood, you are over-refunding…

Commercial

Commercial payers are one of the primary recipients of inappropriate refunds from healthcare providers, in part because they invest heavily in recovery efforts. While it is necessary for payers to recover overpaid claims, they and their vendors cast a very wide net and solicit refunds without doing proper due diligence. If you are not aware of these tactics, it’s very easy (and common) to over-refund commercial payers.

Government

While there are strict penalties attached to the mishandling of Medicare and Medicaid overpayments, there are indeed circumstances wherein you can avoid refunding government payers. For example, Government credits have a 6-year lookback period and are not required to be refunded beyond that time.

Patient / Self-Pay

Patient credit balances are frequently associated with improper coordination of benefits. In the case that too much money has been collected, you can often apply the overpaid amount to another encounter with an open balance. If you issue patient refunds without checking for alternatives, you are almost certainly over-refunding.

What Percentage of Credits Should Be Refunded?

While there is no standard benchmark for the percentage of credit balances that should be refunded, we at Crossroads Health have developed some of our own. Internally, we find that high-performing healthcare providers refund between 15%-20% of the credits on their books. Sadly, the industry standard seems to be closer to 30% or more – meaning providers are frequently refunding far more that what is truly due back, especially to commercial payers.

How Do I Reduce Medical Refunds?

Reducing your volume of refunds is a worthy objective and can be done by reprioritizing credit balances in your organization. Here are a few strategies you may consider employing to reduce refunds:

Review State Statutes & Contractual Obligations

It is important to review your state’s statutes relating to overpayment recovery and your organization’s obligation to refund. Often you will find time restraints, such as 18-months, limiting commercial payers’ ability to recover aged overpayments. Beyond this, it is important to review your payer contracts to understand your responsibility as it relates to overpayments.

Review Other Patient Encounters

Patients frequently have multiple encounters with your facility, meaning that it is not uncommon to find an overpayment that can be applied to an open balance on the patient’s account.

Consider Account Age

The age of your overpayments plays an important role in determining whether a refund is due. For instance, Government credits have a 6-year lookback period and are not required to be refunded beyond that time. Your state will also have its own regulation as it relates to commercial insurance overpayment recovery.

Audit & Fix Posting Errors

Common, albeit preventable posting errors frequently lead to non-cash adjustments. To prevent this, ensure proper coding and documentation to support all claims and conduct regular training for coders and clinical staff. Spend time to report on credit balances and work to identify the root causes of these non-cash adjustments.

Improve Pre-Authorization & Eligibility

Prior to providing services, verify patient insurance coverage and requirements by obtaining necessary pre-authorization for procedures to prevent claim denials. One way this process can be improved is by investing in technology and retraining staff.

Re-Train Staff

Speaking of staff training, make sure they are always up to date on the latest healthcare regulations, payer policies, and compliance requirements. Also consider cross-training employees to handle multiple aspects of the revenue cycle so there is better communication between roles.

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Medical refunds will always be a reality in healthcare revenue cycle management, but there are strategies you can implement to reduce the burden refunds put on your staff. An important consideration is also the cost of issuing refunds and how migrating to Digital Patient Refunds can greatly reduce said cost.