Navigating False Credits: Unveiling Causes and Solutions

Dec 17, 2023

The top 5 causes for false credit balances and what to do about them.

By Valerie Thompson

False credit balances in healthcare accounts receivable are more than just numerical errors; they symbolize a daunting challenge that disrupts financial accuracy and operational efficiency. In a world where precision is paramount, these inaccuracies cast shadows of doubt, consuming valuable resources, and detracting from the essential focus on patient care. This article unveils the top five culprits behind the emergence of false credits and what to do about them.

A credit balance is defined as an excess of financial transactions on a patient account that exceeds the billed charges. Credit Balance overpayments, which is a small percentage of all credit balances, is when there is a balance due back to a Payer or the patient.  A false credit, on the other hand, does not require a refund to be issued, rather a correction of a contractual adjustment or non-cash transaction.  False credits consume staff time, throw off financial reporting, and even negatively impact patient experience. By learning the causes of false credits, providers are better positioned to prevent them from happening in the first place.

Cause #1: Duplicate Adjustments

Duplicate adjustments happen when a payer’s contractual discount or other adjustment is applied twice. Typically, this is caused when two automations repeat the same adjustment at two different stages of the billing cycle – once during pricing and once during payment posting. This double adjustment generates a false credit as the payer/patient has met their contractual obligation with their payment and the balance should show as resolved. Process breakdowns like this occur as providers consolidate, departments merge, new contracts are applied, and new technologies are implemented.

  • TREND’s recommended best practice is to always apply discounts on the front end. That way any discounts applied when payments are received can easily be identified as false credits when data is run through customized analytics.

Cause #2: Contractual Variances

Payer contracts are negotiated with providers and updated on a regular basis.  Updating a provider’s system with a new payer contract can take, on average, 3-4 weeks, even though the newly negotiated contract rates go into effect immediately. When providers post a payer’s contractual discounts up front, outdated contracts will lead to incorrect discounts being posted.  Despite the payer’s payment being correct, based on the updated negotiated contract rates, a false credit will be created.  This type of false credit can lead to incorrect refunds to the payer that will cause even more work for all parties involved.

  • TREND recommends providers regularly review their process on loading new payer contracts into the pricing system to find opportunities for acceleration. Limiting the window of overlap between old allowances and new payment terms can reduce this type of false credits.

Cause #3 Registration Errors

When a patient is registered, the insurance information obtained by the provider plays a major role in billing accuracy.  Each insurance has their own plan code which generates the payer’s expected reimbursement along with their contractual discount.  Additionally, obtaining all insurances that the patient has coverage with is key when it comes to billing order.  Multiple types of false credits can occur when there is an error in registration, such as bills going out in the wrong order and transactional discrepancies due to incorrect contract pricing.

  • TREND recommends that providers use reporting and analytics to identify their most common registration errors and provide registration staff education on how to set the proper insurance codes.

Cause #4: Denial Write-offs

False credits of this type occur when a payer submits a payment after the provider has adjusted the remaining liability off with a write-off transaction.  This typically happens when a denial is posted upon receipt of the initial payment.  The provider appeals the initial denial and the payer reconsiders and makes an additional payment.  These false credits can be easy to identify as the write-off will equal the credit balance.

  • TREND recommends running regular reports or setting alerts to identify these false credits so that the appropriate adjustments can be made, and rework can be avoided.

Cause #5: COB Secondary Adjustments

These false credits occur when the secondary payer pays as secondary correctly but includes the primary payment in their contractual allowance or payments exceed expected reimbursement based on the secondary payer’s COB guidelines.  Typically, this is caused when payment posting automations posts the payment and contractual allowance from the secondary payer’s EOB.  Some secondary payers will make a payment that exceeds the patient liability left by the primary based on their COB guidelines (i.e. Benefit less Benefit or Maintenance of Benefits). An “OA-23” remark code on a secondary payer EOB indicates the secondary processed correctly based on their payment guidelines when there has been no change in charges or primary payment. When a secondary payer pays the liability left by the primary payer, no contractual discount should be posted with the payment.  Otherwise, a false credit will occur.   When these false credits arise, adjust the secondary payer’s contractual discount to restore a zero balance.

  • TREND’s guidance: This is a difficult type of false credit to prevent, but with effective reporting utilizing EOB remark codes “OA-23”, they can be identified and quickly corrected.

Conclusions

Credit balances already make up between 1% and 5% of total gross accounts receivable for providers. Resolving them consumes resources and distracts provider staff from revenue generating tasks. The creation of false credits only makes the problem worse. By incorporating the tips above to try to prevent these false credits, your staff can spend more time focused on driving revenues and delivering patient care.

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