Common causes of credit balances and how to prevent them

11 May 2023
Common cause of credit balance

What is Credit Balance?

When an excess or improper payment is done to a provider, it reflects as a negative balance in the accounts and is referred to as a credit balance. These credit balances result from billing errors that could have been prevented, and they constitute the overpayments that the payer does. A few examples of such errors are incorrect coordination of benefits, the posted duplicate payments, wrong calculation of coinsurance, Etc., According to the payer source, credit balance is categorized into three types – patient credits, government credits, and commercial credits.

What are the Risks Caused by Credit Balances?

Whether aged credit balances or large credit balances, they can cause various risks. As per the Affordable Care Act (ACA), the providers are expected to resolve credit balances without delay legally. The Medicare and Medicaid overpayments should get reported and returned within 60 days when a credit balance is identified. If failed to comply with it, the providers are at high risk for fraud prosecution under the False Claims Act. Thriving healthcare organizations follow a proactive approach and promptly resolve credit balances to keep risks at bay.

What kind of effect does Credit Balance in RCM have?

The well-observed fact is that an increase in credit balances directly impacts and considerably weakens the financial health of the healthcare organization. The revenue cycle of the healthcare organization gets strained considerably causing a significant impact. Collecting payments for the provided medical services is already a tiresome process, and when reconciliation is required, and excess charges need to be refunded, it is an additional headache and greatly affects the health of the overall healthcare organization’s RCM. An arising major concern is losing the organization's integrity and goodwill. As well as it also leads to the following compliance risks.

1. Results in Litigations, severe fines, and even imprisonment

2. Lead to imprecise financial decisions

3. Deeply impacts the A/R team members’ productivity

4. Affects your Reputation

Why is Credit Balance Resolution Important?

The credit balance significantly affects the financial health of any healthcare organization. When the credit balance is high, it weakens the organization’s financial health. The credit balance in medical billing severely affects the healthcare organization's revenue cycle, overall integrity, and goodwill. As it is, the balance or due payment collection for the rendered medical services can be a time-consuming and strenuous process. With this, it is a tedious responsibility for the staff to ensure that the reconciliation is carried out effectively and that refunds for the excess charges done wrongly are settled within the specified time limits.

The Government has set guidelines according to which it is crystal clear that standard procedures are required to track overall payments and mainly to recognize the credit balances, if any. In the case of credit balances, it is essential to instantly validate them and ensure they are reported immediately to be assured of prompt processing of refunding the overpayments.

What are the common causes of Credit Balances?

Credit balances are highly complicated, and there are quite many underlying causes. However, mostly all the providers face challenges due to the following common causes:

Alteration in bills – During the time of the audit, certain alterations in the bill occur, resulting in either adding or removing the charge from the bill, which could lead to a change in the claim reimbursement. If the billing alterations require a refund, we must bear in mind that the payment for the claim has already been made by the payer based on the original charges.

Mistakes during Registration – Coordinating the benefit issues get affected due to the mistakes during the registration process. When patients check into a hospital, they hand over their insurance cards to the staff at the registration desk. Sometimes, the patient has coverage under two different insurance carriers but might not be aware of the several benefits which could get coordinated. In such cases, there is a higher chance of incorrect claims billing. For example, the primary and secondary policy often gets billed as primary due to slight carelessness. And in another case, there are many chances that the patient gets registered with the wrong information. Wrong data entry, erroneous effective dates, failure to precisely verify the current eligibility, Etc., are some of the errors even a single-payer registration often faces.

Payment Duplication or Multiple Payments – Repeated or duplicate payments are similar, and it’s inexplicable how it occurs quite often.

Sometimes a claim gets paid correctly, and another payment is made for the same, which causes the credit. Such type of additional payment is known as multiple payments, and there are chances for the same to happen in case of any changes during the billing of the claim. More specifically, based on the initial charges, the claim gets rightly paid, and a rebill is issued for the correct amount, and it gets paid, causing a credit.

Expired Contract and Wrong Rates – The providers have a contract with the insurance payers to pay the negotiated rates for the different services. But when those contracts expire, the insurance company makes the payment for the earlier contract that has expired.

How can we prevent credit balances?

It is a well-observed fact that credit balances are inevitable while doing business. Healthcare providers can use certain strategies that aid in keeping a proper check on the balances. The policies and procedures can be enhanced or developed and implement credit balance dashboards. The staffing could be properly adjusted to align the roles with the department's requirements and optimize the electronic health record.

We must be aware that, within your organization, it is essential to identify the updates to various processes or technology that might have fallout on your credit balances. Most healthcare organizations find it highly beneficial to use help from external experts to reinforce their revenue cycle management. They also enhance their data analytics reporting to avoid credit balance issues.


Keep your credit balances at bay and save your organization from unnecessary risks. Seamlessly focus on credit balance resolution to reduce the risks of audit or penalties while you enjoy a pleasant relationship with your patients. Contact Business Integrity Services to learn how we can efficiently aid you.

Choose BIS for a hassle-free payment posting process to enhance your RCM

Business Integrity Services has decades of experience and an excellent professional team who are well updated with emerging new trends and technologies. Hence we gladly offer our expert medical billing and coding services for your organization and aid in staying more focused on rendering quality patient care and thriving in your business, amplifying your revenue.