The Great Unwind: A Step-by-Step Guide to Resolving Credit Balances
You’ve identified a credit balance on a patient’s account. Now what? For many billing staff, this is where the process becomes a confusing tangle of questions: Do you refund the patient? Do you send it back to the payer? What if it’s an old balance?
A lack of a standardized, repeatable process for credit balance resolution leads to errors, delays, patient complaints, and an increase in compliance risk. This guide provides a clear, actionable, step-by-step map for billing staff to confidently and correctly resolve credit balances—ensuring accuracy, compliance, and a cleaner Accounts Receivable (A/R).
Table of Contents
Why Credit Balance Resolution Matters
Credit balances aren’t just accounting anomalies. They carry serious implications:
Compliance Risk: Unresolved credits can trigger audits from regulators and payers, exposing your organization to penalties.
Financial Risk: Overstated liabilities distort financial reporting and A/R performance.
Patient Trust: A patient who discovers they overpaid without being notified may lose confidence in your practice.
When managed correctly, resolving credits isn’t just about “fixing mistakes”—it’s about safeguarding compliance, maintaining financial integrity, and protecting patient satisfaction.
The Workflow: A Step-by-Step Guide
Step 1: Identify the Source of the Credit
Think of this as detective work. Pull the transaction history for the patient’s account and carefully trace the root cause. Key questions include:
Did the credit originate from a patient overpayment, payer overpayment, or both?
Was a payment posted to the wrong account?
Was a duplicate payment posted?
Did a payer apply a coordination of benefits error?
Pro Tip: Automate credit balance reports so they’re generated regularly (weekly or monthly). Tagging balances by source helps staff prioritize and categorize resolution quickly.
Step 2: Verify the Overpayment
Not every credit is a “real” overpayment—sometimes it’s a posting or system error. Verification ensures you don’t issue unnecessary refunds.
Reconcile the Explanation of Benefits (EOBs), Electronic Remittance Advices (ERAs), and patient receipts against charges.
Confirm that the total amount paid by all parties exceeds the contractually allowed amount.
For patients with multiple payers, ensure that the secondary insurance payment is correct and not exceeding liability.
Best Practice: Require a second-level review for large-dollar credits or recurring payer-specific credits to reduce mistakes and rework.
Step 3: Determine the Correct Resolution
Once the source and validity are clear, the next step is resolution. Depending on the cause, resolution falls into three main categories:
Patient Overpayment
Action: Refund the patient.
Consideration: Before cutting a check, check for any outstanding patient balances. If allowed, apply the credit to those balances and notify the patient of the transfer.
Payer Overpayment
Action: Refund the payer directly or allow them to recoup the funds from a future payment.
Consideration: Always check the payer’s overpayment policy. Some require refunds by check, while others automatically adjust future remittances. Document which path was taken.
Posting Error
Action: Reverse the incorrect transaction and reapply the payment correctly.
Consideration: Posting errors should be prioritized immediately, as they affect both A/R reporting and claim accuracy.
Pro Tip: Create separate workflows for patient refunds, payer refunds, and posting corrections. Each carries different compliance and communication requirements. For more details, check our guide to improving Days in A/R.
Step 4: Document Every Action
The resolution process is not complete until thoroughly documented. Clear documentation ensures audit readiness and internal accountability.
Documentation Best Practices:
Record the date of resolution.
Note the reason for the credit balance.
Document who approved and executed the resolution.
For refunds: log the check number, EFT details, or payment method.
Leave a detailed note in the patient’s account explaining the transaction.
Compliance Note: Regulators and payers often ask for proof of resolution during audits. A well-documented log ensures your team is prepared.
Step 5: Prevent Future Credit Balances
Resolving credits is important, but prevention is the long-term strategy.
Train staff on posting accuracy and common payer quirks.
Configure system edits or alerts to flag duplicate payments before posting.
Improve front-end collection practices to avoid duplicate patient payments.
Perform trend analysis on credit balances to identify recurring systemic issues (e.g., specific payers, services, or staff errors).
For further insights on compliance considerations, see this resource on revenue cycle credit balances.
Conclusion: A Clean Process, A Clean A/R
Resolving credit balances doesn’t have to be complicated or stressful. With a standardized workflow—Identify, Verify, Resolve, Document, and Prevent—your team can:
Reduce compliance and financial risk.
Improve patient satisfaction through timely refunds.
Maintain an accurate, trustworthy A/R.
In short, a clear credit balance resolution process, supported by expert credit balance services, transforms a compliance headache into a hallmark of operational excellence.
Need help designing and implementing a standardized credit balance workflow? Contact MBW RCM today to learn how we can strengthen your revenue cycle operations.
