Credit Balance Over Contractualization Icon
Credit Balance – Remit-Based Over-Contractualizations

Reducing touches/rework  //  Difficulty: Moderately Simple  //  Revenue Cycle Operations

Why run this play?

This play gives you quick insight into one of the more common root causes of a credit balance, Remit-Based Over Contractualizations. It focuses on the status of a remit, specifically secondary payer payments remitted with a claim status code that is not 2 or 20. This can occur when the remit has a claim status code other than 2 or 20 that causes the provider to post with an incorrect allowance/adjustment, which results in a credit balance. Addressing this head on will result in a reduction in erroneous contractual adjustments and a potential increase in Net Revenue. This play lets the Cash Application or Payment Variance team focus on resolving the credit balance quickly, instead of spending unnecessary time researching its root cause. It also allows managers to aggregate the issue by payer so they can work with payers to fix any systemic issues quickly.

Background

With approximately 20% of our clients, we have noticed that EDI (and related Electronic) based payments and adjustments are posted automatically by the system reading the remit. If an EDI payment is sent from the secondary payer, and the 835 contains anything other than claim status codes 2 or 20, it could post the contractual adjustment as if it were posting as a primary payer. This will result in an over-contractualized account, and create a credit balance. This is a significant root cause behind the increasing number of credit balance accounts. 

Take Action

  1. Create a report based on your most recent remits where the Insurance ranking is set to secondary and the claim status code is not equal to 2 or 20.
  2. Join that set of data with your detailed open ATB. (Aged Trial Balance)
  3. Filter the report to look at only your active credit balance accounts.  This will result in a list that identifies all your over-contractualized accounts with an incorrect claim status code assigned by the payer.
  4. Group these accounts by payer and work them in bulk.
  5. In the future, work with your payers, and use the knowledge you have gained to prevent future occurrences. Or have your organization post adjustments based on calculated reimbursement from their contract management systems, and establish a procedure to QA the contractual post-adjudication.        
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How to Calculate This Play's Value

Benchmark the Credit Balance A/R and divide by Average Daily Gross Revenue. The target is “1” day in Credit Balance A/R. If the benchmarked Days in Credit Balance A/R are 3.6, for example and this play is run with discipline for 90 days, and the Month 3 Days in Credit Balance A/R are 1.6, then the value is a 2 day reduction in Credits.  The fewer the days in Credit Balance, the more you are in compliance.

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