Practice Management Alert

You must base your practices on established law, not personal preference

There are many gray areas in medical billing, but you need to know the ones that are black and white.
 
When it comes to refunds and account interest, your practice needs to set procedures that abide by federal laws and guidelines. Consider the two questions at right.

 
1. How long can we keep - or should we keep - self-pay credit balances in our system before doing a refund?
 
2. How much interest should we add to a patient's monthly balance?

Answer #1: If a self-pay credit balance represents a patient's overpayment and your practice has completed care, you should refund the balance promptly. If you are continuing to administer care, however, you should note the credit balance on the patient's account and put this balance toward the copay or other charges for the next visit, says Stanley Szelazek, CPC, CPC-H, CCP, CCAT, ACS-OR, senior principal at Account ABILITY Physician Practice Management Consulting Services Inc. in Lake Worth, Fla. For on-going treatment, continue using the patient's credit in this way until you use it up.
 
Watch out: When dealing with overpayments from carriers, you must promptly return the amounts to the carrier. "The problem is that many carriers, upon notification [of the overpayment], advise the provider's office to await notice from the carrier requesting the overpayment back," Szelazek says. When this happens, you should always note the name of the carrier representative and the conversation details in your software system, he says. This will protect you in case the carrier ever accuses you of not notifying it first after it receives an overpayment from you.
 
Answer #2: State usury laws dictate the amount of interest you may charge on medical bills, Szelazek says. Usury laws dictate how much interest you may assess to individuals who fall delinquent on payment, he adds.
 
States issue a usury limit, termed a "general usury limit," that is the rate one person or corporation can charge to another. If you loaned your neighbor $500, for example, the amount indicated by the general usury limit is the interest amount you can charge him. Likewise, your practice must only charge patients interest up to the usury limit. 
 
And some states have a "legal rate." In this case, "if you have a contractual obligation that provides simply for interest without a specific term, or 'interest at the highest legal rate,' then the 'legal rate' applies," according to the 'Lectric Law Library's Web site on usury law.
 
So if your practice's financial policy indicates you reserve the right to charge interest, but does not indicate specific terms, you should abide by your state's legal rate (if there is one). For example, Florida has a 12 percent legal rate of interest, meaning practices in Florida may charge patients no more than 12 percent interest on past-due accounts. If your state doesn't have a usury limit, you may be subject to federally imposed limits.
 
Editor's note: To read more about usury law and view a list of each state's legal rates and usury limits, visit www.lectlaw.com/files/ban02.htm. Disclaimer: All rates and limits listed may not be up to date - check with legal counsel to confirm.