Most independent practices know their accounts receivable to the dollar. Far fewer can say what their credit balances total, how old the oldest one is, or who is supposed to be doing something about them. A credit balance sits in the practice management system as a negative number on a patient or payer account, it rarely triggers an alert, and it quietly inflates the bank balance the owner looks at every Friday. The money is real. It is simply not the practice’s money, and for one category of it the federal government has already started a clock.
Where the balances come from
Credit balances are a byproduct of billing that works. A patient pays an estimated copay or deductible at the front desk, the claim adjudicates lower than expected, and the difference sits as a credit. Two payers each pay primary on the same claim. A payer reprocesses a claim months later and pays a second time. A patient prepays for a procedure that gets rescheduled or canceled. None of these are errors in the usual sense. They are the residue of a system in which the practice collects before it knows the final number, which is the only way to collect at all.
That is why the balances accumulate. The workflow that creates them is automatic. The workflow that resolves them is not. Refunding a patient means finding the account, confirming the credit is real and not an unposted adjustment, cutting a check or reversing a card charge, and documenting it. Refunding a payer means matching the overpayment to the remittance, following that payer’s refund process, and often waiting for the payer to acknowledge it. Every step competes for staff time with tasks that bring money in rather than send it out, so the credits wait.
The federal clock on Medicare overpayments
For Medicare and Medicaid, waiting is not a neutral choice. Federal law requires a provider that has identified an overpayment to report and return it within 60 days of identifying it. An overpayment retained past that deadline becomes an obligation under the False Claims Act, and the lookback period for identified overpayments runs six years. The rule has been on the books since 2010 and has been enforced through settlements that started with the amounts retained and grew from there.
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The word that decides most of these cases is identified. For years the standard was that a practice had identified an overpayment when it should have known about it with reasonable diligence, which turned every unreconciled credit into a potential exposure the day it was posted. The current rule, revised in the 2025 physician fee schedule, ties identification to actual knowledge or reckless disregard, and allows a practice that has found a credible reason to investigate up to 180 days to quantify related overpayments before the 60-day clock starts. That is a meaningful relief, but it cuts both ways. A practice that runs a credit balance report, sees a Medicare overpayment on it, and leaves it there has knowledge. The report is the identification. The clock is running.
Commercial and patient balances have clocks too
Commercial payer contracts almost always contain a recoupment clause, and most payers do not wait for a refund. They net the overpayment against future remittances, sometimes a year or more later, sometimes on a claim for a different patient. A practice that has been carrying an unreconciled payer credit sees it disappear as an unexplained short payment, and the billing team spends hours reconciling a deduction whose origin was sitting in their own system the whole time.
Patient credits fall under state unclaimed property law. After a dormancy period that varies by state, a credit that has not been refunded or applied is presumed abandoned and must be reported and remitted to the state. Practices rarely think of themselves as holders of unclaimed property, but a patient credit that has aged past the state’s threshold is exactly that, and state auditors have learned that medical practices are a reliable place to find it.
What a practice should be able to say
Three questions separate a practice with a credit balance process from one with a credit balance problem. What do our credit balances total, split by patient, Medicare and Medicaid, and commercial payer? What is the age distribution, in particular how much is older than 60 days on the government side and older than the state dormancy period on the patient side? Who owns resolution, and how often does the report run?
If nobody can answer those in a single sitting, the fix is not complicated. Run the credit balance report monthly. Review Medicare and Medicaid credits first, because those carry the shortest and most consequential clock. Set a standing rule that a government overpayment is refunded within 30 days of appearing on the report, which leaves margin under the federal deadline. Match commercial credits to remittances before the payer nets them. Apply small patient credits to open balances where the patient has them, and refund the rest on a schedule.
The point is not that credit balances are dangerous in themselves. They are an ordinary byproduct of collecting money. The point is that the bank balance a practice runs on includes money that belongs to patients, payers, and the government, and one part of that money already has a deadline attached. A practice that can name its number can decide how much of its cash is actually its own.
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Its writing covers vendor evaluation methodology, payer dynamics, regulatory and compliance shifts, AI-assisted operations for clinical workflows, and the structural challenges that limit how independent practices grow. Resources are available at GetPracticeHelp, with updates on LinkedIn.
