Unclaimed Property Accounting for Healthcare Practices
Minimize Patient Refunds with Strong Bookkeeping
Overpayments are common in healthcare practices, resulting in the need to refund patients’ payments. But sometimes the refund checks aren’t cashed in a timely manner, and the funds are turned over to the state as “unclaimed property.”
Finance professionals who work for physicians, dentists, optometrists and other healthcare providers must understand the regulations around issuing refunds to patients and then, ultimately, transferring unclaimed funds to the state.
How Overpayments Occur
In the healthcare setting, several circumstances can lead to overpayments:
- A doctor may code a procedure differently than an insurer would, resulting in an overpayment.
- A patient may have two appointments with different providers – an internist and an OB-GYN, for example – within a short period of time and make out-of-pocket payments to both to cover a deductible. If the deductible has already been met by the first payment, the second is an overpayment that should be refunded to the patient.
What Happens to the Funds?
Uncashed checks are considered unclaimed property after three years in Kansas and Arkansas, but different states have different regulations. In Missouri, they are considered unclaimed property after five years.
Loss of contact with a patient is taken into consideration. If a healthcare practice has notified a patient by mail of their uncashed refund check and received the notification back as “undeliverable,” funds are considered unclaimed property immediately and the practice can turn the funds over to the state without waiting the standard three or five years.
If the amount of a refund check is $100 or more, a “due diligence” mailing to the patient is required. It must be mailed early enough to allow a patient 60 days to respond before the funds are reported to the state as unclaimed property. States often provide a sample due diligence letter on their websites.
In Kansas, unclaimed property must be reported to the state by November 1 each year, so due diligence letters should be mailed no later than the last week of August to allow for the 60-day response window.
Minimize Unclaimed Property
Healthcare practices can implement several policies to minimize the number of refunds they issue and, hence, the potential for unclaimed funds:
- Set a policy limiting the amount of refunds. For example, don’t issue refund checks for amounts under $5. Inform clients that they have a credit and offer them the choice of receiving a refund or applying the credit to future services.
- Review bank reconciliations regularly to make sure refund checks are being cashed. Send a letter or email, or make a phone call, to patients who have not cashed them to make sure they received their checks.
- The key to identifying uncashed checks is good bookkeeping and accounting. Make sure you are reviewing any uncashed checks and acting accordingly.
If, despite your best efforts, you do have to remit unclaimed property to the state, the state treasurer’s office is the receiving agency. There is a portal on the treasurer’s website where you may download an Excel template to be used for reporting each unclaimed check, the amount and the recipient’s name. It is then uploaded to the portal. Finally, you write a single check for the aggregate amount of the unclaimed property and forward it to the treasurer’s office.
Patients may reclaim their refund amounts from the state after their checks are reported as unclaimed property.
If you have questions about how your healthcare practice handles patient refunds and unclaimed property, contact your Adams Brown advisor.