WHAT YOU DON’T KNOW
ABOUT PATIENT CREDITS MIGHT BE A HUGE PROBLEM!
Many times, during my review of accounts receivable while
consulting in dental practices, I would find hundreds or even thousands of
dollars in credits owed to patients (either through patient or third party
overpayments) that had been retained by the practice.
If a credit was being held by the office without specific
permission from the patient to apply the credit to further treatment, I urged the
dentist to issue a refund within 90 days of the last payment. Why? Because
unless a patient has given consent for the credit to be held by the practice, that money belongs to the patient, and
holding it is against state law.
Be aware that all states have laws stating that a credit
balance is the property of the patient, and therefore must be refunded within a
reasonable amount of time, unless the patient has given consent for the balance
to be held by the practice.
Furthermore, these laws specify that, if a refund is mailed
and returned to the office as undeliverable, the refund falls under an Abandoned
and Unclaimed Property Act, which specifies how long the property (in this
case, a patient credit/refund) can be held before being submitted with an
unclaimed funds report to the state.
States want this money and are more proactive than ever in
auditing unclaimed funds. State auditors for unclaimed property (patient
refunds) will typically investigate accounts up to 10 years in arrears.
In researching this blog, I went to Unclaimed
Property Laws by State and clicked on my home state of North Carolina on
the U.S. map that appeared. Using NC as an example, I found quite a bit of
information:
·
Unclaimed property is handled by the Department
of the NC State Treasurer.
·
The holder of the unclaimed property (the
patient refunds) must file a report
with the State Treasurer’s office by November 1 each year for all unclaimed
refunds over $50.
·
All money held by a practice that could not be
refunded to patients, for whatever reason, must
be submitted annually with the report.
·
Copies of reports and records of money submitted
to the state must be retained by a dental practice for 10 years.
·
The property (the patient credit balance) is
considered abandoned if there has been no contact with the owner (patient) for
one year following the last payment transaction.
·
The holder of unclaimed funds (the dental office)
that does not obey NC law may be subject to a civil penalty of $1000 for each
day the report, payment, or delivery of unclaimed funds to the NC Treasurer is
withheld. This penalty is levied to a maximum of $25,000 plus 25% of the value
of the property (unclaimed patient refunds) not reported or submitted by the
November 1 deadline.
The regulations listed above are a brief example of NC state
law concerning abandoned property. Your state law may be more complicated and
demanding. Suggestion: go online to find your state regulations and follow them
in order to avoid significant penalties in case of an audit. If you have
concern or questions about the disposal of long-held patient refunds that have
never been reported or submitted to your state, seek advice from your accountant
or attorney.
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