> ## Documentation Index
> Fetch the complete documentation index at: https://dso.getlemma.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Resolve credit balances (patient and payer)

> Weekly discipline on the credit balance report, patient credits versus payer overpayments, the 60-day rule for Medicaid money, credit balances as an acquisition diligence item, and the escheatment pipeline for unclaimed refunds.

A **credit balance** is money on an account that you are not entitled to keep. It is a liability. Resolving credit balances promptly is both financial hygiene and, for payer overpayments, a legal obligation with False Claims Act exposure attached.

## Prerequisites

* A credit balance report from your PMS
* Posting current so stale transactions do not create false credits
* A defined process for payer overpayments
* An uncashed-check ledger

## The weekly discipline

<Steps>
  <Step title="Run the credit balance report weekly">
    A weekly report gives the team time to investigate possible overpayments and meet the applicable repayment window. For dental groups, Medicaid is commonly the primary federal-program exposure, including payments administered through a dental benefit administrator. Coordinate the identification date and deadline with counsel.
  </Step>

  <Step title="Triage by source">
    ```mermaid theme={null}
    graph TB
    A[Credit balance] --> B{Source?}
    B -->|Patient paid too much| C[Patient refund process]
    B -->|Payer paid too much| D[Payer refund process<br/>60-day rule if Medicaid/Medicare]
    B -->|Both| E[Allocate and split]
    B -->|Posting error| F[Correct the posting]
    ```
  </Step>

  <Step title="Resolve within 30 days">
    Anything older than 30 days gets escalated. Anything over 90 days is a finding.
  </Step>

  <Step title="Reconcile against open disputes before refunding">
    A patient with an open chargeback and a credit balance on the same encounter is a double-refund waiting to happen.
  </Step>
</Steps>

## Patient credits

| Situation                        | Action                                                                                               |
| -------------------------------- | ---------------------------------------------------------------------------------------------------- |
| Patient overpaid, reachable      | Refund to the original method, see [Issue a patient refund](/guides/payments/issue-a-patient-refund) |
| Patient has a future appointment | **Ask** before applying it forward                                                                   |
| Patient unreachable              | Check to last known address, then the escheatment track                                              |
| Very small balance               | Refund anyway, or apply your written de minimis policy consistently                                  |

**Never apply a patient credit forward without consent.** Applying it to a future visit converts the patient's money into a prepayment they did not agree to. Ask, and document the answer. In some states this is also a refund-timing violation.

## Payer overpayments

Materially different obligations.

<Warning>
  **The Medicaid and Medicare 60-day rule.** An identified overpayment must generally be reported and returned within **60 days** after identification, subject to the current regulatory framework. Retaining an identified overpayment can create **False Claims Act** exposure.<sup>1</sup> In dentistry, Medicaid is often the relevant program, whether the state pays directly or through a dental administrator.

  Effective January 1, 2025, CMS replaced the "reasonable diligence" identification standard with the False Claims Act knowledge standard: actual knowledge, reckless disregard, or deliberate ignorance.<sup>1</sup>

  Practically: **discovering an overpayment starts a clock.** Weekly review is what keeps the clock manageable. See [Report and return overpayments](/guides/compliance/report-and-return-overpayments).
</Warning>

For commercial payers, the contract governs, typically requiring refund within a stated period, with the payer often entitled to recoup by offset if you don't.

| Payer type          | Process                                                                                               |
| ------------------- | ----------------------------------------------------------------------------------------------------- |
| Medicaid / Medicare | Report and return within 60 days; use the state's (or administrator's) voluntary refund process       |
| Commercial dental   | Refund per contract; some prefer offset against future payments                                       |
| Any                 | **Verify the overpayment is real** before refunding, payers sometimes demand refunds they aren't owed |

<Tip>
  **Verify a payer demand against your records.** Check for a service incorrectly treated as a duplicate, an erroneous COB determination, or a recoupment already taken. Dispute an incorrect demand within the payer's deadline.
</Tip>

## The escheatment pipeline

Unrefunded, unclaimed money does not become yours. It becomes **unclaimed property** owed to the state.

```mermaid theme={null}
graph LR
    A[Credit balance] --> B[Refund attempted]
    B --> C{Check cashed?}
    C -->|Yes| D[Resolved]
    C -->|No, stale| E[Due diligence letter]
    E --> F{Response?}
    F -->|Yes| G[Reissue]
    F -->|No| H[Dormancy period elapses]
    H --> I[Report and remit to the state]
```

Keep an **uncashed-check ledger from day one**: check number, amount, payee, issue date, clear date. Reconstructing it in year three across multiple entities from bank statements is exactly the work a state unclaimed property audit will make you do. See [Handle escheatment](/guides/compliance/handle-escheatment).

## Credit balances in an acquisition

Acquisition is how dental groups grow, and credit balances are a standard diligence item on both sides of every deal.

**When buying:** obtain an aged seller credit-balance report that separates patient and payer credits. Unresolved amounts may create refund, unclaimed-property, and government-program repayment obligations. The purchase agreement should identify who will resolve pre-closing credits, maintain records, communicate with patients and payers, and fund repayments or recoupments. Consider whether an escrow or holdback is appropriate with deal counsel. See [Acquire a dental practice](/guides/growth/acquire-a-dental-practice).

**Selling, eventually:** every dental support organization (DSO) founder is building toward someone else's diligence. A clean weekly-reviewed credit balance history is cheap now and persuasive later; three years of ignored credits is a price reduction.

**After closing:** track pre-closing and post-closing credits separately according to the purchase agreement. Preserve the source records and responsibility for each balance.

## Multi-entity considerations

Each PC has its own credit balances, its own refund obligations, and its own escheatment reporting to its own state.

* The **credit balance report runs per entity**
* Refunds are drawn on **that PC's** account
* Escheatment reporting follows the **owner's last known address** rules, per state
* The 60-day clock runs per entity per identified overpayment

A group reviewing credit balances only in aggregate will miss which entity owes what.

## Verify it worked

* [ ] Credit balance report run **weekly**, per entity
* [ ] Every credit triaged by source before action
* [ ] Nothing unresolved over 30 days
* [ ] Payer overpayments routed to the 60-day process
* [ ] Overpayment demands verified before refunding
* [ ] Patient credits never applied forward without consent
* [ ] Open chargebacks cross-checked before refunding
* [ ] Uncashed-check ledger current
* [ ] Escheatment pipeline defined per state

## Common failure modes

| Failure                                                  | Consequence                                           |
| -------------------------------------------------------- | ----------------------------------------------------- |
| Monthly instead of weekly review                         | A third of the 60-day window burned                   |
| Not determining ownership                                | Wrong party refunded; clock still running             |
| Applying patient credits forward without consent         | Refund-timing violation; patient complaint            |
| Refunding a payer demand without verifying               | Real cash loss                                        |
| Refunding a posting error                                | Same                                                  |
| No uncashed-check ledger                                 | Painful unclaimed property audit                      |
| Aggregate-only review in a multi-entity group            | Nobody knows which entity owes what                   |
| Skipping credit balances in acquisition diligence        | Inheriting unpriced refund liabilities                |
| Blending seller's legacy credits into the buyer's ledger | Paying obligations the agreement left with the seller |

## Sources

1. 42 U.S.C. § 1320a-7k(d), enacted by ACA § 6402(a). Identification standard revised by CMS-4205-F, published December 9, 2024, effective January 1, 2025. See Morgan Lewis, [Tick-Tock: CMS Overpayment Refund Final Rule](https://www.morganlewis.com/pubs/2024/12/tick-tock-cms-overpayment-refund-final-rule-and-practical-implications); Foley & Lardner, [CMS Issues Final Regulations Implementing Changes to 60-day Refund Rule](https://www.foley.com/insights/publications/2024/11/medicare-overpayments-cms-final-regulations-60-day-refund/).