Does your medical practice have credit balances on your patients’ accounts that are six months, one year or even older?
Don’t worry; your practice is not alone.
A very common occurrence in almost every medical practice today is to continue to have credit balances on patient accounts that are over a year old.
But, what are these practices to do?
Typically, the practices have continually tried contacting and returning their overpaid fees to either the patients themselves or even the patients’ insurance companies.
However, apparently, these other parties don’t recognize or realize that they are actually due a refund from their practitioner.
This accounting dilemma respectively yields to the question of “How long should a medical practice continue to keep their patient’s credit balances (refunds) on record in their financial statements?”
Well, the answer isn’t as easy as one may want it to be. According to the Virginia Department of Treasury, any refund or credit balances due to any patient that has not been successfully returned may be considered “Unclaimed Property.”
Therefore, these payments may instead, by law, be payable and reportable to the State of Virginia as addressed in accordance with the Uniform Disposition of Unclaimed Property Act, Title 55, Chapter 11.1 Sections 55-210.1 - 55.210.30 of the Code of Virginia.
The Virginia Code states that Unclaimed Property can include: savings and checking accounts, wages or commissions, underlying shares, dividends, customer deposits, credit balances, gift certificates, credit memos, refunds, etc.
It also states that this property becomes unclaimed when the holder (i.e. a medical practice) has not had contact with the owner (i.e. the patient or their insurance company) for a specified period of time according to the state’s charts.
After this specified period of time (which varies by property type) the holder is then required to report and remit the unclaimed property to the State of Virginia on Form AP-1 and Form AP-2.
However, before any property is reported to the state by the holder, due diligence is required when the property as a value of $100 or more.
This means that they must mail a first-class mailing to the owner’s last known address informing them of the dormant status of the property (Section 55-210.12(e)). The state is then required (Section 55-210.13) to publish the owner’s names in the newspaper annually.
Finally, it is very important to note that the annual submission reports that a business/medical practice (not including insurance corporation type businesses) is required to file relating to Unclaimed Property are actually due on or before November 1st of each year and not December 31st.
These November 1st filings report the balances of the business from the previous June 30th time frame.
Also note that if a holder fails to report or remit these balances on the required forms by the statutory due date, the holder shall pay interest and a civil penalty up to $1,000 for each day the report and remittance is withheld up to a maximum of the lesser of $50,000 or 100 percent of the value of the property.
It can be very confusing and even frustrating for a practice manager or owner to understand all of the above Code Sections and applicable rules. However, these rules are very important to understand before a practice can eliminate any patient credit balances from their financial statements.
Therefore, if a practice is uncertain as to whether or not the above Act applies to them, they can contact the Virginia Department of Treasury - Division of Unclaimed Property or contact us for help in medical practice accounting.