By Claudia Murray, RCC, RCCIR, FRBMA
MSN Senior VP Regulatory Affairs
Corporate Compliance Officer
Escheat laws and the handling of unclaimed property vary from state to state in terms of specific timelines and processes. This article provides a general perspective for medical practices and it is important to seek guidance from legal experts and accounting professionals in your state to identify applicable requirements.
The Situation
The patient has a credit balance and has not responded to statements and/or other attempts to contact them. Six months have passed. At what point should that amount be classified as abandoned and who is responsible for what in terms of unclaimed or abandoned account balances? We will review common questions.
Why do medical groups need to know about escheat laws?
Every state has an “escheat” or unclaimed property statute so if the owner of the property cannot be found, that amount must be turned over to the state. In some instances, consumer protection laws may also apply so it is important to know which regulations will apply to your medical group. Once the credit balance amount is paid to the state, it is considered abandoned and represents unclaimed property.
Can a credit balance for a specific procedure be applied to another line item on the account?
The patient “owns” that credit and must designate how/where to apply it. This can be done on a per-account (or line item) basis or a blanket approval for that patient can be requested and approved.
When is unclaimed property (an overpayment or refund) considered abandoned?
If there is no activity on the account for a designated period of time (typically 3-5 years but variable by state) and reasonable efforts to return the amount have failed, the amount must be turned in to the state. “Activity” would include contact to/from the owner/patient, a refund request or instructions to apply the balance to other services.
What if the credit has been incorrectly posted and belongs to another line item?
In the event of an error, the amount can be posted correctly to the appropriate line item and that action noted on the account.
Tracking unclaimed property.
The practice (and individuals within the practice) are also advised to check the state’s unclaimed property list regularly for amounts due to them.
What happens if we don’t turn over unclaimed property to the state?
While the level of audit activity can vary by state, numerous articles noted escheat/unclaimed property audits are increasing and can be triggered by different scenarios. For example, an audit can be triggered by:
- Inconsistent or ceased filing history, including late filings or gaps
- No filing history at all
- Failure to report industry typical property types, which in healthcare could be patient overpayments or uncashed refund checks
Penalties also vary by state and can include per-day fines, percentage-based penalties, interest, multipliers for willful or fraudulent behavior and potential violations under the False Claims Act (FCA), which can result in treble damages for knowing violations. In addition, the look-back period for audits can span 10+ years.
A 42-physician cardiology practice in Tennessee settled an investigation into its failure to refund overpayments and was assessed penalties of $2.9 million. While classified as a False Claims Act (FCA) violation rather than a violation of escheat laws, it demonstrates the financial risks involved for failure to appropriately handle overpayments.
Claudia Murray
RCC, RCCIR, FRBMA
Senior Vice President, Regulatory Affairs and Corporate Compliance Officer
Claudia brings an extensive background in Medicare regulations, law and billing processes having spent more than 20 years with the Medicare program in various roles. Prior to joining MSN Healthcare Solutions as their full-time compliance officer, Claudia headed a small consulting firm specializing in radiology and other hospital-based specialties. She consulted with MSN for 15 years in designing, implementing and advising on their compliance programs. Currently at MSN, Claudia is responsible for the myriad activities for HIPAA and corporate compliance as well as the Quality Payment Programs, bringing her full circle to CMS regulations and programs.
