Healthcare Organizations and Unclaimed Property

Jinu Thomas
January 11, 2022

Every industry has its own set of unique issues relating to unclaimed property and organizations related to healthcare are no exception. Unclaimed property compliance for healthcare companies generally falls under two categories: general ledger types of unclaimed property resulting from corporate operations such as vendor payables or payroll and unclaimed property in the form of patient or insurance credits, which can be complex. We will discuss a few unique circumstances we encounter in this industry below as it relates to unclaimed property.

Patient credits and accounts receivable

Patient credits/accounts receivable is one area healthcare organizations predominantly generate unclaimed property. Specifically, credit balances that occur on an organization’s books primarily are derived from overpayments, duplicate payments or unapplied payments received by the organization.  Typically for accounts receivable, the relationship that creates the credit balances is from the transactions between the organization and its customers. 

Accounts receivable for healthcare organizations become more challenging because there can be multiple parties involved in the transactions that create a credit balance, such as the organization itself, the patient and the insurance companies. The complexities of dealing with unclaimed property becomes a concern when a payment for the same services is made by the patient and the insurance company. A credit balance may occur because the patient or guarantor paid a higher co-pay or deductible than necessary, paid out of pocket for a service, the insurance company paid more that was contractually necessary, or multiple insurance companies paid for the same service.  

The numerous factors create a scenario where it can take an extended period to reconcile. Nevertheless, the healthcare organization has the responsibility to resolve the credit balance on its books and records, whether by refunding the owner or reporting it as unclaimed property if it remains unresolved once the prescribed dormancy period of the state expires. It should be noted that it is necessary to age the credit based on the date it occurred, not when it was reconciled.

Challenges of returning the funds back to the owner include the time that has lapsed from when the credit occurred and whether the owner information is still reliable. If the patient address has changed, it reduces that possibility of reuniting the funds with its rightful owner. If the healthcare organization is unable to locate the owner, the credit balance will need to be reported to the applicable state based on its unclaimed property laws.

The healthcare organization and insurance company relationship

The contractual relationship between the healthcare organization and insurance companies is an added layer of complexity. The mere volume of transactions that occur requires a robust billing and reconciliation process. However, errors do occur due to misinterpretation of the plan agreement, incorrect contractual adjustments or changes in plan offerings. In situations when two insurance companies pay for the same service, the plan agreements with the patient need to be reviewed to determine which insurance is primary and secondary. The determination will provide insight into how those credits need to be resolved.

Another factor that involves healthcare organizations and insurance companies are the state recoupment laws. Recoupment laws only allow insurance companies to have a specific time period to “recoup” any payments made to the healthcare organization. 

Similar to unclaimed property laws, recoupment laws vary by state. Recoupments are in effect in case the insurance company believes they made an overpayment to the healthcare organization. For example, the insurance company was not aware of a secondary insurance and duplicate payment made for the same service or billing errors. If the state has recoupment laws that limit the insurance company on how long after the occurrence they can make a recoupment claim and if the claim is not made, the insurance company cannot make a future claim against that specific occurrence. Thus, healthcare organizations can take the position that unclaimed property laws wouldn’t be applicable in such states. A complete review and determination on the applicability of the state recoupments laws over state unclaimed property laws will need to be made by legal counsel.

While the primary unclaimed property types generated for healthcare companies are a result of services to a patient, it is important to have a pulse on unclaimed property generated by corporate operations, such as vendor payment and employee wages. A comprehensive unclaimed property process and review is necessary to ensure compliance with each state’s unclaimed property laws.

By: Laurie Andrews and Jinu Thomas

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Jinu Thomas

As Consulting Manager, Jinu analyzes client-provided data and helps clients with their compliance reporting needs. He also provides direction and assistance for initial compliance filings, helps with Voluntary Disclosure Agreements, and performs unclaimed property risk assessments. Additionally, Jinu has established leadership within teams working on audit defense engagements.
Share this post

future of tax and compliance
North America
June 6, 2024
Observations and Predictions: The Future of Tax and Compliance

This blog was last updated on June 6, 2024 When I became the CEO of Sovos one year ago, I knew that I was stepping into an innovative company in an industry primed for a seismic transformation. However, even with this knowledge in place, I must admit that the speed and scope of change over […]

SAP clean core
North America Tax Compliance
September 6, 2024
What is SAP Clean Core and What Does that Mean for Tax? Part I

This blog was last updated on September 11, 2024 Much is being made about the introduction of SAP’s ‘Clean Core’ concept and how it will impact a business’ ability to customize its ERP to meet the unique needs of its operation. In this first blog in a series taking on the issue of Clean Core, […]

1099 fraud
North America Tax Information Reporting
September 6, 2024
IRS Pushing for Filing Due Date Changes to Combat 1099 Fraud

This blog was last updated on September 6, 2024 Millions and millions of tax dollars are lost to fraud every year due to stolen identities, dishonest tax preparers or claims of false tax losses or dependent information. The IRS deploys a variety of processes to detect fraud including analyzing information reported on third party information […]

IPT warranty services
IPT North America VAT & Fiscal Reporting
August 30, 2024
Applicability of IPT to Warranty Services

This blog was last updated on September 5, 2024 Italy: IPT Treatment on Used Vehicle Warranty Services On 21 May 2024, the Italian tax authority published a ruling (No. 110/2024) on the IPT treatment of warranty services provided in relation to the sale of used vehicles. The ruling dealt with a scenario in which a […]

Delaware's verified report requests
North America Unclaimed Property
August 29, 2024
Delaware’s Second Round of Verified Report Requests Released

This blog was last updated on August 29, 2024 Delaware recently released the second round of Verified Report requests by mail addressed to the Tax/Escheat Departments with the subject line Notice Requesting Verified Reports for Report Year 2023*. All companies should be on the lookout for the Notice, even if your organization was audited by […]

2024 Direct-to-Consumer Wine Shipping Mid-Year Report
North America ShipCompliant
August 27, 2024
2024 Direct-to-Consumer Wine Shipping Mid-Year Report

The direct-to-consumer (DtC) wine shipping channel has seen a continuation of movement tracked in the January release of the Sovos ShipCompliant/Wine Business Analytics Direct-to-Consumer Wine Shipping Report, with the top destination states experiencing a dip in volume and value.  The latest data for the U.S. wine DtC shipping market reveals shipment data trending downward. Nationwide, […]