Credit balance lawsuit costs Yale $5.6 million

It’s time to check your credit balances. If you’re holding money that doesn’t belong to you, don’t be surprised if a whistle-blower rats you out.

The Yale School of Medicine in New Haven, CT, learned that lessson to the tune of a $5.6 million settlement. Though Yale had survived a PATH audit last year that ended up with the school owing nothing to OIG, it didn’t escape the attention of Richard Jackson, a former account assistant at the school.

Jackson’s suit alleged that, from 1992 to now, Yale received payments without identifying them to a specific charge. The money was listed on the books as "unidentified credit balances on both patient accounts or unallocated accounts," according to the suit. While not directly admitting liability, Yale says "faulty administrative and inadequate computer systems" caused it to keep duplicate payments from different payers and prevented it from matching payments to outstanding charges. The school is spending $15 million to upgrade its billing system.

Yale will pay $1.2 million to the federal government, plus another $1.9 million to 11 private insurers including Blue Cross/Blue Shield and Aetna. The state of Connecticut will receive $2.5 million that patients and others may obtain through unclaimed property procedures. Jackson will receive $105,000 from the federal portion of the settlement.

Hospital credit balances were an OIG target in 1992. In some cases, hospitals intentionally kept balances, though many others were not given clear instructions from their intermediaries on how to return the money, says Barbara Jerkins, a former OIG supervisory auditor and now a consultant for Parente Randolph in Philadelphia.

There was confusion as to whether overpayments should be eliminated through adjustments or returned as checks to the intermediary, which in some cases returned checks, Jerkins recalls.

Those days are largely past, but even now resource-starved hospitals are running a risk, warns Jenkins. It’s time-consuming to research a credit balance and match it to an account, but too many institutions have one- or two-person credit balance departments that can’t keep up with the backlog, she adds. Jerkins recommends the following:

- Every hospital should have a credit balance staff with a minimum of two people, or more if it’s a large institution.

- Audits should be done at least monthly to check for credit balances.

- A serious policy of matching payments and charges on the front end should be implemented. It’s easier to prevent balances from occurring than it is to research and resolve them later on.

Caution: It’s not just hospitals that need to check their credit balances. OIG is investigating credit balances at physician practices as well, according to the agency’s 1998 work plan. In fact, at least one 25-doctor practice in Pennsylvania just had its accounts checked by two OIG auditors, according to a source who asked not to be identified.