Credit Balances
Jul 10, 2023

The Hidden Cost of "Free" Credit Balance Services

Discover why using "free," contingency-based vendors to resolve credit balances may actually cost your organization millions.

The Hidden Cost of "Free" Credit Balance Services

Hospitals and health systems frequently manage credit balances using both internal and external resources, quite commonly engaging an outside vendor to resolve their credit balance accounts from commercial insurance payors. This service is typically offered as an add-on by very large companies at no direct cost to the healthcare provider, instead the vendor contracts with the payor(s) and agrees to be paid a contingency for the overpayments they identify and refund. Sounds like a pretty good arrangement, right? Well, not so fast…

Below are a few of the primary reasons these so-called “free” credit balance recovery vendors may actually be costing your organizations millions of dollars annually.

Misaligned Incentives

Vendors who perform contingency-based credit balance recovery work for the payor, not the provider. In fact, this type of vendor’s incentives are entirely aligned with the payor’s. An analogy we’ve often used to describe this is as follows: Imagine paying a firefighter $100 for every individual tree he put out in a forest fire. Do you think that fire would be put out quickly? Or is it plausible that this firefighter would keep the fire under just enough control to look effective, while maximizing his payday? Therein lies the problem with using contingency-based credit balance vendors.


Instead of doing the proper research on each individual credit balance account, payor-aligned vendors aim to recovery as many dollars as possible. Plain and simple. This leads to cherry picking high-dollar accounts and incredibly low accuracy of resolutions.

Other vendors refund approx. 30% of the accounts they touch, Crossroads Health averages under 17%

At Crossroads Health, we have encountered credit balance accounts that were actually masking six-figure underpayments. Without deep analysis (enabled by proprietary technology), the traditional payor-aligned vendor likely would have never made this discovery and moved forward with a refund request.

Payor Control

Using a “free” credit balance vendor is like giving payors keys to the kingdom. Instead of working with your payors to minimize overpayments and optimize your revenue cycle, you’re allowing an outside entity to profit off inefficiencies for which they have no intention (or incentive) to resolve.

Data Mining

To resolve a credit balance, significant details are necessary from the provider’s records. This information is often attained by payors using third party vendors for data mining efforts. But what is data mining and what are the risks?

Data mining is the process of extracting useful information from large and complex datasets. It can be used for various purposes, such as business intelligence, market analysis, fraud detection, and scientific discovery. However, data mining also poses some serious risks, especially when applied to sensitive domains such as healthcare. One of the main dangers of data mining in healthcare is the violation of privacy and confidentiality.

Payors may also use the data they uncover from “recovery efforts” to more effectively deny claims, set up additional retractions/offsets that might be inappropriate, or even use the information against you in contract negotiations.

No Root Cause

In the same way our firefighter from earlier was not incentivized to get to the bottom of the fire’s cause, payor-aligned vendors have no reason to identify the root causes of your credit balances. After all, fewer credits means less revenue for them. With a substantial percentage of credits being created by preventable billing errors, identifying and preventing their root causes can be a quick win and is a necessary long-term strategy for improving revenue cycle efficiency.


To conclude, while the thought of a vendor working credit balances on behalf of your payors may seem like a reasonable approach, there are numerous risks associated that could end up costing your organization a lot more than the cost to engage a specialized vendor. Be sure you discuss goals surrounding non-cash adjustments and other quid-pro-quo considerations that may allow for greater success with "free" services.

Joshua Robinson
Joshua Robinson
COO | Partner
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