How long should a medical practice keep financial records?
Keep most financial records for 7 years. The IRS technically requires only 3 years from your filing date, but they can extend audits to 6 years if they suspect underreported income. The 7-year rule gives you a buffer and keeps things simple.
Patient billing records need extra consideration. Any financial document containing patient information falls under HIPAA, which requires 6 years of retention from creation or last effective date. Michigan requires medical records be kept for 7 years after the last treatment. Since billing records tie directly to patient care documentation, treating them the same as medical records is the safest approach.
Payroll and employment records follow different rules. The IRS wants 4 years for payroll tax records. EEOC guidelines require 1 year for most employment records but 3 years for anything related to wages. Keeping all payroll records for 7 years matches your other financial documents and avoids tracking multiple retention schedules.
Some records should never be destroyed. This includes incorporation documents, ownership agreements, property records, retirement plan documents, and any audit reports. Anything documenting major business decisions or asset purchases belongs in permanent storage.
Bank statements, deposit records, and credit card statements supporting tax deductions need the full 7 years. Same with receipts for equipment purchases, leasehold improvements, and any capital expenditures. You may need these records for depreciation calculations long after the original purchase.
The real challenge for medical and dental practices is organizing records so you can actually find them when needed. A filing system that separates patient-related financial documents from general business records makes retention easier to manage. Digital storage helps, but you still need clear policies for what gets kept and when things can be purged.
Working with a Detroit medical billing service that understands healthcare operations can help you set up retention policies that satisfy both financial and regulatory requirements. Getting this right from the start prevents headaches when an auditor or attorney requests documentation you should have kept.
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More Questions
What are common medical billing errors that cost practices money?
Common billing errors include failing to verify patient eligibility, using incorrect procedure or diagnosis codes, missing timely filing deadlines, and not following up on denied claims. These mistakes can cost practices thousands in lost revenue each month.
Read answerHow do I track patient payments and insurance reimbursements?
Track patient payments and insurance reimbursements by posting each payment to specific charges in your practice management system. Reconcile posted payments to bank deposits weekly and monitor patient balances separately from insurance AR.
Read answerWhat should I look for when hiring a medical billing service?
Look for specialty-specific experience, HIPAA compliance, transparent reporting, and a clear denial management process. The right billing service should communicate regularly about your revenue cycle and integrate smoothly with your practice management system.
Read answerHow do dental practices manage insurance billing and patient copays?
Dental practices manage billing by verifying coverage before treatment, submitting claims with accurate CDT codes, posting insurance payments, and collecting patient portions at the time of service.
Read answerWhy are my insurance claims getting denied?
Insurance claims get denied for reasons including missing prior authorization, eligibility verification failures, coding errors, and incomplete patient information. Most denials are preventable with proper front-end processes.
Read answerWhat bookkeeping software works best for medical practices?
QuickBooks Online is the practical choice for most medical practices. It's the industry standard, integrates with most practice management systems, and any bookkeeper or accountant you work with will know how to use it.
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