Insurance overpayments can occur in a practice for a variety of reasons. An insurer may simply make a mistake by paying a provider more than the contracted amount for a service or pay for a service that is not covered under the patient’s insurance plan. Whatever the reason, overpayments can and will create headaches for providers and affect accounts receivable.
What is an insurance overpayment? It is any payment a provider receives from a payer in excess of the amount payable for a service rendered. This can occur because: 1) a patient is covered by two different insurance carriers and both pay as the primary insurance due to a lack of coordination of benefits; 2) a practice bills a claim incorrectly or in excess of actual charges; or 3) a claim is submitted twice, resulting in a duplicate payment.
Practices must monitor payments and proactively report overpayments or risk heavy fines and penalties; not doing so will also give the practice an overinflated assessment of total revenue. Past custom was to hold on to smaller refunds and wait for the payer to request a refund, but that is no longer acceptable. Compliance rules now require all refunds (regardless of size) be made within 60 days of discovery, whether to third-party insurance companies or the Centers for Medicare & Medicaid Services (CMS). Once a practice determines a credit balance is due to an overpayment, a refund process should be initiated. Immediately take the following steps:
- Send a letter to the insurance company making them aware an erroneous overpayment was made. Practices should never send a refund to an insurance company without contacting them first. Each insurance company has its own process for handling overpayments and refunds.
- Allow the payer at least 30 days to respond. The response should include instructions on how the refund should be submitted and where to send it.
- Once instructions are received, make sure the refund is submitted with all required information to ensure proper credit.
- Some insurers prefer to recoup from future remittances. Watch for this occurrence so you can properly notate the accounts affected to reflect the transaction. Unless your practice is financially able to commit to such a practice, try to negotiate agreements that exclude this type of arrangement.
- If no response is received from the insurance company within 30 days, contact the company by phone to follow up before taking further action. Do not leave this undone. Remember, it is the practice’s responsibility to complete the refund process.
- In the event the refund is due to Medicare or Medicaid, the process may differ. Follow the CMS guidelines for Medicare and check with the Medicaid office in your state for refund instructions.
When it comes to overpayments, don’t make the mistake of rolling the dice and hoping for the best. That will only lead to payers looking at your practice for healthcare fraud, waste and abuse.
All providers and the practice administrator/manager should know the payer rules for refunds. There are no cookie-cutter templates; it is necessary to read the requirements for CMS, as well as any clause that may be included in the payer’s contract. For example, the clause in an Anthem Blue Cross Provider Agreement reads:
2.8 Adjustments for Incorrect Payments. When the Provider receives an excessive or mistaken payment, including, but not limited to payments for Claims where the Claim was miscoded or otherwise billed in error, whether or not the billing error was fraudulent, abusive or wasteful from Anthem, a Covered individual or a Plan, the Provider must promptly notify Anthem or the Plan and reimburse the appropriate entity within thirty (30) days, Anthem or the Plan may recover the overpayment through remittance adjustment or other recovery action, subject to the restrictions as set forth in the provider manual.
Whether the practice receives an overpayment from Medicare, Medicaid, commercial insurance, HMO, PPO or an out-of-network claim, the practice is obligated to refund the overpayment, regardless of whether the payer requests it. The payment should be refunded within the time frames stated in the contract or in an otherwise timely manner (60 days or fewer). Doing so will keep the practice in line with billing compliance guidelines.
In the past few years, the regulations on overpayments and refunds have become stricter. In the Health Care Fraud and Abuse Control Program Annual Report, the CMS makes a hard push for efforts to collect overpayments and crack down on providers who fail to make prompt refunds. The CMS has the “authority to suspend payment if reliable information of an overpayment exists.” Additionally, it could establish a final rule allowing it to go back up to 10 years to reclaim overpayments.
Prompt refunds are a good business practice. By keeping up with refunds monthly, the accounts receivable line is clean, accurately represents the practice totals and stabilizes cash flow.
Keep overpayments to a minimum by double checking all claims before they’re filed to ensure accuracy. If you find your practice regularly receives overpayments, you should revamp your practice’s billing processes and require training for the coding/billing team.
The ACR practice management department provides training on refund requests and appeals. For additional information on practice management updates, coding and compliance, email practice@rheumatology.org.