Eli's Rehab Report

Prepare yourself for insurance companies that come knocking -- far too late.

Imagine this scenario: You're hitting the books at the end of the quarter and are pleased to see a comfortable profit margin. Then, the next day, bam; you get a notice from one of your insurance carriers that they want payment back for an expensive treatment they already paid for -- a year ago.

Sound all too familiar? The good news is that you can find ways to eliminate the shock -- and even ethically retain the money in certain cases. Put yourself in the best financial position with the following tips.

Before you call the insurance company and complain or blindly pay the bill, take a step back. "Investigate the reason for the overpayment," recommends Nancy J. Beckley, MB, MBA, CHC, with Bloomingdale Consulting Group Inc in Brandon, Fla. For example, was it due to patient eligibility, non-covered services, etc.? she says.

"The overpayment notice and supporting documents should explain overpayment factors, such as total amount, billing time frame, cause (problem with codes, fees, services, etc.), repayment period, and deadlines," writes Angela Foehl, director of private health plans advocacy for the American Speech-Language Hearing Association in an article on the Association's Web site.

Be honest: If the reason for the overpayment is clearly a mistake on your part, bite the bullet and pay up now to avoid a fraud charge down the road.

Hopefully you signed a contract with the payer. If so, dig it out. "Check the contract terms for repayment notices and your rights to dispute/appeal under the notice," Beckley says. "Pay attention to the timeline, the address, and form to which the notice must be submitted."

Key: "Many providers have contracts with private payers which may well control the payer's right to request a refund," points out Linda Baumann, Esq., JD, healthcare attorney with Arent Fox in Washington, D.C. "Know your rights under the contract as well as under state law so you can respond appropriately if there is a problem." State contract law would also apply, she says.

"Insurance laws are regulated by your state -- check the regulations for the type of insurance plan involved," Beckley says.

Example: "In Arkansas, we have a law pertaining to recoupment that states, 'Except in cases of fraud committed by the health care provider, a health care insurer may only exercise recoupment from a provider during the eighteen-month period after the date that the health care insurer paid the claim submitted by the health care provider,'" points out Becky Sewell, MRC, CRC, with Rehab Net of AR in Conway Ark.

Assuming you've concluded the insurer made the mistake and has broken contract or law by asking for a refund too late, decide if you want to dispute. If the amount in discretion is not substantial, is it worth your rehab organization's time and resources to go through with the process?

Expert advice: For refund requests of large amounts of money, or in cases where the insurer has suggested fraud or misconduct, "consult with an attorney," Foehl recommends. "The insurer should ... explain your due process rights to respond to the notice; submit evidence; have representation; a hearing; and an appeal," she writes. If the insurer did not already send you forms to dispute or appeal, request them via phone, or look for them on the insurer's Web site.

Don't miss: "Once a third party payer requests a refund, there is a potential compliance risk associated with a credit balance," Beckley warns. "A rehab provider faced with this situation should conduct an investigation, gather the facts, seek advice from counsel (perhaps even attorneyclient privilege) as necessary, and proceed with the proper course of action after the investigation has been completed and all the facts of the case are known."

The best solution to dealing with refund requests is to prevent them from the start. "Obviously, filing the claim in accordance with all payer requirements is the best way to prevent problems later," Baumann says.

Also, conduct regular self-audits to catch mistakes, and take special care to watch for software glitches in this age of electronic medical records. As for payer mistakes, know your state laws ahead of time, and be familiar with any refund repayment aspect of your payer contracts.

Try this: "Have a written agreement about recoupment included in your contract with carriers," Sewell suggests. And check with your State Insurance Commissioner to determine if any recoupment laws exist prior to writing any company policy, she says.