Practice Management Alert

Check with your payers before returning overpayments to prevent billing cycle issues.

There’s no such thing as free money, unfortunately, and so properly addressing overpayments in your practice is crucial to compliance. Regardless of the reason for the overpayment, you’ll want to avoid the possible consequences of annoying payers and patients or even setting your practice up for fines and fraud allegations. CMS, which previously had a three-year limit on requesting refunds, now has a full five years to do so.

When overpayments happen, you need to know how to deal with them and with the subsequent refund process. Read on to get the scoop on what you need to do — and when you need to do it — to stay compliant and keep payers happy.

1. Identify the Overpayment

Your practice should have an overpayment protocol. “Whether you do your own billing or you have a billing company doing it, your month-end processes should involve running a report of your credits,” coding expert Barbara Cobuzzi, Vice President at Stark Coding & Consulting of New Jersey, told Practice Management Alert. “You should make sure that you address every credit.”

When your protocol identifies an overpayment, go over all the details of that claim. Be certain that it isn’t the result of a payment-posting mistake or other error. This close review will also help you to avoid making similar mistakes in the future.

Don’t automatically assume that all refund requests from a payer are accurate, either – verify them for yourself. “You need to investigate the reason for the refund and determine if the request is timely and a valid reason exists to warrant a refund,” Barbara Colburn, Director of Business Development at Lakefront Billing Company in Wisconsin, told Optometry Coding & Billing Alert.

2. Reach Out to Insurance Providers

Don’t wait for insurance companies and other payers to request a refund. Call them up and ask for an explanation of their claim so that you can check the details for yourself. Once you’ve verified the overpayment, ask them for a written request.

Have the payer process the claim again – correctly, this time – and then only send them the repayment once you’ve received their request. Never simply pay them over the phone the first time you talk.

3. Contact the Payer Before Sending a Check

The OIG is very clear in its compliance guidance for both physicians and third-party billers: By law, all healthcare providers must refund any overpayments theydiscover.

The first step after identifying and verifying an overpayment is communication. Get in touch with the payer in order to learn how it handles credit balances. Most Medicare contractors use a standard refund form for all overpayments.

In general, government payers should be paid as soon as possible due to the potential penalties involved. Billing expert Michelle Logsdon, owner of Falcon Practice Management in New Jersey, told Optometry Coding & Billing Alert that “even if we disagree with the decision, we refund them right away, and appeal the decision. Medicare will charge interest on the overpayment, and then take it from a future payment.” In addition, new regulations state that if you owe Medicare a refund, any new practitioners in your practice who apply for Medicare enrollment will be denied until you pay the money back.

In addition, new regulations state that if you owe Medicare a refund, any new practitioners in your practice who apply for Medicare enrollment will be denied until you pay the money back.

4. Make Your Case With Letters

Don’t send refunds to payers until they personally tell you exactly where to send the payments, says Cobuzzi. The payer may not know that the check is a refund, or even link it to your practice’s account. Internally, she suggests, “write it off as if the money was paid back, but put it into a dummy ledger for that payer. Enter the patient’s name and the date of service, so that you can tie it back to their ledger. When you send them the money, you can then take it out of their dummy ledger.”

Contact the payer by letter to inform them that you’ve identified an overpayment, and ask them for all the details you’ll need on where and how to send the refund check. Cobuzzi has found that “when you just send them a check, most of the time you’re in for a nightmare. The check may not even get cashed, and it goes into a black hole. Because if they didn’t ask for money back, they don’t know how to handle it.”

When the payer sends you a formal request and you send them a check in return, says Cobuzzi, be sure to include an explanation of what the check is for, along with copies of any EOB forms. Send it by certified return receipt mail, and address it to the repayment staff member at the payer. This creates a full paper trail so that you can prove you identified and paid the overpayment.

Attach the check to a copy of the original refund request, or to a letter on your practice letterhead that mentions the patient’s name and insurance ID number, the date of service, and the refund amount, recommends Colburn.