Practice Management Alert

If your practice is receiving demands for refunds on claims that are years old, paying them with no questions asked will only reduce your bottom line. Instead, experts say, protect your revenues and fight back by refusing to pay. Use your contract language or state laws on claim-filing timeliness to set your own guidelines regarding how long after reimbursement is received you'll accept a refund request.

Like other physician groups across the country, late last year Piedmont HealthCare P.A., a 76-physician group in Statesville, N.C., began receiving recoupment letters from claim-review companies acting on behalf of insurers. The letters requested refunds on 2- to 4-year-old claims, and either denied the original claim outright, or maintained the group was overpaid, says Lloyd E. Matson, its chief executive officer. Piedmont HealthCare has received nearly 100 such refund requests from two commercial indemnity insurers that do not have contracts with the group, he says.

"When we first started receiving these letters, we were floored. We'd never seen this before, and we didn't know what to do. Thinking maybe we did something wrong, we started going back and looking at the claims to see why they were asking for repayments," Matson explains. Retrieving old payment information from the group's computer system, searching a storage room of file cabinets for old explanation of benefit (EOB) forms from the particular carriers, and examining the medical records of the patients for whom the claims were filed took a lot of staff time and effort, and produced no evidence of errors by the group's coders or billers.

After consulting its attorney, Piedmont HealthCare decided to reply in writing to requests for refunds from the noncontracted insurers. The response, which could be used as a guide by other practices, included the following three points:

Noncontracted Provider. In one case, an insurance company claimed the refund was due according to their "standard claims-payment policies." Piedmont HealthCare's response letter argues: We contend that no refunds are due. As noncontracted providers, we are not contractually bound to abide by [the insurance company's] "standard claims-payment policies" in determining what amounts due are to be reimbursed.

Correctly Coded Claims. The refusal-to-pay letter continues: A review of the above-referenced audit information indicates that the procedure codes we billed were codes that were included and defined in the applicable year's American Medical Association's (AMA) Current Procedural Terminology (CPT4) manual. The codes billed describe the treatment and healthcare services that were provided to the participant. Therefore, the codes billed do not represent contraindications with CPT4.

State Consequences. The letter states that if the physicians' group continues to have to deal with this issue, it will consider making the insurance company's participants "private-pay patients" and "cease filing claims as a courtesy." The letter also notes the physicians' group does not want to take "such a drastic step," but may have no choice if it "must continue to deal with issues that are so grossly untimely."
 
Matson says the insurers requesting refunds have failed to reply to the group's refusal-to-pay letter. But the number of refund requests has declined.

In trying to determine why insurers seek refunds on claims that are years old, Piedmont HealthCare identified some trends in the requests. The insurers tend to focus on large claims, reduce payment on second and third procedures performed by the group's surgeons, and deny services associated with office visits, such as some lab tests and x-rays. "I think these are carriers looking to lower their costs by picking up revenue," Matson says. "To them, it's low-hanging fruit. A lot of physicians will probably just make the refund and not ask any questions. And that's just pure profit back to the carrier."

To avoid future refund requests on old claims from other payers, Piedmont HealthCare has set some policies. For example, for carriers it does not contract with, the group now gives them 120 days from the payment of a claim to review it and ask for an adjustment. The group sends a letter explaining the policy to the companies demanding repayment, Matson says.

During negotiations with insurers it contracts with, the group seeks contractual provisions to limit the time the companies have to request claims payment adjustments. The limit sought by the group mirrors each payer's timely filing requirement. "For example, if the carrier wants to be able to deny claims for timely filing at 120 days, we're taking the approach that it has 120 days to review after payment has been made and ask for a refund. After that, it's off the table. As we are going through and renegotiating our contracts, we've been successful," he contends.

Seeking a long-term solution, Piedmont HealthCare has written letters to its state legislators asking for a law to limit insurers seeking refunds on old claims. "We just think what's fair is fair, and to go back beyond a reasonable period of time and demand such refunds is unfair. No other business would do that," Matson says.

Insurers and managed care plans seeking refunds on old claims, also known as retroactive denials, have become so prevalent that states are passing laws to stop them. Florida and Washington, for example, have enacted laws that limit retroactive denials of physicians' claims, according to the AMA. Florida prohibits health plans from rescinding payment more than 120 days after receiving the claim unless a problem is found with the claim. Washington's law requires health plans to pay for services they authorized, even if they approved the services in error.

Note: Visit our Web site at http://codinginstitute.com/extra/mob  extra/mob for a summary of statutes for various states that have laws regarding prompt payment, adjustments and retroactive denials of claims. This Web site also provides links to the complete text of the relevant statutes.

The AMA's Council on Medical Services reported in December 2000 on a survey that found more than 40 percent of 759 physician respondents said that at least one-tenth of their managed care claims are denied retrospectively. Also, the survey found that many managed care plans demand repayment on claims that are as much as 4 or 5 years old, and if the doctor refuses to pay, the plans deduct the recoupment amount from the next payment due the physician. According to the AMA report, the most frequent reasons for these retroactive denials are that the services were not medically necessary or not covered by the insurer.

Based on the AMA survey, the practice of dunning physicians' current payments to recoup old claims may be more prevalent among managed care plans seeking refunds than it is among indemnity insurers. Piedmont HealthCare, for example, has not seen the indemnity insurers seeking refunds on old claims take payment for them from future reimbursements. But in Virginia, managed care plans seeking repayment on retroactive denials and taking the sums in contention from current reimbursements became so prevalent that the Medical Society of Virginia lobbied its state legislature for specific rules. In 1999, the legislature passed a fair-business-practices act that includes a time limit in which carriers, insurers or managed care plans can request refunds on previously paid claims. The Virginia law limits payers' refund requests to the lesser of 12 months from the original payment, or the number of days the payer requires its contracted providers to file claims. Also, the payer must notify the provider at least 30 days in advance of any retroactive denial.

Despite state laws and regulations, some payers may persist in trying to recoup old claims, warns Lisa C. Wood, office coordinator with Family Healthcare Center in Danville, Va., and former insurance coordinator for a hematology and oncology physician practice in that town.

While she was working for the physician practice last year, Wood says, a managed care plan retroactively denied a claim that was two years old and deducted the payment from another reimbursement the plan owed the practice. Wood says she sent the managed care plan a copy of the state's fair-business-practices act and demanded payment. The managed care plan responded by paying the money it had deducted.