Credit Balances and Overpayments

Credit Balances and Overpayments:  No More Delays!

Most practices focus their energy and resources on coding, billing, and collecting money―not returning it. Understanding where your practice stands on this issue may end up saving you money in the long run. We heard a lot about this subject in 2002, when Medicare published a rule in the Federal Register called “Reporting and Repayment of Overpayment”.  The rule established the timeline of 60 days for producing refunds.  Unfortunately, many physician practices have adopted the poor practice of waiting for a refund request to return the money, or worse, waiting for an insurance company or CMS intermediary to recoup the money from other pending payments.   If this is your policy today, a recommended audit of your credit balances and refunds should be done quickly, and you should take action to clear all refunds and overpayments.

Updated Regulations

In May 2014, the Department of Health and Human Services, Office of Inspector General (OIG) published a proposed rule updating its regulations. The proposed rule will authorize civil monetary penalties for “failure to report and return a known overpayment,” among other issues.   The rule has outlined the penalty for failure to report and return overpayments no longer than 60 days after the date the overpayment was identified, and characterizes it as a per day penalty with up to $10,000 for each day a practice fails to report and/or return a known overpayment.  The final rule has not been determined, and there is speculation that Congress may convert the per day penalty to a “per item” or per service penalty.   Either way, the assessment of a penalty of this magnitude could ruin a practice.

Policies and Procedures

How do you protect your practice from potential fines or audits?  The best form of defense is to be proactive, with a sound compliance plan.  Policies and procedures for the identification of overpayments and the resolution for patient and insurance credit balances should also be implemented. As a first step, an internal audit of the practice will identify the extent of your exposure; this gives you a good starting point to develop a plan, institute policies and training, and monitor any payments, particularly those from Medicare and Medicaid that may pose potential risks related to overpayment rules.

Overpayments happen for many reasons, and examining your practice for these potential hazards can help you, the practice owner, know where to look for potential for insurance overpayment.   The top operational procedures that can cause an insurance overpayment are:

  • The insurance follow-up process:  the claim is slow to be paid and we assume that the carrier did not receive the original claim and send another claim, resulting in the same claim sometimes being paid twice. Credit balances, which need to be returned to patients, can result from these issues. Once identified, this situation should be resolved and money returned to the patient.
  • Insurance Eligibility:  not thoroughly obtaining proper insurance coverage information from the patient, and then assuming the patient is not covered, only to find out that coverage is available after collection of a self-pay payment.  If the insurance is ultimately filed and paid, then the portion collected from the patient must be refunded.
  • Coverage:  some plans make it difficult to determine if procedures are covered, resulting in payment requests to the patient to pay for an uncovered procedure. Later, the patient learns that the procedure is covered―or the plan reverses their decision to cover―and the patient is then due the collected amount back from the practice.
 

Once you have assessed your billing and refund practice, then setting up standard procedures for monitoring billing is a necessity, and a simple one.  Most practice management systems provide credit balance reports.  These reports should be generated each month, and insurance overpayments and patient credit balances should be quantified.   The practice should maintain a written refund process with checks and balances.   Your practice should develop an account resolution process that includes identifying and conducting research on the claim, along with supporting documentation. To have proper accounting controls in place, the documentation should be reviewed and signed off by someone other than the refund request investigator prior to a check request for the refund. 

In many cases, the entire process is followed until the last step―sending the money.  Holding on to these refunds until the practice has a “good month” should be avoided.  Working of refunds and credit balances should occur regularly, with weekly check runs.  The last step, and one that many practices omit, is an actual verification that the checks were cut and the refund check was mailed or sent to the patient or insurance company.

Spending the time and resources to create a thorough and standard process for handling overpayments will benefit the practice in the long run. The assessment of where you are today will help you to understand how soon you can bring the practice into compliance.

 

 

July 2014
Carol E. Alexander
Stroudwater Associates
calexander@stroudwater.com

 

Contact:

Anne Diamond
Senior Director
adiamond@acog.org