Coding & Reimbursement

What should you do with an overpayment?

By Suzanne Corcoran

An overpayment is money you should not have received, usually from a third-party payer, based on a claim you submitted. It may be all or part of the payment you received. It may be the result of an inadvertent mistake or caused by intentional misrepresentation. It may be an isolated occurrence or a recurring problem. Whatever the case, not only can you not keep it — you have to work to make sure it doesn’t happen again.

Q What is an overpayment?

A Overpayments result from a variety of causes, principally poor chart documentation that does not support the medical necessity for services, upcoding, overbilling and unbundling.

Q Are there time limits for refunding overpayments?

A While you investigate a possible overpayment, consider the potential for a refund but take no action. Current law requires providers to report and return payments within 60 days of a known overpayment.

Q How should refunds be made?

A Direct voluntary refunds of overpayments to the payment correction unit of the Medicare contractor or the specific department of a third-party payer that handles refunds. Send refunds via registered mail, return receipt requested, and keep a copy of all related correspondence. The refund to the payer is commonly followed by refunds to secondary payers or beneficiaries due to the effect of co-payments and deductibles.

In addition to the refund check, Medicare needs to know:

• Why the voluntary refund was made.

• How it was identified.

• What steps were taken to assure that the issue causing the problem was corrected.

• The dates the corrective action was in place.

• Specific claims involved in the inappropriate payments.

• Methodology used to arrive at the amount of the refund (if not specific claims).

• Whether a full assessment was performed to determine the extent of the refund.

We expect other payers require the same type of information.

Q When is an overpayment treated as fraud?

A Fraud is an intentional deception or misrepresentation made for personal gain. It is both a crime and a civil law violation.

Q Do we require an attorney to make a refund of an overpayment?

A Not usually, but when a significant amount of money is involved, it may be advisable to arrange the refund through an attorney with expertise in health law.

Q Does refunding an overpayment lead to an audit?

A Sending a check with a clear explanation should not lead to further review, but reporting a sizeable overpayment might trigger an audit.

Q Is refunding an overpayment sufficient to address the problem?

A No. Management should pursue an investigation to determine whether the overpayment is a part of a larger problem. Then, the provider must educate staff and physicians about the proper way to obtain reimbursement so that the overpayment does not recur.

An effective compliance program is the best way to prevent overpayments (and underpayments). It includes a clear commitment to compliance, effective training and education programs, appointment of a compliance officer, auditing and monitoring, internal investigations and enforcement, a communication system, and application of corrective action plans.