Published 5/1/2018
Michael R. Marks, MD, MBA; Michael J. Sacopulos, JD

Are Physicians Required to Return Overpayments?

When overpaid, many providers wonder if they need to return the funds. The short answer is yes. An overpayment is money that does not belong to providers and keeping it exposes them to collection and other risks.

The U.S. Centers for Medicare & Medicaid Services (CMS) ruled that Medicare overpayments must be refunded within 60 days. However, some practices are passive on the issue and many do not have a policy addressing these funds. For example, during a recent discussion with a client, it was discovered the practice had not run the Medicare Credit Balance Report in nearly a year. When they did, they were astounded to learn they owed more than $300,000.

If your practice hasn’t run this report, immediately do so. Consult your practice’s attorney for assistance on how to address any overpayments. Medicare’s rules are specific. To review their fact sheet, visit https://go.cms.gov/1Oy2sK1.

Medicare overpayments can occur for a variety of reasons, such as insufficient documentation, medical necessity errors, duplicate payments, and administrative and processing errors. The look-back period is six years. When your office identifies an overpayment within that period, you must report and return the overpayment within either 60 days after identifying the overpayment or by the due date on any corresponding cost report, whichever is later.

When Medicare identifies an overpayment of $25 or more, the Medicare Administrative Contractor (MAC) will initiate a recovery process by sending an initial demand for repayment. The MAC letter will explain the following:

  • the reason for the overpayment
  • that interest will accrue if overpayment in full is not received within 30 days
  • options to request immediate recoupment
  • options to request an extended repayment schedule
  • your rebuttal rights
  • your appeal rights

In response, you may either make immediate payment, request immediate recoupment, submit a rebuttal, or request a redetermination to appeal the overpayment. With immediate recoupment, Medicare recovers the overpayment by offsetting future payments for other services.

If the overpayment is not repaid in full, you will receive an Intent to Refer letter 60 to 90 days after the initial demand letter. This document advises that unless payment is made or a plan is established for repayment, the MAC will refer the overpayment to the U.S. Treasury for collection.

Private and third-party payer requirements
Does any of this information apply to private payers? Again, the short answer is yes. Once overpayments are discovered, a provider is required to refund them even if the payer does not request it. Most plans with written contracts have a clause that outlines this requirement and the period during which the practice must make the refund.

For example, visit https://bit.ly/2Je5EKX to read the complete Anthem Blue Cross Overpayment Reimbursement Policy. Its list of reasons for overpayment includes the following:

  • paid wrong provider/covered individual
  • allowance overpayments
  • billed in error
  • noncovered services
  • terminated covered individuals
  • paid wrong covered individual/provider number
  • coordination of benefits
  • late credits
  • duplicate claims
  • claims editing
  • total charge overpaid

Aetna’s statement on the subject, available on their website, reads: “If we have identified an overpayment and request a refund, please mail the check, along with a copy of the overpayment request letter we sent you, to the address provided in the letter.” For more information, visit https://aet.na/2InEMH4.

These policies provide instruction and forms on how to make repayment. Whereas CMS wants repayment within 60 days, commercial carriers can have their own timeframe. In fact, some of them want repayment within 30 days. Others may try to recover the overpayment through remittance adjustment on future claims or other recovery actions.

The bottom line is that you need to read your payer contracts and review the refund procedures and policies to make sure you return overpayments swiftly after discovery.

Even out-of-network providers need to be concerned about overpayments, as covered in Section 6402 of the Affordable Care Act (ACA). Although the ACA’s overpayment requirements appear to apply only to governmental payers, the requirement that patients secure health insurance coverage by third-party payers ultimately transmits certain rights to those patients. Those rights include issues surrounding overpayments. Overpayments impact patient deductibles and lifetime benefits. Therefore, ACA requires providers to return any insurance overpayment under the law’s Patient’s Bill of Rights. However, these rules may certainly be open to interpretation.

In summary, overpayments are not found money for the practice. They are funds you are holding that belong to others. We urge you to check if your practice has a refund repayment policy, run the Medicare Credit Balance Report, and seek guidance from your attorney.

Michael R. Marks, MD, MBA, is a member of the AAOS Medical Liability and Patient Safety committees and cochair of the AAOS Communications Skills Mentoring Program. He is employed by Relievant Medsystems and Marks Healthcare Consulting. He can be reached at mmarks1988@gmail.com.

Michael J. Sacopulos, JD, is president of the Medical Risk Institute and general counsel for Medical Justice Services. He can be reached at msacopulos@medriskinstitute.com.