Regulations on Refunds

June 14, 2016 | By Ami Tucker

In recent years the regulations have clamped down hard on refunds. That’s why you are seeing us get these “Requests for Refunds” to you monthly. In the “old days” we used to hang on to the smaller refunds and just flag the accounts for the patient’s next visit, or hold insurance overpayments waiting for the insurance company to request. But no more. The rules as they relate to compliance now require all refunds (regardless of size) be refunded within 60 days. Insurance companies. Medicare and Medi-Caid are the most stringent. We must proactively report overpayments or risk heavy fines and penalties.

Here’s a  good summary pertinent information on the regulations:

  • The OIG published a list of risk factors the OIG identifies as “particularly problematic.” Bullet five on this list is “Inadequate Resolution of Overpayments,” otherwise known in the billing industry as resolution of credit balances. In essence, it says that providers may not keep payments that do not belong to them.
  • Very few, if any, billing companies relish the prospect of resolving credit balances. Much time and effort is devoted to collecting information, creating charges, submitting claims, and collecting payments. To have to spend additional time and energy trying to return this money seems like an untenable situation. And yet the government is very clear in its guidance: “Billing companies should institute procedures to provide for timely and accurate reporting to both the provider and the health care program of overpayments.”
  • Processing and returning credit balances, or “overpayments” as the government calls them, is not optional but mandatory. The term “credit balance” can be defined in a number of ways; however, we will define it as “improper or excess payment made to a practice/provider as a result of patient billing or claims processing errors.”
  • It’s not uncommon for providers to keep such overpayments until specifically asked to return them or until payers have withheld them from subsequent payments. This is illegal.
  • The rule also addresses the timeliness of refunds and requires Medicare providers to report and return an overpayment to the appropriate patient, intermediary or carrier within 60 days of identifying the overpayment.
  • A frequently asked question is, “Must a provider refund all monies?” The answer is yes, for both patients and federal payers, i.e., Medicare and Medicaid. For commercial payers, a provider may set a refund threshold—for example, only credit balances of $10.00 or more shall be refunded—remembering the threshold must be a reasonable amount

In addition to the regulations, prompt refunds are a good business practice. By keeping up with refunds monthly your A/Rs are clean, they more accurately represent your totals, no large months of refunds so cash flow is more stable, and you have happy patients!

41 Responses to “Regulations on Refunds”

  1. Jeff Karns says:

    What if a commercial insurer (non-contracted) erroneously pays a claim but it is not an overpayment (no credit balance exists). Does the provider have to return the payment?

    • Ami K Tucker says:

      The answer as I understand it is “No”. If the provider did nothing to misrepresent the claim and if the error is exclusively the insurance company’s error, and no overpayment exists…then the insurance should seek refund from the patient!

      • Ashley says:

        I would say if you know it was paid erroneously you should refund it and state the reason why. This was the practice at the last company I worked for. I’d say it’s ethical. Maybe it would depend on the reason it was paid erroneously.

  2. Kathy Branson says:

    Is there a Kansas Law that providers/facilities do not have to refund payer if the payer has not asked for the money to be returned? And if the refund is over a year old the provider/facility can keep the money?

    • Ami Tucker says:

      It is our position that best practice is to refund all legitimate overpayments as quickly as possible and in no longer than 60 days. By conforming to this benchmark we are assured all of our clients are compliant and within even the strictest of state laws. If you are interested in specific state requirements, please contact an attorney conversant in this aspect of the law for that information. We do not provide legal advice, but hold our standards to the highest possible to ensure we are never working counter to what is right or outside of legal guidelines.


    Regulations on Refunds:

    We are getting multiple requests from non-contracted insurance companies stating that the patient policy actually terminated back in 2016 and they are looking for us to recoup the amount they paid. We are also received requests them stating the patient only has so many drug screens per year and they over paid the number and want the money returned. Is this correct? and if not, where is it written that we could use this information in a letter to them?

  4. Debbie Hoffman says:

    What about escheats requirement for those balance which aren’t refunded? Aren’t you required to escheat down to the penny ($.01) if you aren’t refunding?

    • Ami Tucker says:

      Every state has their own specific laws on this topic and you should consult with your local attorney for assistance in your state. Thank you for reading!

  5. Chris says:

    I work for a doctor as the office manager. It’s a small office with just the doctor and myself. I occasionally bring it to the doctor’s attention when a patient has overpaid on their account. Unless the patient asks for it, he tells me to “let it go”. I am uncomfortable doing this, but I don’t know how to address my concern with him as it’s not my business. Would I bear any responsibility in this if it came to light? Any suggestions on how to deal with this without losing my job?

  6. William says:

    “The answer is yes, for both patients and federal payers, i.e., Medicare and Medicaid. For commercial payers, a provider may set a refund threshold—for example, only credit balances of $10.00 or more shall be refunded—remembering the threshold must be a reasonable amount”

    For federal payers, it seems there is obvious legislation (ACA etc.) requiring repayment for repaying credit balances – even a penny over.

    However, where do you find support for paying back patients and commercial payer thresholds?

    For example, I am in Colorado, and the unclaimed property (escheat laws) make it appear that you have to report credit balances after a year anyways. Even if you set a $10 threshold, when you report to the state for unclaimed property, you would have to show that you attempted to return the money.

    I guess my question is, what is the basis for your statement that you have to pay back patients, but that you can have a threshold for commercial payers? Is there any statutory support for a state like Colorado? I haven’t found anything except that unclaimed property laws require you to attempt a return when you report to the state after a year.

    Some states like Texas have explicit patient over-payment and physician refund laws, but others don’t seem to have that (like Colorado).

    Hopefully that all makes sense!

    • Ami Tucker says:

      Each state has specific laws and regulations on this topic. We choose to take the most conservative approach across the board in order to ensure compliance for our clients and our business. So while some states may be more liberal, we choose the safest route rather than make decisions state by state.

  7. Laura Watts says:

    I am a patient and overpaid by $41 for an appointment in July, 2017 because the doctor’s office overestimated what I would owe. They are telling me that they do not issue refunds and will apply a credit to my next appointment. I told her I would meet my full deductible (I am on a high deductible plan) before the next appointment in April, 2018 and that I would like a refund. She e-mailed back and said it is their policy to hold the money until after the next appointment. I am likely not going back to them again and want them to issue the refund. Should I send them this article?

  8. Sarah says:

    I am wondering where to find my State/Local laws in regards to this. I work/live in Michigan. What “wording” or websites should I be looking into to get the local answers. I am not able to find my “local” laws just common answers to this. I work for a doctors office that has multiple accounts in which we owe patients money. I am VERY uncomfortable about this and want to find the Michigan laws to show the doctor that we need to give refunds. Please help. Thank you

    • Ami Tucker says:

      If Google hasn’t helped you, you should call a local healthcare attorney for some direction. Thank you for reaching out – it is obvious that this is a big issue for billers. The more documentation we can show the providers about refunds, the better they can protect themselves from any legal repercussions.

  9. Micheal Brinnel says:

    I was able to locate information by searching under ” (enter state) patient over-payment and physician refund laws”. That should help

  10. Hollis says:

    If I work for a doctor who over $50,000 dollars in patient credits and she refuses to pay patients back. Is there some where she can be reported. Do we as employees have a responsibility to report this? It feels like they are stealing from patients by not returning them. The employees are not allowed to tell patients they have credits. The office counts on people not looking at there EOBs or understanding the system.

    • Ami Tucker says:

      I strongly recommend you seek the advice of a healthcare attorney at your earliest convenience regarding your obligations, and your own personal liability in this issue. This is very serious. If these happen to be government-related payer credits (such as Medicare or MediCaid) you could absolutely be held personally liable. Have you provided her with the rules and regulations regarding refunds?

  11. Karen Steil says:

    We inform an insurance company of an overpayment. If an insurance company ALWAYS recoups its overpayments in future payments to us, does the 60 day deadline apply? 80% of our insurance companies recoup from future payments.

    • Ami Tucker says:

      If you notified them and they agreed to recoup – you are in compliance. That said, this often causes major bookkeeping nightmares for you if it is a small payer who could take months to complete a recoup. In those cases we recommend issuing a refund to just simplify your life!

  12. Nicole M. says:

    Is the 60 days for refunding a payment period? Or is this just if you are a contracted with the carrier? I have multiple fund request for non contracted carriers and am wonder if the time frame for issuing payment is longer?

    • Ami Tucker says:

      Is it possible there might be an exception? Maybe. However we recommend you always default to the safest approach and refund within the 60 days. You do not want to be on the wrong side of this if there is a patient or payer complaint filed.

  13. Cassandra says:

    I have researched the regulations for the Washington State regarding “insurance” refunds however I cannot find information in regards to handling refunds that are either rejected or returned by the payer to the provider. At one time, some states allowed the provider to keep an overpayment when they had already in fact submitted a refund to the payer but the payer either, reissues the payment or returns the refund. Is this still the case or what would be the suggested/proper way to handle this. I am specifically referencing provider payments and not patient payments. I understand that patient payments would be reported as unclaimed property when appropriate refund attempts fail.

    • Ami Tucker says:

      The approach depends on your individual state regulations and your type of insurance. We recommend you start by calling your insurance company – they will often advocate for you with the provider in this situation.

  14. Kaye Dillingham says:

    My account has been overpaid in excess of $1,000 since June 2017 and I cannot get a refund – how do I file a complaint and cause this facility to pay a penalty.

    • Ami Tucker says:

      The approach depends on your individual state regulations and your type of insurance. We recommend you start by calling your insurance company – they will often advocate for you with the provider in this situation.

  15. Shane Turner says:

    Is there a particular regulation to how the refund should be issued. For example: if payment was made by credit card, can the refund be in a check form or should it go back to the credit card?

    • Ami Tucker says:

      No regulation; however most providers would prefer you refund credit card payments with a credit card refund in order to recapture the merchant discount that was charged to the provider on the original payment.

  16. Andrea says:

    I would like to receive clarifiation on the following scenario. If a provider receives an overpayment from insurances such as Mutual Omaha, Coventry, or any self-paid insurance and said insurance makes a payment causing a credit where should the payment be refunded to. The patient because they paid their premium or back to the insurance that made the payment? Please advise I am not able to find a direct response that regulates why the patient would get the refund rather than the insurance. Thank you in advance.

    • Ami Tucker says:

      If the insurance over paid in error, they should receive the refund. If the insurance paid correctly AND the patient also paid – the patient should receive the refund. The overriding principle is to refund the entity or person who paid in error.

  17. Cassandra says:

    I just went to a ENT specialist and filed an e-claim. My insurance provider and even CPF dept work really efficient. Only 3 weeks time I had received the letter said that my claim is successful. The problem is here, I had make full payment to the clinic but my claim instead pay to me is pay to the clinic. I will need to wait for the clinic to reimburse back the payment to me. May I know what is the maximum time frame the clinic must make the refund to me? As the clinic account department had told me very rudely that they are very busy and claim is only can refund to me within 6-8 weeks.

    • Ami Tucker says:

      According to the OIG, 60 days is the time limit, so while that is frustrating, if they get that refund to you within their promised 8 weeks, we believe they are in compliance.

  18. Michael Anderson says:

    I am a billing mgr for a private ambulance company in California. We recently received notice from a commercial insurance company that they had audited their payment records and determined that for a period of 1/1/2015-3/31/2017, we overbilled them $980,000 and they want their money back. During that time frame, we were not contracted with this insurance company. We billed them at the rate our county EMS agency either mandated or suggested as a rate. The overpayment was due errors being made in how the ambulance transport was coded. My question is, is there a statue of limitations that pertains to an insurance company demanding payment for having over paid a claim?

    • Ami Tucker says:

      They can go back 4 years if the errors were the providers’ errors, in this case the Ambulance Company. If your coding was incorrect, they are probably within their rights to request this. That said, if you correctly coded and submitted corrected claims, they should only request the difference between the two. I would highly recommend you contact a skilled healthcare attorney for an issue that large.

  19. Charity Miller says:

    Do you have to have contracts with insurance companies if you start a Business to Process Refunds for Medical Insurance Companies from Physician offices or the Hospital?

    • Ami Tucker says:

      I am not really sure I understand your question but it sounds like you should contact a healthcare attorney to assist you. Good luck!

  20. Rhonda Leasure says:

    I have a patient who has Cigna insurance company. I have been fighting for almost 2 years to get paid from Cigna on services from our office. About 4 to 6 months ago, we finally got paid. We just received a letter from Cigna’s collection agency stating that they want all their money back because it should have gone to the patients deductible.. Our clinic has done nothing wrong and all claims are legitimate. Since this is the insurance companies fault for paying us in the first place and not charging the patient, do we absolutely have to pay Cigna back for Cigna’s obvious error. We are in the state of Illinois. Thank you

    • Ami Tucker says:

      This definitely sounds like a recoup you can appeal. There are templates online of letters that you can use to argue this (Google insurance refund dispute letter). Look for letters that reference the legal decisions in support of your position and make sure to send it CERTIFIED! Good luck!

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