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!

18 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.

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