What is Recoupment in Medical Billing? Here’s How to Prevent It

August 20, 2021
by Admin

In an ideal world, your medical practice would 100%  accurate billing with no overpayments (valid or otherwise), refund requests, or automated recoupments. Even with 100% accurate billing…you’re still going to receive all of the above.  It is the unfortunate reality of medical billing today.    

The good news is, with better understanding of recoupments and refunds, you can process out the frustration


What is recoupment?


A recoupment is a an auto-refund essentially from insurance.  You know that 50 page contract you signed years ago that you probably never read (don’t worry you’re not alone)?  Yeah, you gave them the right to rip money back at their discretion by withholding money they owe you for work you did on any other patient at any other time. Crazy, right?  Guess what, you can’t decline.  That contract language is staying in the terms or you’ll be told to kick rocks if you don’t like it. 

Here’s the kicker, insurance will give you 10 days or 15 days to reply to a recoupment before they yank back the money…but they get 30-45 or 30-60 to process your reply…so it is mathematically impossible for you to stop these. 

Yes, yes we agree.  This is insanity. 

Your practice could receive a recoupment request for many reasons:

●       Insurance could be re-processing a claim based on the patient’s benefits (e.g., they didn’t allocate enough to deductible/coinsurance/copay…because why do anything right the first time?).

●       The insurance may not have been the primary payer (e.g., BlueCrossBlueCrook paid when UnitedHeretics should have paid first)


Think recoups are a red flag that you biller sucks?  Wrong.

The two most common types of recoup requests are bullsh*t.

1)      You bill insurance for an excision and a closure and code it appropriately, by not including a 59 on both lines because the CPT book says you don’t have to.  Or, you bill it with a 59 on one.  Or you bill it with a 59 on both.  Doesn’t matter what you do, you’ll get a denial because of the insurance companies “making mistakes.”  You get paid for 1 of 2 codes.  You appeal.  You appeal again.  You win because you’re right.  Now, the insurance company recoups code 1…and then repays you for 1 and 2 later.  If anyone can figure out why they do this other than to make life more difficult, I’m all ears.

2)      You will get refund requests from third parties.   Pick these up.  Walk to the shredder.  Drop them in the shredder.  Voila!  You’re done.  Seriously, these guys are crooks.  If they call, tell them the insurance company can call directly if they need something.  These third parties have ZERO recourse.  That will be the end of it.  OR…send them to your amazing billers to take care of.

How do you handle a recoupment?

No one wants to deal with a recoupment request, but if you ignore it, the insurance company is getting their cheddar one way or the other via withholding future funds.   So how do you deal?

1)      Keep a list of recoup requests so you know where the money is coming from when you get the withholding.  Those EOBs don’t spell it out for you, they reference the withholding number which you won’t have if you don’t keep a list…then you gotta call and sit on hold and lose some hair/patience/years of your life just to get the info.  Save yourself the time.

2)      Appeal those bogus recoups and be sure they fall into your denials/management workflow.  It is money you didn’t receive!  Your biller should be on it!

3)      Be sure you note your billing system carefully.  You have to shuffle money around with credits/debits between accounts.  This can get messy and fast.  It can also totally mess up your month end reporting, specifically financial closes.  So be sure your team is posting these correctly.

Ah, and most importantly.  Especially with CMS (Medicare/Medicaid)…don’t mess around…if they overpay you and you don’t catch it for them AND return the money in 60 days, you have committed Medicare fraud.   Every claim carries a max penalty of 10 years and 10K.  You don’t look good in orange.  So stay on this stuff with CMS.


What if a patient has overpaid their bill?

Patient overpayments occur all day, every day.  The key is to prioritize based on impact.  AKA reply to the patients who are knocking on your door immediately, and have a recurring process for those who don’t seem to be aware of the refund need. 


A patient is complaining about their bill…what do I do?

Remember, medical billing is so confusing that you have to hire a medical biller or medical billing company.  Remember that you actually have to know a little bit about it because you’re a doctor and it is how you get paid.  Well consumers don’t have that constraint, and this is confusing to them too.  Plus you’re telling them to pay you.  Plus your statement is confusing…I don’t care what you put on it. 

So, think customer service. 

1 – Make sure you answer the phone –“Hey I hear you let me take a look and get back to you,” is a 20x better response than a voicemail.

2 – Assuming the overpayment is false – Listen to the complaint in full.  Understand it.  Tell the patient you understand it as well as repeating their confusion back to them so they hear you understanding it.  A “no” is a lot easier to deliver if someone feels heard.

3 – Assuming the overpayment is valid – try to always cut a check.  IF you decide to refund by credit card, be 100% sure it is the same card the patient paid on.  If you refund by check or on the wrong card, the patient can also file a chargeback on their original card and you have no legs to stand on.


I have a ton of credits on patient accounts…can I just keep these?

Nope.  Most people put their head in the sand here and leave the credits indefinitely until they decide to scrub their AR in a cleanup project once a decade (or are forced to when they switch systems). 

Newsflash – this is illegal and your state has some laws to prove it.  Rule of thumb is two years.

Ways to Make the Recoupment/Refund/Overpayment Process Easier

If all this talk about recoupment and refunds gives you a headache, don’t worry, you’re not the only one. Fortunately, there are some things you can do (besides aspirin) that make the process easier.

In short, hire a medical billing expert. Whether it’s someone carefully selected on staff or a third-party professional, the right person can help you through recoupment with relative ease.

Medical billing experts also will decrease the number of recoupment requests you get in the future. These pros are worth their weight in gold if they can help your practice prevent the headache of recoupments.

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