What is Overpayment in Medical Billing? Here’s How to Recover

February 28, 2019
by Admin

What is Overpayment in Medical Billing? Here’s How to Recover

When a provider receives payment over the amount payable for a service rendered, we call this an overpayment.

While overpayment happens in every practice, it creates problems when left unaddressed. Insurance companies typically prefer to short our providers when it comes to reimbursement, but occasionally they do make a mistake in our favor. That said, with the focus on pre-collection, benefit estimation, etc. in an attempt to avoid painful patient collections, overpayment typically comes from our customers…our patients.

Is Overpayment in Medical Billing Really Something We Need To Worry About?

Overpayment becomes a serious problem when the medical service provider doesn’t return the money. We all make mistakes, but either deliberately or unintentionally withholding overpayment holds legal consequences.

Processing and returning overpayments is not optional. It is a federal mandate (see 63 FR 70144, Dec. 18, 1998). If not handled properly, overpayments create costly legal problems for you, insurance companies, and your patients.

How Do Overpayments Occur?

There are several common reasons for overpayments in the healthcare industry, including:

  • Technology – the estimation tools we use do not function to 100% accuracy.

  • Billing – mistakes happen…and sometimes we over/under-bill.

  • COB – coordination of benefit issues with the payers.

  • Policy (bad) – we pre-collect amounts we should not be in an attempt to protect the practice financially.

Overpayment in medical billing occurs for many reasons. Often, practices cannot easily identify the source. Some less common reasons include:

  • Rushing through processing.

  • New payments/clients.

  • Applying claims to the wrong account or transaction.

  • Using incorrect contract payment rates.

  • Receiving duplicate payments.

  • Insurance companies often pay duplicate claims because they’ve incorrectly coordinated benefits.

How To Recover From Overpayment in Medical Billing

Overpayments do not immediately create serious problems…but if the medical service provider doesn’t return the money to the appropriate entity or person in the proper time frame…we can find ourselves in hot water.

Investigate the payment as soon as you notice a discrepancy. Then, determine the source of the overpayment and react. Don’t leave things sitting to pile up.

If the patient overpays:

  • Contact the patient and explain the overpayment.

  • Determine whether they want to receive a check or an account credit.

  • If the patient will not return to your practice, immediately send a check for the overpaid amount. Include a note explaining the overpayment and the reason.

  • For credit card receipts – make 100% sure to refund the card the patient paid on. If you refund the wrong card, your processor will not view the refund as “valid” and you leave yourself open to chargebacks.

    • As an aside – watch your refund process…this is a gap that bad eggs will occasionally take advantage of when extracting funds from the practice.

If the insurance company overpays:

  • Contact the insurance company. Even if the insurer did not notice the overpayment, the medical practice legally must return overpayments. Contact them in writing and keep a copy.

  • Ask the insurer to explain the payment when they request a refund. We all know they aren’t doing us any favors so validate BEFORE you refund and/or before they recoup.

    • Keep a close eye on which venders are recouping. You don’t want to get caught sending a check…and then seeing a recoup. Paying them back in duplicate isn’t something we want to get in the habit of.

  • If there was an overpayment, ask the insurer to reprocess the claim and send a formal request for the overpayment. Let’s not go out of our way to pay them until we’re paid up 100% on what they owe us.

Document The Overpayment

Anytime you have an overpayment in medical billing, keep copies of everything: letters, notes, checks, and correspondence with both the patient and the insurance company. If your practice keeps records of telephone calls, include these notes. This is again especially important for credit card refunds. Protect yourself against those disputes.

Collecting all records protects your practice legally and provides valuable insight for future cases.

Are All Credit Overpayments?

Investigate every overpayment before initiating the return process. Some payment discrepancies result from insurance company policies and do not constitute overpayment.

Especially for those practices estimating benefits and collecting up front or for those practices with heavy cosmetic service verticals/medspas…you will have credits for future services and of course you do not want to refund these.

The credit is not an overpayment. You do not need to return any money. A common mistake we see is placing a dummy charge to apply the credit to so the patient ledger zeroes. You’re just creating work for yourself…don’t do it.

Struggling With Overpayments?

If your practice struggles with identifying and addressing overpayment, consider hiring an experienced medical billing company. Trust an expert staff to handle your billing and coding needs while you focus on what matters most: your patients.

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