Explaining Overpayments

August 22, 2016

Category: General

Overpayments and refunds are some of the most painful things to handle in a business. You already have put in the effort to provide the service or product, take care of the paperwork and claim, and process the payment. Now you must put in additional effort to actually give money back.

Managing overpayments is a cost center that eats into your profitability. There is a lot of paperwork to review, double check, and use to decide your course of action – which could include appealing the decision. Then, there is the tracking of the overpayment recoupment once an amount is established. If you are repaying Medicare, the offset amounts are seemingly random and spread out.

Furthermore, sometimes you have to refund even if you do not get your equipment or supplies or medicine back if you are HME or Pharmacy. And you clearly can’t take a service back if you are in other areas of healthcare. So you are out the work done and the product itself plus you now must give back some or all of the money you were paid.

Overpayments, especially ones due to Medicare, are a beast to manage and end up eating up an exponential amount of resources to stay on top of. 

What is an overpayment?

An overpayment is exactly what the word sounds like – according to the insurance contract and what was billed, you were over-paid for the product or service you provided.  If it was a Medicare claim, and the amount that was overpaid was over a threshold of $25, it is now something you must repay.

How does an overpayment happen?

Overpayments arise due to a variety of issues. These five buckets basically cover it:

• Payments to an ineligible recipient
• Payments for an ineligible service
• Duplicate payments
• Payments for services not received
• Payments for an incorrect amount

Examples

Typically, the root cause of an overpayment is either an error or a miscommunication or total lapse of communication.

Errors

• You were paid for something twice
• You were paid the copy by the payor, but the patient already paid upfront so you have to refund the insurance (or the patient)
• You billed Medicaid but the patient has another insurance that should be billed first (Medicaid is payer of last resort)
• You billed the wrong code or modifier in error and got a payment that was higher than your contracted allowable amount.

Communication issues

• You were not notified that the patient died before the date of service.  You billed in good faith and were paid and now months later after reconciliation, the money is owed back.
• The product supplied is not covered in a skilled nursing facility or hospital and no-one notified you that the patient was admitted to the hospital or skilled facility.
• A patient called to cancel a rental or service the right before the billing cycle, and the CSR did not get the information to the reimbursement department in time so the claim was released.

There are also rare occasions where your billers make a mistake and enter a claim for a service that was not provided. This is the worst case scenario because it is genuine fraud, but it still can happen by mistake.

Overpayments are a common and hefty burden on providers. If one of your business goals is to preserve your margins and maximize profitability, minimizing the follow up and management of an overpayment demand is essential.

To learn more about how Medforce helps customers overcome the overpayments burden, fill in the form below or watch our recorded webinar on Overpayments in the Medforce Library. 

 

To read Part 2 of our look at Overpayments click here. 

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