Accounts Receivable play a critical role in measuring a practice’s incoming revenue. This might be from an insurance company, private payers, public health institutions, or a patient copay. Sometimes referred to as “AR” it effectively refers to the invoices that either patients or insurance companies owe to you as a healthcare provider for the services delivered. It’s especially important for larger medical facilities and clinics, though it is critically important for small medical practices and solo practitioners who rely on a consistent revenue stream to stay financially solvent.
It’s also important to note that when an insurance company detects an accidental overpayment it can also affect the provider’s revenue stream in a variety of ways. This typically results in an offset payment that follows a specific process. Getting caught off guard can lead to claim delays, inconsistencies in your practice’s revenue stream, as well as financial and even legal complications.
What Is The Overpayment Process
When an overpayment is detected by an insurance company a special letter is sent to you, the provider. It notes the specific information regarding the overpayment and typically provides you with up to 30 days to refund the overpaid amount.
An overpayment notice like this will also contain an accounts receivable number or “AR#” which identifies the specific transaction. This makes it easier for both you and the insurance company to research and track the claim that generated the overpayment issue. It might also be necessary in a rare case where you need to file an appeal or to seek additional compensation from a patient or another payer institution.
On the insurance payer’s side of the equation, if the refund is not received from you, the provider within 30 days, a second notice letter will send out for overpayments. If they do not receive the stated overpayment amount within 40 days of the initial notification, then the insurance company will engage in the process of offsetting money from upcoming payments to your practice until the specified overpaid amount is fully recovered.
Common Reasons For Overpayment
There are a few common reasons that lead to accidental or perhaps even intentional overpayments in the medical billing process. Making yourself and your in-house administrative staff aware of them will go a long way toward preventing the kind of problems that can lead to inconsistencies in your revenue stream. They include the following
- Late processing of employment terminations
- Incorrect or duplicated claims
- Incorrect reimbursement rates
- Incorrect classifications
Example Of An Overpayment
The following example can help shed some light on how an overpayment might occur and how it can be caught or resolved quickly.
The provider physician administers health care services to a patient and then bills the claim to their employer-sponsored insurance company with an amount of $200 for the rendered services. Yet the physician only receives a payment of $100 from the insurance company based on the patient’s current level of coverage. During a routine audit, the insurance company finds out that they have incorrectly processed the claim and paid $100 when they should have only paid $80.
At this point, the insurance company sends a notice of overpayment letter to the provider noting the case and the reason for the overpayment. They also request a refund of $20, and they give the physician 30 days to refund the amount. If it is not paid within the stipulated 30 days, the physician or the practice may need to pay interest on overpayment if they do not refund the overpaid amount to the insurance company in the specified time.
Can You Issue An Immediate Overpayment Refund?
From the insurance provider’s perspective, the overpayment refund is due immediately. They are providing you, the payer with 30 days as a courtesy. If the overpayment is truly accurate, you can pay the amount immediately. This will go a long way toward maintaining a good relationship with the insurance company in the future.
What If I Do Not Have The Funds For The Overpayment Refund In 30 Days?
If you do not issue the overpayment refund within the given 30 days, a second notice will be sent providing you with another 10 days. The insurance company might also assess additional interest to the original overpayment amount.
If your practice is going through a period of unforeseeable financial strain, and a valid refund is due, you might be able to request an Extended Repayment Schedule (ERS) if you cannot pay the entire refund in full. This would allow you to pay the overpayment in monthly installments rather than paying at one time or by garnishing future claims.
Though your chances of having an ERS request granted may be influenced by the timing at which you request it. Ideally, you want to file your ERS request before your 30-day grace period has expired.
What Happens If I Have Multiple Overpayment Problems?
Insurance companies do perform their own internal audits to look for patterns of fraud. A medical practice that has a chronic problem with overpayments and delays in refund requests may be taken as a red flag. The insurance company could start to look into cases with greater scrutiny for potential fraud. It might also come up as a negative factor against you in the future if you need to renegotiate your reimbursement rate with a payer institution.
How To Prevent Overpayment Problems
There are a few things you can do to prevent an accidental overpayment and the inevitable delays it can cause in your practice’s revenue stream. This starts with availing yourself of a patient’s coverage levels, as well as making sure to get prior authorizations for all necessary treatments.
You might want to also consider outsourcing your medical billing services to a third-party agency like Operant Billing Solutions. Not only will this free up your time to stay focused on providing patients with care, but it also buys you the peace of mind that comes with knowing true professional experts are keeping an experienced eye on your medical billing practices. This will go a long way toward catching claim errors before they enter the system. Corrections can then be made to help maintain a consistent revenue stream for your practice in the long term.