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Credit balances
Practices must be able to identify and refund all overpayments.
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An ophthalmologist becomes concerned that his practice administrator is not performing adequately and decides to hire a new administrator. The new administrator is asked to thoroughly evaluate the practice during the first 2 weeks of her employment and report any issues to the ophthalmologist. Two days later, she meets with the ophthalmologist and reports that the practice has accumulated credit balances in the amount of $27,534.32. Some of the credit balances date back as long as 5 years. Apparently, the previous administrator had not instituted any system to return or otherwise dispose of credit balances. The ophthalmologist asks the administrator what should be done.
How should a practice treat credit balances?
The answer, painful as it may be, is that the practice needs to take steps to return the overpayments. To the extent that the credit balances reflect Medicare and Medicaid services, the Social Security Act makes it a criminal violation of law for any person to fail to disclose or refund a known overpayment of Social Security Act funds, including Medicare or Medicaid monies.
![Alan E. Reider [photo]](/images/commonart/reider.jpg) Alan E. Reider |
Overpayments related to private payer and self-pay services can raise similar issues. The federal government has taken action against some providers for failing to return co-payment and deductible amounts collected in error from Medicare beneficiaries and retained by the providers. Under state law, insurance fraud provisions may, like the Social Security Act, require the disclosure or refund of the overpayments.
Unfortunately, various complications can be encountered when trying to return overpayments. We are aware of situations where Medicare carriers, as well as private payers, have returned refunded overpayments. In order to prevent being later accused of fraud for failure to make the refund, physicians should send the refund check or offer to make the refund at least twice, in writing, by certified mail. Copies of the letters should be retained in the files for future reference.
Some private payers may have provisions in their provider agreements that make all payment decisions final after a certain period of time, meaning generally that a provider may retain an amount that was paid in error. Physicians are cautioned that failure to refund overpayments identified within the prescribed period, but held until after expiration of the time limit for refund, may result in allegations of fraud. If the overpayment is identified only after the period runs, we still suggest considering sending a letter that notifies the payer of the overpayment, but states that the funds will be retained, as permitted by the contract, unless the payer provides documentation to support the repayment.
There also may be problems encountered when a practice tries to make a refund to a patient. A patient may have moved with no forwarding address or, particularly within a Medicare practice, may have died. A practice generally is not entitled to retain a patient overpayment, even under these circumstances. Many states have something called an escheat law, where, if a person or entity cannot find the rightful owner of funds or other property after a specified period of time, they are obligated to turn the property over to the state. The state then attempts to find the owner of the property. After a fixed period of time, if the owner has not been located — you guessed it — the state takes the property.
Issues in compliance with billing and coding regulations.
In This Issue:
- Alan E. Reider, JD, is the author of the new book, Compliance Issues in Ophthalmology. He can be reached at Arent Fox Kintner Plotkin & Kahn, PLLC, 1050 Connecticut Ave. NW, Washington, DC 20036; (202) 857-6462; fax: (202) 857-6395; e-mail: reidera@arentfox.com.
- The guest contributor is William A. Sarraille, JD. He can be reached at Arent Fox Kintner Plotkin & Kahn, PLLC, 1050 Connecticut Ave. NW, Washington DC 20036; (202) 857-6359; fax: (202) 857-6395; e-mail: sarrailw@arentfox.com.