Practice Management Alert

To Prevent Compliance Problems, Make Refunds Promptly

Practices that conduct retrospective audits often find such a review gives them a complete picture of the billing process, including coding, documentation, charge posting and payment posting. However, such a review can raise questions about what to do when an error is found.
 
If you've been overpaid, you must refund the money whether it is a one-time error or a mistake that you've been making for a long period. In its Final Compliance Program Guidance for Individual and Small Group Physician Practices, published in October 2000, the federal Office of the Inspector General (OIG) states, "In regard to overpayment issues, it is advised that the physician practice take appropriate corrective action, including prompt payment identification and repayment of any overpayment to the affected payer."
 
"Whenever you accept what you know is not yours, and you accept it willfully, that's fraud. All you have to do to protect yourself is do the right thing. We tell clients that if you overpaid someone, you would want your money back, and the insurers are no different," says John Bauer, FACMPME, MBA, CPA, managing member of Aspen Consulting Group, a medical practice consulting company in Strongsville, Ohio.

Steps to Handle Errors That Produce Overpayment

When you find an error that caused overpayment, follow Bauer's recommendations:
 
1. Evaluate the mistake and determine the reason why the claim was wrong and how it occurred. Make sure you actually made a mistake. Pull the medical record, check the documentation, and examine how the claim was billed.
 
2. Make sure your staff and physicians learn from the mistake and correct whatever caused it. For example, if you have a lot of elderly patients who pay the entire bill every time they receive a statement, causing credit balances and necessitating refunds, maybe the practice needs to learn from that, Bauer says. A corrective action in this case could be changing the billing process so those patients don't receive a statement until after their insurance has paid.
 
3. Categorize the refunds by the reason for them. This permits tracking the kinds of overpayments you are returning so you can head off problems.
 
4. Make the refund. Many practices make the mistake of holding on to refunds due payers as retribution for payer payment delays. The check should be written as soon as you've evaluated the mistake and according to your policy on refunds. For example, your practice's policy could be that when an incorrect payment is identified, refund checks are issued within 30 days.
 
To make the refund payment, send a letter stating you are making a refund, the reason for the refund, what the mistake was, and how you've corrected it. Attach to the letter the explanation of benefits (EOB) from the original claim and a check. Send it to the address where the insurer has specified refunds should be sent, or to the address where you normally submit claims.
 
You should send the refund by certified mail so you have proof that you sent it, advises Stephanie L. Jones, NRCMA, NRCAHA, CPC, vice president of operations for Aztec Medical Systems in Miami, and former director of audit programs for eCompliance Doc in Miami. Note in the letter that you are making the refund due to an "honest mistake," which is language used in the OIG's compliance guidelines to distinguish between "erroneous claims" produced by innocent mistakes and "fraudulent claims" resulting from reckless and intentional conduct. The OIG compliance guidelines state, "When physicians discover that their billing errors, honest mistakes, or negligence results in erroneous claims, the physician practice should return the funds erroneously claimed, but without penalties. In other words, absent a violation of a civil, criminal or administrative law, erroneous claims result only in the return of funds claimed in error."

To Call, or Not to Call

When they find a mistake in which they've been overpaid, some practices call the insurer to ask how and where to send the refund. Insurers handle refunds differently. Some have specific addresses where they want refunds sent. Others have no set method to handle refunds, and practices discover it's difficult to make the repayment.
 
If the insurer has no set method to handle refunds discovered by an audit, send a letter explaining the refund with the EOB attached and a check to the insurer to the address where you normally submit claims. "I have had cases when it's been hard to pay back the insurance company," Bauer says. "All you have to do is make a good-faith effort. If they send the check back with a letter saying they don't want it, at least you've made the good-faith effort. But, to just call them up and say here's what we want to do and where do I send it, and go no further is not a good-faith effort. Instead, write the letter and send it with the EOB and the check. I've never seen an insurer send a check back yet."
 
If you discover through an audit an inappropriate billing pattern in your practice, for example, the first call you should make is to your attorney, Bauer advises, especially if the error involves Medicare or Medicaid claims. The OIG has a Provider Self-Disclosure Protocol, a program that encourages providers voluntarily to reveal potential fraud and abuse problems. Such self-reporting may be looked upon favorably by prosecuting agencies. A healthcare attorney can best advise a practice on the self-disclosure process.
 
Because retrospective audits hold the potential for uncovering problems requiring many refunds, Jones recommends conducting prospective audits, ones in which a coder or a coding consultant performs a formal audit of claims before they are billed. "If you uncover something you now realize you've been doing wrong, you can correct it and move forward. That's the best way to audit because you don't have to refund anything," she says. But, practices often find the retrospective audits easier to do, and they don't have to delay claim submission while the auditor examines the claims. She also suggests having an attorney coordinate any retrospective audit for the practice. "You want to have the attorney-client privilege to help protect you if any potential liability should be uncovered," she adds.

Avoid Problems with Internal Controls

You can avoid problems an audit may find with policies and procedures that give you internal controls over the billing process. "When we look at internal controls as accountants, we look at them to make sure they are working correctly and creating an environment so objectives are met," Bauer says. For example, one internal control could be a policy in your billing department that all insurance claims that are denied or returned are categorized based on the reason for their return or denial, and billing staff are responsible for reviewing them, correcting them and resubmitting them to the payer within five days of receipt. "If you have that in place," Bauer says, "it's a lot easier to monitor returned claims. What you do is create polices in the form of internal controls that force people to be accountable."
 
Then, you monitor the process to make sure your internal controls are working. So, instead of only making follow-up on claim returns and denials a part of the biller's job description and expecting the work will get done, set up and monitor your internal control. In the example above, a practice-management computer program could track the date of resubmitted claims and compare them to the date of original ones to see if they are being returned to the payer in the five days specified in the internal control. If they are not, take corrective action, such as additional staff training in handling claim returns and denials.
 
Note: To obtain a copy of the OIG's Final Compliance Program Guidance for Individual and Small Group Physician Practices, visit www.oig.hhs.gov/oigreg/physician.htm.
 
Our sister newsletter, Medical Office Compliance Alert, regularly features articles on conducting audits such as "Auditing Faux Pas: What Do You Do Now?" in November 2001 and "Five Steps to Conduct an Effective Self-Audit" in April 2001. To purchase an issue or subscribe to the newsletter, call (800) 508-2582 or visit www.codinginstitute.com.