"Fair and Proper Claims Payment"

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"Fair and Proper Claims Payment"

When it comes to payment, it’s a two-way street.

Gil Weber, MBA

Adapted with permission from Podiatry Management
© Copyright, 2007. All rights reserved.
March 2007


What To Do If You Receive a Mistaken Payment

Imagine this nightmarish situation. For a considerable time your group has been submitting claims and has been reimbursed by a third party payer. Then one day you receive a letter from the payer stating that over the course of "X" months it has paid you improperly to the tune of $189,000. And you're asked to cut a check or work out an extended repayment schedule.

Well that's exactly what happened to a New Jersey cardiology group in 2004 when Horizon Blue Cross/Blue Shield notified the physicians that they had been paid five (5) times the proper amount for a particular service (cardiac catheterization). In fact, Horizon notified approximately 600 New Jersey cardiologists that they were mistakenly paid a collective $15 million on just this one service.

This situation is far from unique, and physicians in every state face an almost constant battle with third party payers over amounts the payers represent were made in error. In the previous article for this series (June 2006) I described some methods physicians can use in attempting to limit a payer's ability to unilaterally deduct or offset disputed amounts from future payments. But what should physicians do in those circumstances when they receive a payment and believe it may be an improper payment that favors the payer?

"Do the Right Thing." Spike Lee

On occasion you might receive a duplicate payment, or one that for some other reason you're not entitled to keep. Perhaps the check was supposed to go to another physician. Or maybe you've received multiple payments – from a Workers Compensation carrier and from a patient's health plan.

If you're paid in error don't simply keep the money. To do so is fraud. The payer will figure it out eventually, and if the payer is a Medicare or Medicaid plan you could be in for a lot of trouble once the error is realized.

Remember also that if physicians expect the payers to play fair with them when a claim has been underpaid, then the payers have every right to expect that physicians will play fair in return when it is clear (or suspected) that a claim has been mistakenly paid.

But if your first thought is simply to send the check back to the payer, don't! To do so could create an even bigger mess. You might be owed some of the money, and entitled to part of the payment. Or, if the payer is really disorganized, it may improperly handle the returned money, perhaps applying the credit to the wrong physician, or losing the check. During a later audit the payer may decide that you did not, in fact, return the money.

A Proper Response is Essential

To be certain that you are properly credited for returning any suspected mistaken payment you'll want to create a paper trail documenting that you responded properly and promptly upon its discovery. Take these steps:

  1. Review your claim and accounts receivables to determine exactly what you are and are not owed.
  2. If you believe that the payment was mistaken, or made partially in error, send the payer a letter informing it of the overpayment and asking for instructions on what to do. (See the model letter below for examples of the specific information you want to receive from the payer.)
  3. Ask your attorney if it would be advisable to set aside any money that appears not to be yours pending resolution (for example, in a special account so that the monies are not mixed with your other payments).

Here's a sample letter you can use as a boilerplate for creating your own document. Be sure to ask your attorney for help modifying it as necessary to suit your circumstances and to comply with relevant laws.

BY CERTIFIED MAIL

<Date>

Re: Payment received <insert date> for claim number <insert number>

Dear <insert Plan staffer's name>,

We are in receipt of the above referenced payment. Our records indicate that you previously paid this claim on <insert date>, and that this is a duplicate payment. Please check your records to confirm whether this is correct.

If so, please send us instructions for handling the payment. If you want us to return the money, please send us a request or invoice for our records, specifying the recipient's name and address, and we will return the money as soon as practical.

If you have any questions please call us at <insert phone number>.

Yours truly,

<Name>
<Title>

Protecting Your Right to Timely Payment When a Plan Seeks Subrogation Recovery

When a managed care plan Member is injured and the financial responsibility ultimately may fall to a different third party you can get caught in the middle of a protracted battle. While two or more insurers fight it out, or while the managed care plan tries to recover its costs from a settlement paid to the patient, your payment(s) for services could be placed in limbo, perhaps for months.

For example, let's say one of your patients is injured on a ride at an amusement park. You provide covered services, including surgery, and submit a proper claim to your patient's HMO.

When payment isn't forthcoming your staff inquires and is told that the amusement park's liability insurer is responsible for paying the HMO its cost of providing the patient's care (i.e., paying your claim). And until the HMO receives payment from the amusement park's insurer it can't pay you!

The process by which a health plan tries to recover its costs from another source is called subrogation, and in your provider agreement you likely agreed to cooperate with the plan and assist in its subrogation recovery efforts. There's nothing inherently wrong with agreeing to help a plan recover monies it's entitled to collect from another financially responsible source. Typically this means little more than providing copies of your medical records to show what was done.

But you should not be held hostage waiting for those other parties to battle it out before you get paid. Unfortunately, the plan may use subrogation efforts as a somewhat sleazy means to delay paying your claim, disingenuously arguing that it can't pay you until it has received the money to which it is entitled.

But that's unfair and unreasonable (and, in fact, it's prohibited in some states). So in your provider agreement you'll want to protect your rights to prompt payment by specifying the plan's obligations in the event that subrogation comes into play.

Add Simple Language

Add some simple language to your provider agreement when it's first negotiated (or amend existing agreements).

Have this wording reviewed by your attorney. Then ask the payer to insert it into the provider agreement. Note also the comment set off with an asterisk (*).

SUBROGATION

a. Payer's Subrogation Rights -- In the event a Member is injured by the act or omission of a third party, Payer may elect to pursue its subrogation rights against the third party or the third party's insurer. Payer shall, however, make payment to Physician in accordance with this Agreement while pursuing those subrogation rights.

b. Physician's Cooperation -- Physician shall reasonably cooperate with Payer when it pursues its Subrogation rights. Physician shall abide by any final determination of responsibility for the Member's injuries and, upon receiving payment from the responsible party, will remit the amount of the payment to the Payer, up to the total amount paid by Payer to Physician for the services involved.

c. Excess Payments to Physician* -- Physician shall be entitled to keep any payments received in excess of the amounts paid to it by Payer. Nothing in the Agreement, including Physician's agreement to accept amounts received under this Agreement as payment in full from Payer for all Covered Services or Physician's promise to hold Members harmless for cost of Covered Services except for Copayments, Coinsurance, and Deductibles, shall preclude any collection efforts by Physician as set forth in this Agreement.

*Note: Not all states allow Physicians to keep any difference mentioned in paragraph c.


These materials are intended to provide useful information about the subject matter covered. The author believes that the information is as authoritative and accurate as is reasonably possible and that the sources of information used in preparation of the materials are reliable, but no assurance or warranty of completeness or accuracy is intended or given, and all warranties of any type are disclaimed.

The materials are not intended as legal advice, nor is the author engaged in rendering legal services. The materials are not intended as a replacement for individual legal or professional advice.

Information contained herein is presented only for illustrative purposes, and it should not be used to establish any fees or fee schedules, nor is it intended and it should not be construed as encouraging any user of the materials to take any actions that would violate any state or federal antitrust laws, tax laws, or Medicare or Medicaid laws.


Gil Weber is a nationally recognized author, lecturer and practice management/managed care consultant to physicians and industry. He has served as Director of Managed Care for the American Academy of Ophthalmology.

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