May 2016

When to Return Overpayments to Medicare and Other Payers

In February, Medicare published a final rule that now requires self-identified overpayments to be reported and returned in a timely manner. Although identifying, documenting and refunding overpayments from patients and insurers takes time and focus away from revenue-generating activities, it is absolutely necessary from an accounting and compliance standpoint.  A review of the final rule and California state law provides a better understanding of some major provisions of the final rule:

Effective March 14, 2016, the Centers for Medicare and Medicaid Services (CMS) requires Medicare Parts A and B health care providers and suppliers to report and return overpayments by the later of 60 days after the date an overpayment was identified or the due date of any corresponding cost report, if applicable. Under the final rule, failure to report and return an identified overpayment could be actionable under the False Claims Act. The Medicare final rule, in addition to California state law which already requires medical practices to be proactive in identifying and returning payments to patients, makes it imperative for physicians to reevaluate their compliance programs. 

It contains three newly defined terms of which physicians should be aware:

  1. Medicare Contractors, includes a fiscal intermediary, carrier, durable medical equipment Medicare administrative contractor (DME MAC) or a Medicare Part A or Part B Medicare administrative contractor (MAC).
  2. Overpayment, includes any funds a person has received or retained under Title XVIII of the Act, to which the person, after applicable reconciliation, is not entitled.  CMS considered but declined to exclude from the definition, overpayments that were not caused by and/or were outside of the control of the provider or supplier.
  3. Person, includes a provider or supplier (i.e., the definition excludes a beneficiary).


As noted above, the statute requires a person to report and return an identified overpayment by the later of 60 days after the date on which the overpayment was identified or the day any corresponding cost report is due, if applicable.  The 60-day timeframe will be suspended in the following three scenarios:

  1. The HHS Office of Inspector General (OIG) acknowledges receipt of a submission to the OIG Self-Disclosure Protocol;
  2. CMS acknowledges receipt of a submission to the CMS Voluntary Self-Referral Disclosure Protocol;
  3. A person requests an extended repayment schedule.


Identifying Overpayments

CMS clearly stated its expectation that all providers and suppliers engage in reasonable diligence, which includes both proactive compliance activities to find potential overpayments and reactive investigative activities in response to receipt of credible information related to a potential overpayment.  Acknowledging that compliance activities are not uniform in size or scope, CMS did not delineate details of satisfactory compliance activities in its final rule. As the Patient Protection and Affordable Care Act (PPACA) required all providers and suppliers to establish a compliance program containing certain core elements almost six years ago, it is important for physicians to review the protocols. In the final rule, CMS declined to create a presumption of reasonable diligence for a person whose compliance activities mirror the Office of Inspector General (OIG) compliance program guidance and the U. S. Federal Sentencing Guidelines. 

The final rule sets forth numerous examples of situations that may, depending on the underlying facts, create a duty to perform a reasonable inquiry.  Some examples using “real life” scenarios reported in family medicine settings follow:


Upon review of billing records, a provider or supplier determines certain services were coded incorrectly, resulting in increased payment.

  • Example: A practice performs an annual internal audit to assess correct coding compliance.  During that audit it becomes apparent that some patients, both elderly and younger, had an ear lavage performed by a medical assistant to remove ear wax.  The practice coded, billed and was paid for CPT code 69210. That service code to remove ear wax, however, requires the procedure be done by a physician or qualified health professional (QHP) using instrumentation (not just lavage). Such billed services were, therefore, overpaid.  

    Solution: The practice should perform a complete audit on all services coded 69210 (going back six years) to determine the number of services that may have been paid incorrectly. remember to identify only those services that previously were paid incorrectly; if some services were paid correctly because the service was done by a physician using the appropriate instrumentation or if some services were not paid correctly because they were bundled with another service that day, then those services should not be identified as having been “paid” and, therefore, should not be included in any payback.
  • Example: During an audit performed as part of an initial risk assessment for a newly developed compliance program, a mid-sized group practice identified a number of E/M services were paid at a higher level than the provider documentation supported.  The issue was pertinent for three of the 12 providers in the group. 

    Solution: Further review these services for a period back to three years (to the time of inception for the group).  If a significant number of overpayments are identified, the practice should determine the difference between what was paid and what should have been paid (supported by the providers’ documentation), and voluntarily refund payments using the designated form accessed on the MAC’s website. Include a spreadsheet detailing each of the overpaid claims.


A provider or supplier obtains knowledge that services were rendered by an unlicensed or excluded individual.

  • Example: When one of the clerks in the billing department was posting payments from Medicare, she noted that the practice had received payment for services provided to the father of one of the physicians.  The physician had billed for an office visit, joint injection and medication for his father. 

    Solution: Since 1989, Medicare has not paid for patient care charges by immediately related physicians, their associates or their professional corporations.  Language in both the Medicare Benefits Policy Manual (Chapter 16, Section 130) and the Medicare Claims Payment Manual (14-3-2332) prohibit the billing of charges imposed by immediate relatives of the patient or members of the patient’s household (live-in domestic help). Medicare defines immediate family member as:
    • Husband and wife;
    • Natural or adoptive parent, child, and sibling;
    • Stepparent, stepchild, stepbrother, and stepsister;
    • Father-in-law, mother-in-law, son-in-law, daughter-in-low, brother-in-law, and sister-in-law;
    • Grandparent and grandchild; and
    • Spouse of grandparent and grandchild
    • (Some special inclusions and exclusions exist for step-relationships and in-law relationships.)

An internal audit reveals a potential overpayment.

  • Example: Family Medicine Practice ABC is about to become part of another organization.  As part of the due diligence process, an internal audit of coding and billing practices was performed.  During the audit it was found that the services provided by a recently hired nurse practitioner were being billed under the “incident to” concept, even though there was not a physician on site at the office when these services were provided.  The nurse practitioner had not yet been enrolled with Medicare as part of the group.

    Solution: The practice should go back through all the billings for those services and make a voluntary refund, using the Non-MSP Voluntary Checks form provided by the Medicare MAC, checking “Voluntary Refund” as the reason for refund and “Billed in Error” as the reason for the claim adjustment. 


A provider or supplier experiences an increase in revenue without explanation.

  • Example: The billing agency performing billing services for a large medical foundation noted that over a calendar quarter, one of the physician’s charges and subsequent payments had increased dramatically, while no other provider had accumulated such an increase during that time.  Doing a production by CPT code report, it was then noted that the particular provider in question had increased his production by providing significantly more CPT code 99215 services for the quarter being reviewed. In an interview with the provider, he explained that he was dissatisfied with the payment he was receiving and decided to bill all his office visit services at a much higher level to improve payment.

    Solution: The billing agency should produce a report of all E/M services provided by the physician during the quarter.  An external audit should be done to verify documentation support for each level of service. Then, the billing agency should reconcile each account to meet the appropriate level of service as supported by the physician documentation.

    The organization should make a full voluntary disclosure of all services coded in error.If the error occurred recently, the practice can decide to have all incorrect CPT codes be denied in full and then resubmit new claims if they are still within a timely filing period.

Several options are available to deal with overpayments, but be consistent.  An organized procedure, backed by a written policy and ongoing supervision, will keep the process on track. Most practice management systems can produce an aged trial balance report on accounts with credit balances, both as a routine report and on demand. Smaller practices should check these reports at least monthly; larger operations should check weekly. Be sure your billing staff members understand this process is a priority for them. They are trained to bring money in, so you must reassure them that this is an essential part of their job. Just as importantly, they should be looking at explanations of benefits (EOBs) in detail, watching for inappropriate or questionable payments. Medicare’s enforcement of the recently released final rule makes this an issue of urgency for all practices.



The articles provided in Practice Management News are general. They do not constitute legal, practice management or coding advice in any particular factual situation or create at attorney-client relationship. Consult your attorney or other professional for advice in your particular situation.