How to Handle Overpayments

A patient makes a healthcare payment

Overpayments are a chronic problem in the healthcare sector. Although healthcare overpayment prevention technology helps in many cases, it’s important that providers know how to handle overpayments. 

Healthcare billing and coding is infamously complex, for everyone from payers to providers to patients. Many patients have difficulty navigating copays and deductibles, even though recent legislation should eliminate some surprise bills. Medical billing and coding experts wrestle with an ever-increasing number of medical codes and a volume of work that makes clerical errors inevitable. Even administrators get mixed up by the sheer complexity of medical billing and coding. 

Overpayments happen, but it’s important to identify improper payments and return them to the payer, whether that be the patient, insurer, or government program. Let’s go over the handling of these types of payments, 

Patient Overpayments

Due to the complexity of healthcare billing, It’s not uncommon for a patient to make a payment at the time of a procedure, only for there to have been changes or mistakes made that resulted in a lower charge for the patient. For example, if a patient comes in for a regular checkup but the doctor ends up doing an unplanned procedure, that may change the copay or deductible.

Once a provider recognizes the payment was higher than the patient’s actual copay, they have two options. 

Option A: Contact the patient and offer to apply the payment toward future services. This is a great option for primary care physicians or specialists who expect to see the patient regularly. If the patient declines that option, however, the office must return the overpayment. 

Option B: Immediately send the patient a check or digital refund for the amount they overpaid. Experts recommend you include an explanation of what happened to avoid confusion. 

Payer Overpayments

If the insurance carrier or government program used by the patient pays more than is owed, the first step is to determine that the payment is actually more than the owed amount. Contact the payer and ask how they determined the payment amount. Compare the claim to other documentation and make sure that all charges are legitimate. 

If the payer confirms they made an overpayment, they should reprocess the claim to reflect the correct amount paid, then request that the provider return the overpayment. That request will normally contain a payment address or instructions for how to digitally return the overpayment. If it doesn’t, the provider can send a check back to the claims department. 

In some cases, especially when the payer uses a healthcare overpayment prevention partner such as Alaffia Health, the payer will identify the overpayment on their own and request supporting documentation or that the payment be returned. In these situations, you’ll need to be prepared to support the original payment amount and produce documentation showing the charges are valid. 

Payment integrity partners such as Alaffia Health scan high cost claims for duplicate or inaccurate billing codes to locate overpayments. 80% of medical claims contain fraud, waste, or abuse charges due to clerical errors or intentional overcharges. The best way to handle a situation in which the payer reaches out to request return of an overpayment is for it to never happen in the first place; by ensuring charges and documentation are accurate, you’ll minimize overpayments. 

Multiple Insurers

If you have an apparent overpayment but your investigation shows the payer processed the claim correctly and the patient paid the correct amount, the most common cause is that the patient has two insurance plans. Once the primary plan has made a payment, the secondary insurance plan processes the claim. Sometimes, the secondary plan allows and pays a higher amount than the primary carrier. Since secondary insurance carriers don’t always take the primary insurance carrier’s payment into account, this is not an uncommon occurrence. 

This isn’t truly an overpayment by the payer. The excess funds actually belong to the patient since they purchased the extra plan. The proper outcome is to adjust the patient’s credit balance to account for the overpayment. A provider cannot collect and keep more than they actually billed for services rendered. 

Healthcare Overpayment Prevention

If you’re a provider, we hope this guide provides some clarity in how to handle overpayments. If you’re a healthcare payer, consider partnering with a strong payment integrity partner like Alaffia Health. By leveraging their AI-driven platform and proven team of medical coding and billing experts, they save healthcare payers an average $150 per member per year in overpayments with no upfront cost to the payer. Book a call with Alaffia Health to begin tackling your overpayment problems and protect your bottom line.

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