Difference between recoupment and refund in Medical Billing

What is recoupment?

Many insurers request a refund when they have issued an overpayment. This request is called recoupment.

Reasons at play for a recoupment occur when:

An insurer is not aware of the patient’s another insurance plan
A duplicate payment for the same service code/service date/claim more than once has been made
Payment for the claim for an ineligible beneficiary (e.g., after the termination of the plan)is done
A payment to the wrong health care provider has been sent
An error in billing, calculating the deductible or allowable amount occurs
Payment has been made for non-covered supply or services

The Recoupment Process

In case of recoupment from the provider, a written request for repayment happens. Many insurers allow a response time of 30-60 days, post that if the attempt to recoup does not happen, then the contractor transfers the case to DHA (Defense Health Agency) for claim collection. If the recoupment is indeed invalid, you can file an appeal to evaluate the decision. However, DHA claim collection has different alternatives for recoupment.

Litigation or legal action against the provider that quickly redeems your revenue directly
The recoupment amount recovered from your retired pay or any federal funds
Overpayment amount subtracted from your upcoming submitted claims
Credit bureau takes over your debt

There are few options for the health care provider during the recoupment-related investigation.

Ask for all the documentation from the insurer related to recoupments like the patient account involved, procedure code, and service date.
Cross-check the contract terms to ensure the recoupment request is within the guidelines.
When a recoupment request arrives, check with the insurance commissioner for your state laws, as some states have stricter timelines for recouping funds.
If the recoupment is triggered, identify who breaches the contract and who is liable for the recoupment, honoring the agreement.
In case of the recoupment happening, because the beneficiary has another insurance plan. To avoid the problem of duplicate payment, identify the refilling deadline, and if not passed, then resubmit the claim to avoid legal consequences.

What is a refund in medical billing?

Refund is a process of returning the excess money than the specified amount to the responsible party, patient, or insurer on request. This not only maligns the reputation but also attracts a variety of lawsuits. For instance, the bill amount for a submitted claim is $100, and the designated amount is $80. On this claim, the insurer pays $90 which leaves $10 as the excess money. Now the insurer requests for refund as the payment received is more than the client’s specifications.

To avoid such problems, here are some factors to look out for that can result in an overpayment in medical billing:

Usage of obsolete tools which fail to calculate the exact amount.
The staff collected so much that it triggered billing issues.
The patient’s information is not updated.
Beneficiaries changed plans between visiting the provider and registering for the billing process.

Refunds to patients

If a patient overpays for a copay and the provider has the overpayment, then inform the patient by offering credit notes for the next services they take. This approach gives the patient’s a positive impression of your clinic. For an immediate refund, send a check to the patient within ten days from the refund issued through the submitted details to avoid any legal consequences.

Refunds to insurers

After the confirmation from the participating provider, the insurer requests to process the claim again with the updated amount. It is initiated through a refund request form/written document to avoid mishaps in the future. After receiving the written request, assign and send the bank check to the insurer at the appropriate address. If the credit processing is not acceptable by the insurer, then only proceed with physical check mailing.