Dealing with California Healthcare Audits and Overpayment Recovery
by BillingFreedom | Jan 17, 2025
Dealing with California healthcare audits and overpayment recovery can be a significant concern for medical practices. Insurance carriers and regulatory bodies conduct audits to ensure correct payments and control healthcare costs. These audits often target practices based on billing patterns, such as the frequent use of specific codes. In some cases, overpayments are extrapolated to cover multiple claims, even when they are valid, resulting in requests for repayment. Additionally, insurers may reduce future reimbursements to recover past overpayments. To protect their revenue, healthcare providers in California must ensure accurate billing and be ready to respond to or dispute improper repayment demands.
Audits and Overpayment Recovery in California Healthcare
Audits and Overpayment Recovery refer to how insurance carriers, Medicare, Medicaid, and other payers review medical claims to ensure that the services provided were accurately billed and that the correct amount was paid to healthcare providers. These audits identify any overpayments, underpayments, or potentially fraudulent claims.
In California, healthcare providers, including hospitals, physicians, and specialists, may be subject to audits by private insurance companies, Medicare, or Medicaid (Medi-Cal in California). These audits typically focus on billing practices, service documentation, and coding accuracy to ensure that payments align with the services provided.
Overpayments Recovery
Overpayment recovery occurs when a payer determines that a provider has been overpaid for services rendered.
This can happen if services were billed incorrectly, more documentation is needed, or a provider is flagged as an outlier based on billing patterns. Once overpayment is identified, the payer may demand repayment for the excess amount, often requesting that it be returned within a specific time frame, such as 30 days.
In California, overpayment recovery efforts are often aggressive, and payers may use extrapolation methods. If an overpayment is identified in a sample of claims, the payer may apply the findings to a larger group of claims. For example, suppose an audit determines that a practice was overpaid for 10% of claims reviewed. In that case, the payer might demand a repayment based on an assumption that 10% of all the practice's claims are similarly overpaid.
Audit Requests
California providers must respond promptly to audit requests and overpayment recovery demands. Failure to do so can result in penalties, reduced future payments, or even exclusion from certain payer networks. Providers must also ensure their billing practices are accurate and compliant with regulations to minimize the risk of audits and avoid financial instability caused by overpayment recovery.
What to Do When Audited: A Guide for California Medical Billing
When your California medical practice is notified of an audit and a repayment request, it's crucial to respond appropriately to avoid financial instability and ensure compliance. Here’s a step-by-step guide on how to handle the situation:
Do Not Ignore the Request
Ignoring an audit notice or feeling intimidated can lead to unfavorable consequences. Addressing the audit promptly is important to avoid further complications.
Identify the Reason for the Audit
Understand the reason behind the audit to determine the most suitable course of action. Review the claims in question and assess whether there are any discrepancies.
Respond in Writing
Inform the carrier in writing that you will cooperate and request clarification. Ask them to identify each claim under review and specify the criteria or standards they are using for the audit.
Ensure Compliance with CPT Guidelines
Both your practice and the carrier must follow current CPT guidelines. Refer to these guidelines and ensure your documentation supports the claims submitted. For guidance, utilize resources like the AAP Coding Hotline.
Review Your Carrier Contract and State Laws
Examine your carrier contract regarding audits and dispute resolution processes. Familiarize yourself with California state laws governing audits and repayment requests to understand your rights better.
Handle Overpayment Recovery Case-by-Case
Approach each overpayment recovery request individually. Avoid allowing carriers to extrapolate repayments across future claims. Focus on disputing claims where the overpayment is not substantiated.
Request Documentation from the Carrier
Ask the carrier to provide documented proof of overpayment for each contested claim. Make sure you have evidence to support your case.
Document All Communication
Keep detailed records of all interactions with the carrier, including emails, letters, and phone calls. If a carrier policy differs from standard CPT guidelines, request a written confirmation of this in a dated, signed form. Retain this documentation permanently.
Consult Legal and Medical Experts
If the situation escalates, consider seeking assistance from an attorney skilled in carrier contracting. It may be helpful to hire an independent external review for coding-related disputes. Discuss the matter with your medical director or other relevant authorities if you believe your documentation was correct.
Self-Identified Overpayments in California Healthcare
Under California law, healthcare providers are required to identify and return any overpayments received from Medicare. Providers must use reasonable diligence to detect any overpayments and calculate the correct refund amount. As per Section 1128J(d) of the Social Security Act, providers must report and return self-identified overpayments to their Medicare Administrative Contractor (MAC) within the following timelines:
- 60 days from the date the overpayment is identified.
- 6 years from the date the overpayment was received, in compliance with the “lookback period.”
- By the corresponding cost report due date, if applicable.
Overpayment Recovery Process
When Medicare identifies an overpayment of $25 or more, the MAC will initiate the recovery process by sending a demand letter. The letter outlines:
- The overpayment amount and its calculation
- The patient’s name and Medicare Beneficiary Identifier (MBI)
- Dates and types of services for which the overpayment was made
- Interest details, including the rate and how it accrues if not repaid within 30 days
- Options for repayment, including Extended Repayment Schedules (ERS)
- The recoupment process and the associated appeal rights
- Instructions for Medicaid State Agencies, if applicable
Upon receiving a demand letter, California providers can take several actions:
- Make a full payment
- Request immediate recoupment
- Submit a rebuttal if they disagree with the overpayment
- Appeal the overpayment decision by requesting a redetermination
- Apply for an ERS, if needed
If the demand letter is undeliverable, the MAC will attempt to contact the provider within 10 business days.
Payment Options for Overpayments
Providers must return overpayments to the MAC promptly. After a claim is processed, the MAC sends a remittance advice to confirm the overpayment. Providers should report the reason for the overpayment when returning the funds.
If the overpayment is linked to a violation of the physician self-referral law, it must be reported through the Self-Referral Disclosure Protocol. Providers can also choose from several repayment methods after receiving the demand letter:
- Immediate Recoupment: Request to offset current or future payments to cover the overpayment. This can apply to all future debts unless specified as a one-time request. Immediate recoupment is not subject to interest as outlined under Section 935(f)(2)(B) of the Medicare Modernization Act.
- Standard Recoupment: The MAC will begin standard recoupment following the initial demand letter. Interest may accrue if the debt becomes delinquent.
- Extended Repayment Schedule (ERS): If the provider cannot repay the full amount in the specified timeframe, they can request an ERS, with instructions provided in the demand letter.
Other Options for Providers
- Rebuttal: Providers have 15 days from the demand letter to submit a rebuttal, explaining why the overpayment should not be recouped. While the rebuttal will be evaluated promptly, it does not stop the recoupment process.
- Appeal: If the provider disagrees with the overpayment decision, they can appeal through the following Medicare Part A and Part B levels:
- Redetermination by the MAC
- Reconsideration by a qualified independent contractor
- Hearing by an administrative law judge or review by an attorney adjudicator
- Review by the Medicare Appeals Council
- Judicial Review in U.S. District Court
Recoupment Limitations
Under Section 1893(f)(2)(A) of the Social Security Act, the MAC cannot begin recoupment if the provider files a valid first- or second-level overpayment appeal. This limitation applies until the appeal process is completed, affecting the timeline for recoupment.
Interest on Overpayments
If a provider does not repay the overpayment within 30 days of the demand letter, interest will begin to accrue from Day 31. The interest is simple, calculated on the outstanding principal, and is assessed every 30 days until the debt is paid in full. Payments made will first apply to interest before reducing the principal balance.
Timeframe for Overpayment Debt Collection in California
The MAC follows specific timelines to collect overpayment debts:
- Day 1: The MAC sends the demand letter.
- Day 15: The last day to submit a rebuttal.
- Day 16: Immediate recoupment begins if requested.
- Day 30: The final day to make full payment before interest accrues.
- Day 40: The MAC begins standard recoupment if the overpayment is not disputed.
- Days 61-90: The MAC sends a letter of intent to refer the debt to the Treasury.
- Day 120: The provider can still submit a redetermination request to stop recoupment.
- Days 126-150: The debt may be referred to the Treasury Department for collection.
Failure to Return an Overpayment
If the overpayment is not repaid, and no repayment plan is established, the MAC will send a notice of intent to refer the debt to the U.S. Treasury Department. The Treasury may employ various methods to recover the debt, including:
- Demand letters, phone calls, and skip tracing
- Administrative offsets or wage garnishments
- Referral to private collection agencies
- Potential litigation through the U.S. Department of Justice
BillingFreedom is an Expert Audit and Overpayment Recovery for California Healthcare Providers
BillingFreedom, a medical billing company in California is your trusted partner in handling audits and overpayment recovery for healthcare providers in California. We specialize in ensuring compliance with state-specific regulations and Medicare guidelines, efficiently managing the identification and return of overpayments. Our team expertly handles demand letters, rebuttals, redeterminations, and extended repayment schedules, ensuring your practice navigates the audit process easily.
With a remarkable success rate of over 96%, we help California providers minimize the risk of recoupments and streamline their financial operations. BillingFreedom's expertise in California's unique healthcare environment ensures that your practice remains compliant while reducing administrative burdens.
Let us manage your audits and overpayments so you can focus on delivering outstanding patient care without the financial strain.
Trust BillingFreedom to safeguard your revenue and ensure your practice's financial health.
For more details about our exceptional medical billing services in California, please don't hesitate to email us at info@billingfreedom.com or call us at +1 (855) 415-3472.
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