Difference between Refund and Recoupment in Medical Billing

Healthcare practices that deal with medical billing by themselves often come face-to-face with insurance recoupment and refund issues. Both of these can significantly affect a healthcare practice’s revenue. Furthermore, refunds and recoupments can trigger legal ramifications for healthcare practitioners. Understanding the difference between refund and recoupment is essential for smoothly running medical billing services and healthcare operations.
First off, let’s explore what does recoupment mean in medical billing?

Recoupment of Payment – An Overview

Recoupment in healthcare is the compensation for the losses incurred – resulting from paying extra amounts than the amount payable for provided care services. In healthcare insurance billing, recoupment payment covers losses owing to the collisions of two stakeholders. Here, appointing and partnering with a third-party medical billing company can help medical practices contest certain recoupment of payment requests.
To fully understand the difference between refund and recoupment, it is necessary to understand:

What is recoupment in medical billing?

And

How is recoupment of payment is related to overpayments?

What is Overpayment?
Overpayment inside medical billing occurs when a healthcare practitioner expects to be paid more than the amount receivable for a particular care service. Overpayments affect patients who can make early payments. However, they face difficulties with it. For instance, some patients might find that they no longer need the payout but have already been compensated for it.

Understanding Overpayments

One difference between refund and recoupment is the set of patient overpayment laws. These laws ensure that the affected party has safer and better chances of receiving the percentage of a full recoup payment. Moreover, the healthcare departments and hospitals are obligated to follow instructions.
Receiving a request for recoupment of payment can be upsetting. However, most practices and insurance providers manage such situations regularly. It is important to note here that the recoup insurance requests can be triggered through lawsuits.

What is Recoupment in medical billing?

Recoupment is when an insurance company or a governmental agency steps in to recover an overpayment made to a healthcare practitioner. These overpayments can occur for multiple reasons, including:

Errors in the billing process
Duplicate billing
Coding mistakes
Documentation errors and issues

The recouped payment process is simple, starting with a healthcare payer identifying the overpayment and then notifying the provider. The concluding step of the process is for an insurance company to deduct the overpaid amount from future reimbursements.
Next on the list of core difference between refund and recoupment are:

Common Reasons Leading to Recoupment Insurance Instances

Usually, there are many reasons for overpayments, as discussed above. However, most healthcare practices seek advice from serious connection points for clearing out the documentation plan. It is done to ensure patient stability and security. Some of the common explanations for overpayments are:

1. Medical Billing Errors

Billing errors are among the most common reasons leading to overpayments, which call for recoups from insurance providers. Accurate coding and charge capture of services can help reduce such errors and curb instances of overpayments.

2. Unusual Policies

Another leading reason for overpayments is healthcare facilities’ odd policies and poorly elaborated guidelines. Such procedures and policies are known as destructive policies.
One of the significant difference between refund and recoupment is:

How the Recoupment Process Works

Most of the recoupment processes are straightforward, while some of these can be a bit complicated. In rare cases, stakeholders (an insurance provider or a healthcare professional) take legal action. These legal actions are to deal with impasses or miscommunications. Mostly, the recoupment process begins with a written request for repayment. It can be accompanied by an email, a phone call, or any other electronic communication to alert the stakeholders that a particular error has occurred.

Response Time

Another difference between refund and recoupment is that most insurance companies will facilitate healthcare providers by allowing a response time of 30—60 days after the initial notification/mailing was sent.
Response time comes in a written request to ensure the healthcare provider is aware of the deadline. However, if a response is not received in the acceptable time frame the insurance provider sets, they take a more hands-on approach. The approach can be transferring the case to the DHA (Defense Health Agency), which handles the insurance claims management and collection process.
Moreover, if a healthcare professional believes a claim is invalid, they can appeal to evaluate the decision further. It is important to note here that the DHA’s claim collection process has different options for recoupment of payment.

Understanding Medical Billing Refund

After thoroughly understanding insurance recoupment, we must now learn about refunds in billing. It is a technical process of returning excess money. Refunds in medical billing are returning excess amounts in lieu of the specified amount that stakeholders like healthcare providers, patients, or other parties owe per the recoupment request.
In a few cases of medical refunds, a medical provider’s reputation can be affected, leaving them potentially vulnerable to litigation in instances where the correct amount is not returned quickly.
To further understand the difference between refund and recoupment, let’s explore:

Common Reasons Leading to Refunds in Medical Billing

Incorrect diagnoses, procedural codes, and lags in documentation or duplicate billing are some of the core billing errors leading to refund requests.
In some instances, the insurance providers change their guidelines or policies, and payers must then take a refund from healthcare providers.
If an insurance company discovers some type of fraud, it can lead to taking legal action.
Another reason is that occasionally, the medical documentation of physicians does not support the services/treatment given to patients.

These are reasons for a refund request from insurance companies; while these outline the procedural difference between refund and recoupment, some reasons are similar in both instances.

Dealing With Patients Refunds

In some cases, the billing analytics of a refund request show that the patient collection process is faulty. For instance, it may indicate that a patient has overpaid for a specific amount and they are qualified to receive a refund.
But how can that be?
It can happen when a patient’s plan changes relating to the copay amount or if a patient needs medical equipment or supplies covered by their old plans but not under their new and updated insurance policy.
For such cases, getting in touch with patients as soon as possible is essential, offering them credit applicable for future services. When a patient is no longer receiving treatment from you, offer to mail them a check within 10 days of the initial contact. Doing so will go a long way toward protecting you from any foreseeable legal consequences.
Secondly, there are a few precautions that healthcare practitioners can take to prevent recurring recoupment and refund requests.

Precautions to Reduce Refunds and Recoupment Requests

Healthcare providers must:

Update their in-house administrative and medical billing protocols
Provide administrative staff training
Enhance patient information collection and intake processes
Check patient’s coverage as a part of the scheduling process
Consider outsourcing their medical billing processes to third-party specialist billers or agencies

Conclusion

By outsourcing, many of the small-scale healthcare practices can focus better on treating patients rather than dealing with administrative tasks, including billing. Secondly, understanding the procedural difference between refund and recoupment inside medical billing can be a complex undertaking. Instead of hiring and training billing or administrative staff, healthcare practices with a history of refund and recoupment issues can outsource their operations. Outsourcing to an expert billing company frees up more time for treating patients. Furthermore, it offers providers peace of mind that trained and experienced billers are using the industry’s best billing practices to avoid future refund or recoupment requests.