Medical Practice Overpayments: Navigating Updated Guidance for Healthcare Billing Compliance
While healthcare underpayments tend to make headlines, medical practice overpayments occur as well, and providers must know how to handle scenarios where money is owed back to the payer. Providers certainly can’t retain money to which they’re not entitled, nor should they. They also can’t wait for payers to request a refund. Monitoring payments and reporting medical practice overpayments proactively helps providers maintain healthcare billing compliance with federal regulations and avoid costly fines.
Healthcare billing compliance guidelines for medical practice overpayment management
Medical practice overpayments occur for many reasons and keeping them can cause a whole host of financial and operational challenges. For example, perhaps a patient has coverage through two different insurance carriers, and both pay as the primary insurance due to a lack of coordination of benefits. Or a practice submits a claim in an amount that exceeds actual charges. Another example: A provider submits a duplicate claim resulting in a duplicate payment. Sometimes it’s the payer’s error, and the payer pays more than the contracted amount. The result each time? Medical practice overpayments.
Regardless of the reason, keeping medical practice overpayments is illegal, and physicians who engage in this behavior could face significant financial consequences stemming from fraud allegations and fines under the False Claims Act, a federal statute that punishes fraud against the federal government. In fact, under the False Claims Act, financial punishments could result in treble damage (i.e., three times the overpayment amount) and additional civil penalties. Keeping medical practice overpayments can also lead to possible exclusion from federal healthcare programs—something that could easily force a medical practice to close its doors.
In addition, if unreturned medical practice overpayments involve a payer, there’s always the possibility that the payer could take aggressive recoupment actions by imposing interest charges and/or reducing future reimbursements. If unreturned medical practice overpayments involve a patient, physicians could face reputational damage and erosion of patient trust if the patient discovers that the medical practice kept their money when it wasn’t entitled to do so.
Operationally, mishandled medical practice overpayments and lack of healthcare billing compliance also give the false impression that the medical practice earned more revenue than anticipated which can cause a whole host of unnecessary accounts receivable and financial reporting challenges.
The bottom line: Returning medical practice overpayments is the right thing to do, and it promotes healthcare billing compliance.
Recent updates in handling medical practice overpayments
According to the federal overpayment statute, providers must return Medicare and Medicaid overpayments within 60 days of identifying them. However, changes outlined in the 2025 Physician Fee Schedule Final Rule allow physicians more time if they are in the process of investigating whether the overpayment is a single, isolated event or indicative of a larger healthcare billing compliance trend.
When digging into the overpayment, providers can suspend the 60-day deadline for up to 180 days so they can conduct a timely, good faith investigation to determine whether related medical practice overpayments exist. Taking advantage of this suspension is a wise thing to do because it gives providers time to really examine their payments, demonstrate healthcare billing compliance, and reduce liability.
If providers don’t conduct an investigation—or the investigation is not timely or conducted in good faith—the 60-day deadline is not suspended. To maintain healthcare billing compliance, providers must report and return the initially identified overpayment within 60 days of its identification—not within 60 days of calculating the precise amount of the overpayment. Note that calculating the precise amount may take some time. This means providers will need to act quickly regardless of whether they intend to leverage the suspension period because the 60-day clock is ticking.
On the other hand, if providers do conduct a timely, good faith investigation, the 60-day deadline is suspended until they conclude the investigation and calculate the initially identified overpayment and related medical practice overpayments or by day 180 (whichever comes first).
Best practices for managing medical practice overpayments
Considering these new overpayment requirements, medical practices should take the following steps to ensure healthcare billing compliance:
Arm staff with the tools and technology needed to investigate the initial overpayment and identify any related medical practice overpayments as well. The goal? Enable healthcare billing compliance and efficiency.
Document each step of the timely, good faith investigation into each overpayment to demonstrate healthcare billing compliance.
Enlist the help of legal counsel to oversee the investigation and ensure the medical practice makes refunds in accordance with the new rule.
Implement a corrective action plan to avoid future medical practice overpayments and ensure healthcare billing compliance.
Open the lines of communication with outsource billing partners. If a provider partners with an outsource vendor for payment posting, it’s important to ensure the vendor alerts the practice immediately when it identifies a potential overpayment to ensure healthcare billing compliance.
Track payment discrepancies proactively. Monitor remittance advice and leverage the practice management system to identify over- and underpayments as soon as they occur to promote healthcare billing compliance.
Update overpayment policies and workflows to align with the 2025 Physician Fee Schedule Final Rule to promote healthcare billing compliance.
Proven experience with medical practice overpayments
Prompt refunds are good business practice, and working with the right revenue cycle management partner can be extremely beneficial in terms of increasing healthcare billing compliance. A dedicated payment processing team that examines payment data closely can help medical practices comply with overpayment reporting requirements. Learn how edgeMED can help.
