What Every Practice Should Know About Reimbursement Overpayment and Underpayments

What Every Practice Should Know About Reimbursement Overpayment and Underpayments

Key Takeaways:

  • Underpayments and overpayments are common – and both can be costly
  • Self-auditing and self-reporting overpayments are important best-practices in revenue cycle management
  • E/M Codes are common areas of deficiency and are often audited by CMS and other payers
  • Errors often come from improper E/M coding for new vs established patients; error from sloppy use of EHR coding templates are also common
  • There are new guidelines and code descriptors for office and outpatient E/M codes effective January 1, 2021
  • Avoid underpayments by verifying that you are being paid your contracted rate and that your fee schedule matches your contract.

Underpayments and overpayments from health insurance plans are incredibly common.  We see them all the time.  All. The. Time.  And both can be costly.  If a plan is underpaying, you’re leaving money on the table.  And if they’re overpaying, well, that may sound enticing, but you are required to refund the overpayment.  Failure to do so promptly can expose you to fines, penalties and even loss of credentialing.

And don’t think for a moment that your small, private practice is immune from the risks of this exposure. Multi-million-dollar settlements with large health systems may be the stories that make the headlines, but private practices get audited by the Centers for Medicare & Medicaid Services (CMS) and private payers, every quarter. Here’s how you can protect yourself.

Conduct a Self-Audit Quarterly

If you have kids, you have undoubtedly discussed the importance of them reporting the truth to you before you learn about it from teachers or other parents. Sure, there may still be consequences, but the punishment will be much less severe if they come to you instead of you coming to them.

The same is true with overpayments.  Failure to report overpayments can expose you to liability under the False Claims Act. You are always responsible for refunding overpayments, but fines and penalties can be mitigated if you self-identify and -report overpayments.

Private payers and CMS both require you to refund overpayments. CMS has the most stringent rules for credit balances (overpayments). Once you have become aware of a credit balance, you have 60 days to report it to CMS.  Organizations that have attempted to skirt this reporting period have faced harsh legal consequences (see sidebar).

And don’t overlook the possibility of a current or former disgruntled employee becoming a whistleblower.  The smart path here is to conduct quarterly audits and self-report any credit balances.

Focus on Evaluation and Management Codes

A good Revenue Cycle Management partner should quickly identify any credit balances you may have. For practices that manage revenue cycle in-house, I always recommend that you conduct a quarterly audit using AAPC’s Evaluation & Management (E/M) auditing tool.

Why focus on E/M codes? Because all payers perform audits, and they all start with E/M codes.  Why? Because E&M codes are commonly used, high-dollar codes with specific requirements about when and how they can be used.  And based on my experience, I’m betting half of you reading this are deficient in your use of E/M codes! Most of the time, these deficiencies come from two common errors: The differences between new vs. existing patients, and improper use of Electronic Health Record (EHR) systems.

“Based on my experience, I’m betting half of you reading this are deficient your use of E/M codes!”

Know How to Use E&M Codes for Established vs New Patients

For 2021, the American Medical Association (AMA) and CMS implemented extensive revisions to office and outpatient E/M codes 99201-99215. These changes are designed to streamline the coding and documentation requirements for these commonly reported codes.

There are new and unique E/M codes for new patients, 99202-99205 and for established patients, 99212-99215.  And there are new Levels of Medical Decision Making (MDM) attached to each code that specify proper usage for each. You can find a thorough exploration of these new E/M codes here.

I’m cautiously optimistic that these revisions will make it easier for physicians to use E/M codes properly. But with multiple codes to choose from, and multiple criteria for when and how each code is to be used, I suspect that E/M codes will continue to be a source for deficiencies.  Audits will continue to be an important safeguard for your practices.  As will being vigilant about how you use your EHR to code your encounters.

Make Proper Use of Templates in Electronic Health Record Systems

First generation Electronic Health Record (EHR) systems could be challenging to use.  Fortunately, EHR suppliers listened to the feedback provided by physicians and developed workflows that are better, faster, and easier to use. Coding templates are a great example of this type of improvement.

Coding templates make it quick and easy to click a box and move on to the next field, the next tab, the next patient.  I promise you; I see it all the time.  So here’s my advice: don’t let convenience override the need to be accurate with your coding.

“Don’t let convenience override the need to be accurate with your coding.”

If you’re clicking the same box, selecting the same code level, routinely and out of habit, it’s going to be a big red flag during an audit when all of your new or established patients have the same E/M code levels!   Again, this is why I encourage you to perform quarterly audits yourself – or have your RCM provider do so on your behalf.

Check Your Contracted Rates to Find Underpayments

Finally, a few words about underpayments.  Underpayments do happen – and if you fail to identify them, you’re leaving money on the table. As a part of your audit process, you should select a few claims at random and verify that you are being paid the contracted rate.  It’s a near guarantee that at least one payer is not paying your contracted rate.  And in all my years in the Revenue Cycle industry I’ve only seen this mistake go one way – and it’s always in the payer’s favor!

Two other things to watch out for: first, make sure your fee schedule matches your contracted rate – if it’s lower than what’s on your contract, the payer will not be pointing that out to you.  Next, make sure

you’ve negotiated a good rate. It should be at least the rate Medicare pays.


You may feel a momentary sense of satisfaction and revenge when you discover you’ve been overpaid for claims.  Enjoy it while it lasts.  It’s important to self-report overpayments and to refund the money to the payer. There are legal and credentialing risks for failing to do so.  The best way to find overpayments is to perform quarterly audits. Focus on your E/M codes – these high-fee services are common sources of deficiencies. Be mindful of the coding requirements and the new 2021 codes for new vs. existing patients and be mindful of how you use your EHR’s coding templates. To make sure you’re not being underpaid, audit claims periodically, check that your fee schedule matches your contracted rate, and verify that your negotiated rates at least match CMS’s Medicare rates.

A Cautionary Tale:

What Happens if You Delay Repaying an Overpayment?

The Practice: First Coast Cardiovascular Institute, P.A., (FCCI) of Jacksonville, FL

Overpayment Amount: $175,000

Cost to Settle: $448,821.58

How Identified:  Whistleblower provision of the False Claims Act

“When FCCI learned that it had received over $175,000 in potential overpayments to federal health care programs in 2016, it had a legal obligation to return those funds within 60 days,” stated Acting U.S. Attorney Stephen Muldrow. “Instead, they delayed repayment, ultimately retaining thousands of dollars to which they were not entitled.”

First Coast Cardiovascular Institute, P.A. (“FCCI”) agreed to pay $448,821.58 to resolve allegations that it violated the False Claims Act by knowingly delaying repayment of more than $175,000 in overpayments owed to Medicare, Medicaid, TRICARE, and the Department of Veterans Affairs.

The investigation began with a whistleblower complaint filed by FCCI’s former executive director.

About the author:

Jacqueline Todd-Washington, VP of Revenue Cycle Management, Alta Medical Management

Jacqueline has over 35 years of experience in Revenue Cycle Management, helping practices of all sizes and across multiple specialty areas capture the revenue they deserve. Her motto is, “It’s your money!” and she loves to share her knowledge with anyone who asks.