Recoup d'etat: Fighting recoupment efforts

Doctors are complaining that health plans are becoming more aggressive about demanding refunds after claiming that they've overpaid. Experts say physicians can become more aggressive about fighting back.

By Bob Cook — Posted June 20, 2005

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In the earliest days of elementary school, you learn the rule, "No takebacks!" That means, once you've made a deal, such as trading your lunch, you can't undo what's been done. It's a lesson many physicians believe health plans haven't learned.

Unlike in elementary school, takebacks by health plans have a more genteel name -- "recoupments." Those are funds that health plans paid to doctors but then demanded back after the plan determined, for whatever reason, it paid out in error. There's no study detailing exactly how often plans are demanding recoupment -- or how much they're demanding -- but there's agreement that it's getting to be more often, and for much more money. Medical associations, including the AMA, say private health plan recoupment is an increasing source of complaints from physicians.

Plans say recoupments are fair because physicians who are paid more than a contract dictates have no right to keep the extra money. Physicians respond that because their contracts have no listed fee schedules, or terms saying the plan can change the payment schedule at any time, getting the payment right is the plan's problem.

Also, they wonder how a plan can come back two or three years after the fact to demand recoupment. AMA policy states a plan shouldn't attempt a recoupment more than a year after making a reimbursement, but can attempt one within the same amount of time permitted for submission of the claim, or one year, whichever is less.

Physician fights over recoupments are getting more public. For example, in August, a lawsuit is scheduled to go to trial involving $15 million in recoupments Horizon Blue Cross Blue Shield of New Jersey is seeking from cardiologists in that state. The lawsuit was filed by the New Jersey chapter of the American College of Cardiology and the Medical Society of New Jersey.

The case is notable mostly because it's a rare case of a health plan trying to get such a large amount of money back from hundreds of doctors at once, said R. Gregory Sachs, MD, president of the college's New Jersey chapter. In most cases, plans seek recoupment from "one group at a time, and put the squeeze on one group at a time," said Dr. Sachs, a cardiologist with the Summit (N.J.) Medical Group, a multispecialty practice.

"When that's the case, you don't feel like you have a lot of leverage," Dr. Sachs said. "You find out by talking in the halls. 'They're doing that to me.' 'Oh, they did that to me 12 months ago.' "

But some attorneys and consultants say physicians might have more leverage than they think. In fact, if you do things right, they say, there's the chance that you could find out when plans aren't paying you sufficiently -- and you then can become the recouper, instead of the recoupee. In this trade, there are takebacks.

Setting up a strategy

Health plans are getting more sophisticated and more pointed about recoupments because they increasingly use computer systems that analyze transactions and spot doctors who the plans say are not conforming to coding and billing norms. Medicare and Medicaid use similar programs.

This is often done in the name of preventing fraud, but physicians fear they are going to get unfairly dinged for mistakes. In the case of the federal program, criminal penalties can be assessed. In the case of private health plans, criminal penalties generally don't apply -- but getting kicked out of a plan, or suddenly having to turn over $30,000, does.

If a health plan comes back to you with a request for recoupment, the first thing you should do is get "someone knowledgeable to read the contract," said Robert S. Bennett of the Bennett Law Firm in Houston, which has handled recoupment cases. Sure, an attorney has a vested interest in hawking his services in this case, but experts say bringing in outside help could save you more money in the long term.

Giving your contract a thorough once-over will lead to the parts that explain what happens in the case of recoupment. For example, Bennett said, a contract might stipulate that the plan has the right to take what's known as a set-off -- effectively, garnishing your reimbursements -- to make up for the alleged overpayment. Also, the contract very well might stipulate any arbitration or mediation rights you have once a plan starts a recoupment effort.

Depending on your state, you might have an argument that arbitration -- having an outside party make a binding ruling on who is in the right -- might not be appropriate, even if it's in the contract. Bennett said some states declare that a doctor signing a contract is in the category of a business, meaning that any arbitration clause is valid. But in some states, Bennett said, the physician could be classified as an individual consumer, meaning that a lawyer has to sign off on any contract. So if a lawyer didn't sign the deal, a physician can challenge it in court.

In Bennett's experience, it's a rare case that gets to court. The plan is usually very willing to settle for something, even if it's not everything it's asking for.

Lori-Ann Rickard, a health care attorney in St. Clair Shores, Mich., said being bold with a plan -- such as by getting a lawyer or consultant involved in a dispute -- can help a physician in a recoupment case. But you can't be bold unless you have some sort of system that "spot checks" to make sure that you're coding correctly, and that you're following the rules of the health plan contract, she said.

Believe it or not, health plans might even help you, Rickard said. Major plans, including Blues plans, will hold seminars on coding, will send updates regarding billing and will even, if you request it, send you information about how other physicians in your specialty and your geographic area are coding.

If you're prepared, Rickard said, you have a better shot at fighting a recoupment effort or not becoming the target of one in the first place.

"In some ways, [recoupment is] like the lotto" for health plans, she said. "They send out so many audit letters, and it's easier to pay [the disputed money] back than to defend it. If they get $30,000 to $40,000 back per physician, it's a good business deal."

Fighting back

Of course, you could have everything in place, every piece of paperwork in hand, every code correct, and a plan still might want recoupment.

In at least 19 states, the issue generated legislation that governs how and when a plan can launch such an effort, according to information provided by the AMA's Advocacy Resource Center. In many cases, the legislation limits plans to the AMA-suggested maximum one-year deadline to ask for money back. California requires that plans send such a notice within 30 working days. Maine's limit is 90 days. But in Kentucky, it's 24 months. (In most cases, the limits don't apply when a health plan is seeking recoupment because of fraud.)

One of the states where there is not such legislation is New Jersey, the site for one of the biggest recoupment showdowns between physicians and health plans.

In November 2004, the New Jersey chapter of the American College of Cardiology and the Medical Society of New Jersey filed suit against Horizon Blue Cross Blue Shield of New Jersey when the plan sent letters to most of the state's cardiologists, demanding a collective recoupment of $15 million. The plan said a computer error caused overpayments in 2003 and 2004, and that physicians do not have the right to hold onto the money they've already received.

The physicians disagree. Dr. Sachs -- who is not personally affected because his Summit Medical Group has no contract with Horizon -- said 90% of cardiologists in Horizon's network didn't have a stated fee schedule in their contracts. (The AMA House of Delegates also has policy demanding that health plans publish fee schedules.) So the physicians didn't think anything was awry when Horizon, for those two years, paid cardiac catheterizations at a rate consistent with what it's paid "over the last seven or eight years," Dr. Sachs said.

Horizon already has lost one fight in a New Jersey state court to get set-offs against future physician payments as a way to get money back. On June 3, a judge was scheduled to rule again on Horizon's argument for getting those set-offs restored.

The two medical associations that brought the lawsuit are having a conflict over legal strategy. The Medical Society of New Jersey wanted to expand the case to class-action status, believing that would reduce upfront legal fees and possibly set precedent for how Horizon could handle recoupment in the future, said Steve Kern, the MSNJ's counsel. The cardiology association did not want class-action status because its lawyers advised that the case "might not get as favorable a judge for the economic issues," Dr. Sachs said.

Kern said the MSNJ is "evaluating whether to stay in the case."

Both societies, however, say they're committed to ensuring that health plans in the future do not drop recoupment bombs on their members.

"If you were cutting my lawn for seven or eight years, and I told you that you have to cut me a check because I overpaid you, you wouldn't be happy about that," Dr. Sachs said. "If somebody's willing to pay me more than the market rate to mow the lawn, then great. But if you tell me you're now paying the market rate, I would expect the pay to go down, not to have to cut a check."

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Recoupment rules

Nineteen states have legislation that specifically mentions how health plans must handle recoupment of payments already made to physicians, according to the AMA's Advocacy Resource Center. In most cases, the laws set a deadline for recoupment -- although that deadline can be tossed if the recoupment is being made because of suspected fraud or duplicate payments for the same service. The provisions, for the most part, were written into legislation covering a gamut of prompt-payment issues. Here's a sampling of state laws:

Alabama: An "insurer, health service corporation and health benefit plan" may not "retroactively deny, adjust or seek recoupment of a paid claim for health care expenses" after one year from the date the claim was paid, or after the expiration of the contracted deadline for a "health care provider," whichever comes first. The deadlines hew to AMA policy on recoupments.

California: The deadline for notice of recoupment is set at 30 working days from the receipt of payment. If a physician does not, within the following 30 working days, reimburse the plan or send written notice to the plan of a wish to contest the recoupment, interest on the recoupment payment will accrue at 10% annually.

Florida: The deadline is 30 months after a claim is paid. The deadline is much longer than other states because the legislation allows recoupments after plans perform retroactive claim reviews. A physician must pay or appeal the recoupment claim within 40 days. Physician-contested claims must be paid or denied within 120 days of the receipt of the recoupment claim. Other deadlines, involving requests for additional information, also are stated. Physicians pay a 12% annual interest rate on any recoupment payments past the designated deadlines.

Illinois: At a minimum, plans seeking recoupment from physicians must give written notice that includes the name of the patient; the date of service; the service code, or if no service code is available, a service description; the recoupment amount; and the reason for the recoupment or offset. Also, physicians must be given a telephone number or mailing address that lets them know how to initiate an appeal of the recoupment or offset.

Texas: The deadline for insurer notification of physicians is 180 days. Physicians must repay the money in 45 days. But physicians have the right of appeal, and a plan cannot collect until "all appeal rights are exhausted."

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