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Phia Group Media


Are Overpayments Over?
Ron E. Peck, Esq.

Illinois Federal Court Issues a Troubling Decision Declaring Overpayment Recoupment to be Identical to Claim Denials; Requiring ERISA Compliant Notification of Adverse Benefit Determination, and Rights of Appeal for the Provider.

Any and all entities involved in the payment of claims must become familiar with the case of Pa. Chiropractic Ass’n v. Blue Cross Blue Shield Ass’n, No. 09 C 519, 2014 WL 1276585 (N.D. Ill. Mar. 28, 2014), and its impact on the pursuit of overpayment refunds!

Below we provide a brief summary of the case and its impact on our valued clients. Upon reviewing the facts, you’ll likely agree with us that a detailed approach to overpayment refunds is needed.

Fortunately for our overpayment clients, The Phia Group’s dedicated team of attorneys, paralegals, and overpayment specialists not only assist their clients in pursuing reimbursement of overpaid amounts, they also provide correspondence for use in that pursuit, which adequately describe the reason for the overpayment, identifies applicable plan document provisions, and opens a dialogue with the provider enabling them to respond and request further review.

What’s the Case About?

Do providers have rights under ERISA to file suit?

Determining whether providers are “beneficiaries” under an ERISA plan, the court interpreted “benefit” to include a provider’s rights to receive payment. The court also found that if the plan sets up a payment scheme by which they pay the provider directly, other “anti-assignment” language will not eliminate the provider’s beneficiary status.

Do providers suffer an adverse benefit determination within the meaning of ERISA when the payer recoups overpayments?

The court stated that the payer’s “… practice of withholding or reducing payments to a provider when it determines that a previous payment was made incorrectly” … “falls within the applicable regulation’s definition of an adverse benefit determination.” This decision was made in response to payer practices of pulling back overpaid claims electronically (when possible) and/or offsetting overpaid amounts by denying future claims submitted by the same provider (regardless of the patient’s identity).

We question whether the characterization of “adverse benefit determination” is tethered more to the determination that an overpayment occurred, or, the later claims denied as an offset. It is also not entirely clear whether recovery of a payment made by pure technical error (computer glitch or math error), rather than because of a coverage determination, would constitute an adverse benefit determination if the funds could be recouped in some way which does not impact unrelated benefit payments.

Regardless, this decision means payers seeking to recoup overpayments must initiate a process more akin to denying a claim, complete with notification and an appeals procedure.

The Takeaway:
This case does not deal a death blow to any and all efforts to identify erroneously paid claims and recoup these overpaid amounts. It does however, suggest that for any recoupment effort which constitutes an actual “adverse benefit determination” (with the term “benefit” now clearly including payments – even overpayments – made by plans directly to providers), a meaningful notice and appeal process must be set up.

Recouping amounts which were paid due to pure error rather than eligibility or benefits related considerations may not fall within the strictest literal reading of the language of this case, but it seems likely that a later court may interpret the holding to have contemplated the inclusion of such action – applying the term “adverse benefit determination” and all that entails under ERISA, to all overpayments – regardless of cause!

Thus, the safest course, after establishing proper notice and review policies for overpayment determinations, would be to utilize collection methods which do not affect future benefit payments. With this in mind, and in light of this recent ruling and its potential to spread (impacting other venues and jurisdictions), The Phia Group will continue to guide its clients regarding proper procedures for adverse benefit determinations, handling overpayment recoupment efforts, and compliance with applicable law.

To learn more about this case and The Phia Group, please contact me at:

Ron E. Peck, Esq.
The Phia Group, LLC
163 Bay State Dr.
Braintree, MA 02184
rpeck@phiagroup.com
781-535-5617