Q: A health plan that I participate with has sent me a notice stating that it has audited some of the claims I have submitted over the past three years. The health plan believes that some of these claims were improper and that I owe them a refund. The amount of the refund is large and based on a statistical extrapolation. The notice states that if I do not send the health plan a check it will withhold the amount of the refund from its future payments. Can the health plan do this? What rights do I have in this process?
The situation you describe has become common. Physicians are frequently being audited by both governmental and private health plans with refunds claimed based on alleged failures to comply with the health plan’s technical coding, billing and documentation requirements. Many physicians wrongly believe it takes a finding of fraud to result in a refund. This is untrue. Claims can be denied and refunds sought based on incorrect claims submission caused only by honest errors and lack of documentation.
Statistical extrapolation can greatly increase the amount of the requested refund. The refund amount resulting from the claims the health plan has actually audited is extrapolated to all similar claims paid to you over the entire audit period. Using such a method, what may be a minor refund on actual audited claims can escalate to a refund demand of a much larger amount.
You do have rights in this process. These rights are for the most part contained in your contract with the health plan and any policies and procedures of the health plan that have been incorporated into the contract by reference. You must familiarize yourself with these documents and evaluate the following:
Can you dispute the health plan’s right to conduct an audit? Does the contract, directly or indirectly, specifically allow the health plan to conduct an audit?
If so, how often and under what terms and conditions, if any? Is there a limit on how far back claims may be audited and/or refunds sought?
Do you need to retain your own billing and other consultants/experts to use in disputing the audit findings?
The health plan should be required to disclose the complete audit results including an itemized list of the claims audited and the findings and the basis for the findings on a per claim basis.
Can you challenge the use of statistical extrapolation methods? Is the use of such methods specifically authorized by the contract?
If statistical extrapolation is allowed by the contract, you have the right to challenge the validity of the sample taken and methodology used.
If any of the health plan findings based on medical necessity issues or otherwise involve information documented in medical records, were those determinations made by a physician in active practice with the same training, qualifications and experience as you? These determinations should be made by active practicing physicians with the same training, qualifications and experience.
Is there some type of mediation or managerial-level conference for resolving the dispute promptly and informally? Do you have a right to dispute the health plan’s audit findings with Michigan’s Department of Insurance and Financial Services or some other governmental agency?
You do have rights but you must know what your contract says to discover what they are and how best to use them. This is a process that requires a health care attorney experienced in these matters.