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Three Facts Physicians Should Know About Overpayment Liability


Whether a physician is liable for an overpayment is not determined solely by whether such action is attributable to that physician.

If there is one thing that is certain in the healthcare industry today, it’s the increasing number of audits and recoupment actions.  Every day my colleagues and I receive notices from CMS detailing new investigations and recoupment actions.  Accordingly, many of our clients have become increasingly concerned about their actions, and how the actions of other practice physicians can impact liability for the practice as a whole.  Their general concerns are not liability for fraud or illegal conduct, but simple, unintentional overpayments. 

Below are some of our physicians' most commonly asked questions and our answers related to these issues:

1. What liability does a practice have for recoupment of payment for services rendered by its physician providers?

Under Medicare, and assuming the services were billed under a number assigned to the practice, Medicare will look to the practice for the recoupment of payments for services rendered by its employed physicians.  For independent contractors, however, Medicare can look to both the practice and the independent contractor for recoupment, as Medicare policies dictate that independent contractors only can assign their right to receive payment to the practice if they maintain “joint and several” liability for overpayments.  If you’re an independent contractor physician, you should pay attention to the group’s billing practices to minimize your exposure.

For non-Medicare payments, the provider agreement with the payer controls recoupment.  Generally, however, the payer will recoup payments from the party who received such payment.  Accordingly, if the physician's services were billed under the practice's billing number, then the practice likely would be responsible for the recouped amount.

2. What happens if the practice no longer provides services and dissolves?

Medicare and other payers have no greater claim to recoup money owed to them than any other creditor upon dissolution.  Once the practice dissolves and all assets liquidated, payers likely will not be able to recoup any amount from the practice.  They may, however, attempt to collect through other methods.

If the physicians form a new practice after dissolution, a payer may successfully argue the new entity is a successor to the prior entity, and therefore, it should be able to look to the new entity to recoup the amounts due.  Whether the two entities are so closely related as to be deemed successors is very fact-specific and varies from state to state.  If your practice intends to defeat a recoupment action by going out of business, you should consult legal counsel to avoid successor liability. 

If an overpayment is attributable to the services of an independent contractor of the practice, then Medicare can look to the independent contractor for payment as set for above.  Again, a commercial-payer's ability to act accordingly is dependent upon the specific payer agreement. 

Under limited circumstances, a payer may attempt to obtain amounts owed by the dissolved practice from its individual owners.  This concept is known as "piercing the corporate veil" and occurs when a practice-entity operates in such a way that it is not deemed separate and distinct from its owners. The ability for creditors to hold owners liable for the debts of an entity under this doctrine is uncommon, but still is a theoretical possibility.  Accordingly, it is important to follow the advice of legal counsel when forming and operating your practice as a corporate entity.

3. If a physician is employed by two practices, can payers offset overpayments attributable to services provided by such physician on behalf of Practice A from payments attributable to services provide by physician on behalf of Practice B?

There is no clear law or policy allowing Medicare to recoup funds owed by one practice from another when the services were provided by the same physician.  Any right a commercial payer has in this regard likely would be set forth in the payer agreement.

As illustrated by the foregoing, whether a physician is liable for an overpayment is not determined solely by whether such action is attributable to that physician.  If you practice medicine through a group, you should always remain informed of the billing practices and actions of your colleagues to minimize your legal exposure. 

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