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Overpaid? Providers Under No Obligation to Return Payment to Claims Admin

November 17, 2017 by Catherine Montgomery

When an employer or insurer’s claims administrator incorrectly overpays a workers’ comp bill, the provider is under no legal obligation to return the payment. This issue came up due to incorrect payments per the ASC/Outpatient Fee Schedule. Mistakes regarding the complex new Status Indicators have left some claims administrators scrambling to recover erroneous payments — even to the point of threatening providers.

In these situations, it’s important for all parties to be clear on the rules. California Labor Code does not require the restitution of mistakenly paid reimbursements.

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Trouble With Status Indicators

We’ve discussed the changes to the ASC/Outpatient Fee Schedule before. Specifically, recent blogs and FAQs addressed reimbursement rules for procedure codes assigned the J1 Status Indicator, as well as Comprehensive APC (C-APC) payments.  

As we explained, generally only one procedure code with Status Indicator J1 is payable. An exception is when a C-APC payment applies, which allows a higher reimbursement amount for qualifying multiple J1 codes.

Daily, DaisyBill examines many Explanations of Review (EOR). Our analyses indicate that some claims administrator’s bill reviews incorrectly pay multiple procedure codes that are assigned a J1 status indicator. Some bill reviews also mistakenly pay the increased C-APC reimbursement, even when the combination of J1 codes do not qualify for the higher payment.

Both of these bill review errors result in significant overpayment to the provider. Both could be avoided with greater fluency in these complex coding matters (or by using DaisyBill’s OMFS Calculator to correctly calculate Outpatient and ASC reimbursements). But some claims administrators, realizing the costly error, try to recoup the overpayment from the provider after the fact.

Unfortunately for the claims administrator, it’s too late.  

The Rules Regarding Overpayment

money emoji.jpgFor better or worse, there are no “takebacks” in California workers’ compensation. Just as proper authorization is an agreement to pay for a given treatment, payment is an irrevocable transfer of money. If the provider chooses to offer a refund after a genuine provider billing mistake, that’s their prerogative. But there is no legal compulsion to return such payments.

As it stands, California Labor and California Code of Regulations do not require providers to return paid funds to any claims administrator, even in the event of a mistake.

Only two situations exist in which the claims administrator may retroactively collect an incorrect reimbursement. The first case is if the provider signs a separate reimbursement contract wherein the provider agrees to return overpayments within a specified time limit. The second circumstance is if a judge issues an order for restitution. However, this usually only occurs in cases of purposeful fraud or abuse on the part of the provider.

Bottom line: If the claims administrator’s bill review fails to determine the correct payment, the cost of that mistake is the employer or insurer’s to bear. Attempts to bully or intimidate providers to return payments are counterproductive at best, and duplicitous at worst.

If faced with such harassment, we remind providers that the law is on their side.


To ensure billing accuracy (especially regarding complicated Status Indicators), providers should use reliable billing software: exactly what DaisyBill provides. Schedule a free demonstration today, and see what fast, reliable billing can do for your office.

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DaisyBill is a trusted authority on workers’ comp billing. Thousands of work comp professionals attend our webinars and state agencies and professional organizations turn to us for our expertise. We created this blog to help everyone involved in workers’ compensation; sharing news, tips, and data of interest to the community.

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