Healthcare Providers Can Fight Plan Overpayment Requests

Health plans in California often send notices to healthcare providers demanding reimbursement of amounts the plan has already paid the provider.  Providers often ask healthcare attorneys to fight these reimbursement requests. Fortunately, as discussed below, the law is favorable to the providers.

1. California Regulations Require Detail from Plan.

Per Title 28, Section 1300.71 of the California regulations, if a health plan in California determines  it has overpaid a claim, it must provide the provider with all of the following:

  • Name of the patients;
  • Dates of service; and
  • Clear explanation of the basis on which the Plan believes the amount paid was in excess of the amount due, including interest and penalties.

This detail is required whether or not the provider is a contracted provider. (The above regulation also applies to capitated IPAs and Medical Groups).

If the Provider has a contract and contests the overpayment within 30 days of receipt, the Plan cannot offset future payments from the provider. If the Plan does offset (where there is a contract) the Plan needs to send a detailed written explanation identifying the specific overpayments that have been offset against specific current claims.

2. The Law of Mistake Favors Healthcare Providers.

Healthcare providers can use California Civil Jury Instruction 330 regarding the Law of Mistake to defend against an overpayment demand.  To recover on an overpayment that was mistakenly paid, the Plan would have to prove all of the following:

  • The Provider knew the Plan was mistaken and used that knowledge to take advantage;
  • The mistake was not caused by the Plan’s own carelessness or neglect; and
  • The Plan would not have paid the Provider if it had known about the mistake.

It is very unlikely the Plan will be able to provide all of these elements, especially the first one.

3. Caselaw Supports Providers.

In City of Hope Medical Center v. Superior Court, 8 Cal. App. 4th 633 (1992), the insurer paid a hospital under an assignment of benefits for cancer treatment and after paying the provider determined the treatment was experimental.  The Court held that the hospital had no duty to repay where the provider was not at fault, had disclosed all material facts, and had changed its position in reliance on the Plan’s actions.  The Court ruled that the Plan was in the best position to know what was covered and what should be payable.  In the event of litigation,  the Plan would have the burden of proof on these issues.

4. Regulatory Action Favors Providers.

In 2012 the California Department of Managed Care (DMHC) which regulates all HMOs and most PPOs in California, found that Blue Cross  had not given providers the required notices of alleged overpayments and fined them.  Thus the Plans are sensitive to regulatory complaints by providers.