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Complexity of Medical Billing

Medical billing is a systematic procedure of billing and collecting professional fees for medical and healthcare services provided by doctors and other clinicians to patients. The complexity of medical billing is compounded by health insurance. You can have 100 people, each may have different types of health benefits through 100 different insurance companies, such as:

  • primary and under State law jurisdiction
  • primary and under Federal Law jurisdiction
  • combined with auto accident or workers compensation coverage
  • Or some who has multiple health benefits that could be considered secondary coverage

And the list goes on. 

Payment of the health benefit is usually based on:

(a) applicable State or Federal law
(b) a contract with the provider
(c) a contract with an employer

or the patient themselves.

Coordination of Benefits

You may have health insurance laws that regulate what is called Coordination of Benefits. In simplistic terms, Coordination of Benefits (COB) is communication with a patient's insurance companies where each insurance company determines whether it is primary or secondary payer. The determination of COB is NOT the doctors responsibility, but some insurance companies will deny benefit payment stating the doctor did not coordinate the benefits. Therefore it is in the doctor's own interest to verify, verify, verify that coverage or health benefits are available and the medical care about to be received is a covered service. Typically, this is the medical office's administrative staff's duty, such as the administrative medical assistant at the front desk. Next, it is on the medical biller to send the claim to the correct insurance company.

Processing Overpayment

One thing you must be on the watch for in your role as a medical biller are the payments. Let's say your doctor has a charge of $100 and the patient has ABC insurance and XYZ insurance. ABC pays $80 and XYZ pays $50. You have been overpaid $30. You cannot keep the overpayment regardless of how the doctor, or billing company feels.

You also cannot say if the insurance company wants their money back, they have to ask for it first. A regulatory agency or investigator might see it as fraud through the misrepresentation of your true charges. If ABC or XYZ has a contract with a federal program, it might be said you submitted a false claim.

How is this possible? When you submitted the claim, you represented your services as costing $100. You told the patient's insurance company that the service costs $100. When being paid $130 and not returning the overpayment of $30 you inadvertently represent your actual charges as $130. Hence the false charge.

It might also be said you might be in violation of other Federal laws. By accepting the overpayment, you might be inducing the patient to return to you as a self referral, as a means of unjust enrichment at the expense of the patient and their insurance company, or having the patient refer others to you. "Hey Martha, you need to go see Dr. Doctor, you'll never get a bill."

Claims and Investigations of Fraud

The insurance company owed the overpayment could perform retroactive review of your claims. If it is determined that fraud is involved, they could perform an audit review of the claims going back 10 years. That $30 could add up to $300,000 and that is a nice inducement to filing a lawsuit to recoup not only the overpayment but the actual payment itself, but interest and penalties as well.

Some insurance companies may be contracted as primary, therefore ABC may be contracted to pay 100% of charges and XYZ may be contracted to pay 100% of charges as well. Some insurance companies don't want any overpayments sent to them and may direct you to send the overpayment to the patient/guarantor/insured.

In your role as a medical biller it is good practice to get overpayment instructions in writing from the insurance company. When considering the consequences of an investigation, audit, or lawsuit you want everything as concrete as possible to show you used due diligence to return the overpayment.


When processing overpayments it is best to do the following:

  1. The EOB scanned and saved to DVD.
  2. Notes placed in the patient's account outlining the overpayment, name of the person or entity of the overpayment returned to, including the date, where the overpayment was sent, check number, check amount, a scanned image of the check, the letter to the insurance company, or patient regarding the overpayment saved to DVD with all other scanned images, scanned image of the certified mail receipt and scanned image of the return receipt when it is received.
  3. If the insurance company was contacted by phone, a synopsis of the call documented, to include date, time, your name, whom you called, number called, who you spoke with and their response.
  4. If the overpayment was returned to insurance company, a courtesy copy (Cc) is sent to the patient.
    Vice versa, if the overpayment was sent it to the patient then the insurance company is Cc' d.
  5. Follow office/compliance plan regarding overpayments, which includes what to do if the overpayment is denied or returned. The health insurance policy may dictate that the returned or denied overpayment is sent to your state's unclaimed funds department of the State Treasurer. This can vary from state to state.

When working for a doctor as a medical biller, you need to know the doctors insurance company contracts as to how the contract requires the insurance company to pay as primary and secondary. If the doctor sees Medicare patients, know Medicare's secondary payer (MSP) rules. The same applies to Medicaid: become familiar with the patient's health insurance policies. Obtain and verify this information and get all the insurance information and copies of all insurance cards from the patient and most important, VERIFY, VERIFY, VERIFY! Also, become very familiar with your State COB rules.

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