WEDI Strategic National Implementation Process (SNIP) Transaction Workgroup 835 Subworkgroup Overpayment Recovery 5010 Education December, 2013

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1 WEDI Strategic National Implementation Process (SNIP) Transaction Workgroup 835 Subworkgroup Overpayment Recovery 5010 Education December, 2013 Workgroup for Electronic Data Interchange 1984 Isaac Newton Square, Suite 304, Reston, VA T: //F: Workgroup for Electronic Data Interchange, All Rights Reserved

2 Contents Introduction... 3 Purpose of this Issue Brief... 3 The Issue... 3 Scope... 4 Conclusion... 8 Acknowledgements... 8 Disclaimer This document is Copyright 2013 by The Workgroup for Electronic Data interchange (WEDI). It may be freely redistributed in its entirety provided that this copyright notice is not removed. It may not be sold for profit or used in commercial documents without the written permission of the copyright holder. This document is provided as is without any express or implied warranty. While all information in this document is believed to be correct at the time of writing, this document is for educational purposes only and does not purport to provide legal advice. If you require legal advice, you should consult with an attorney. The information provided here is for reference use only and does not constitute the rendering of legal, financial, or other professional advice or recommendations by the Workgroup for Electronic Data Interchange. The listing of an organization does not imply any sort of endorsement and the Workgroup for Electronic Data Interchange takes no responsibility for the products, tools, and Internet sites listed. The existence of a link or organizational reference in any of the following materials should not be assumed as an endorsement by the Workgroup for Electronic Data Interchange (WEDI), or any of the individual workgroups or sub-workgroups of the Strategic National Implementation Process (SNIP). Document is for Education and Awareness Use Only

3 Introduction The implementation of the ASC X12 version transaction (005010X221A1), specifically the notification/delayed overpayment recovery process (Option 3) identified in Section of the Technical Report Type 3 (TR3) which can be found at has presented several tracking and posting challenges for providers. In light of the fact that the next HIPAA guides will not be mandated for several years, any proposed solution in a future guide is years away. Consequently the industry must find a way to ease the provider burden and continue working within the ASC X12 version TR3 requirements. Purpose of this Issue Brief This Education document is being written to provide awareness of the overpayment recovery challenges with Option 3 that are causing administrative burden for providers with the tracking and posting of the delayed refunds to their associated accounts. This brief will explore the complexities on both the payer and provider sides related to overpayment recovery and provide an educational view for payers and practice management software vendors that might resolve and bring awareness to the providers administrative burdens and ultimately be part of the final solution in a future guide. The Issue The notification/delayed (Option 3) refund method was developed to give payers an automated means to request a refund (rather than send a letter). This method allows the provider a specified timeframe to review and agree or disagree with the specific refund request. Option 3 is accomplished by giving the claim and service reversal and correction data immediately in the 835 transaction, but the actual collection of the funds is delayed using adjustments in the PLB Segment that temporarily negates the refund for a period of time. The delayed collection period gives the providers the necessary time for reviewing all financial modifications (payment, contractual obligations and patient responsibility) to determine if an appeal is necessary at the time of the refund request and prior to posting the actual reversal/correction adjustment to the patient account.

4 While the Option 3 process was created to remove the paper letter process, build in required review time and promote additional automation. It often requires different processing and/or manual intervention by the providers and their practice management systems. Scope The scope of this education document is to bring awareness on the issues regarding the delayed overpayment recovery process. Varying state laws on collection timeframes (i.e. 30, 60, 90 days), payer s collection policies (i.e. collect 25% of refund, collect no more than $ from each remittance, etc.) and other factors are why the workgroup felt education was the first step to getting the industry to understand the impacts. It is possible that payers who implement this overpayment recovery process may receive an increased number of phone calls from providers as these delayed refunds are collected. Some providers may struggle to manage the tracking and posting until practice management systems are prepared to handle these recoveries in an automated manner. The WEDI 835 Sub-workgroup has discussed the Option 3 process at length and has gathered important information that we want to convey in this document for consideration by the industry. As a result of many discussions and industry input, the workgroup has identified the following to act as education on the payer and provider impacts of this option. It is the hope of this workgroup that providers and PMS system vendors will assess these impacts and design solutions as appropriate. Examples of Provider Posting these Notification Reversal/Corrections Providers are significantly impacted by the current Option 3 method as many practice management systems in the industry today do not support the consumption of the PLB segment or create a process for these types of recoveries. The providers have had to adapt their business process/workflow to include some of the following: Drop the remittances to paper By dropping these remittances to paper they go to a business unit that keys off the paper as they would a straight paper EOB process. This is increasing the manual effort that was supposed to be avoided by having the ERA auto post. In some systems all reversal corrections have to drop to paper. This increases manual handling and decreases auto posting.

5 Providers who experience too much variance from their payers opt to turn off ERA entirely and revert back to a manual process. This is done when the PMS system cannot be programmed to determine which remits to print for manual processing or keep and process electronically. Providers have some manual and some auto posting as depicted in the scenario below: Provider process example 1. The Payer initiates a claims correction action via claim system 2. The claims will be identified individually in the PLB of the ERA under the financial adjustments as a FB (forward balance) followed by the payer ICN of the claim, the Payer proprietary number, and the amount that was previously paid. 3. When an FB adjustment appears on an ERA, the account appears in the detail of the ERA, but is not reflected in the payment total. No money is being retracted; this posting is for informational purposes only. When this occurs, the amount should not be posted to the account. Remarks Codes several specific Remark codes may be used to indicate the type of recovery that is happening to provide more information about why this is occurring. 4. When the payer actually takes the money back, a WO will appear on the PLB of the ERA, followed by the payers claim ID, the payer proprietary number, and the amount taken back by the payer. In this case, the dollars are included in the payment total but not in the detail. (no CLP records for these claims) 5. At this point, the transaction will be manually posted to the account in the PMS system, so the total detail posted to the system reconciles with the cash received or that days payment from that payer Examples of Payer Actions to reduce phone calls In an effort to aid the providers in posting (or not posting) these reversal/correction pairs payers have modified their delivery of the 835 transaction. These workarounds help to reduce phone calls to the payers and satisfy the providers. Some of the things the payers have done are:

6 1. Put key words embedded in fields to alert the receiver there is a notification This is done to alert the provider to the fact that the amount that appears in the PLB is being taken later and is related to a reversal correction pair in this remittance ie: DEFER AND/OR 2. Segregate all the reversal correction pairs that are related to an overpayment This allows the providers to NOT post these since the money is not being taken. Specific trace numbers may be used so the provider can be alerted (automate), so they can exclude this from posting. 3. Group all the notification type reversal corrections into a special LX group or its own ERA which somehow segregates these This allows the providers to NOT post these since the money is not being taken. Specific LX are used so the provider can be alerted and they can exclude these from posting. AND/OR 4. In the PLB WO change the Reference Number to be the CLP07 and the CLP01 This is done because while the CLP07 is a useful number to the payer the CLP01 is the number that will link to the providers account. Providers have asked and some payers have added this in order to be very clear which patient the recovery is for. One full loop scenario for how a payer handles overpayments is below: 1. When overpayment of a professional claim is identified by Payer, the provider s payment will not be reduced by the overpayment amount until 60 days after the reversal and correction claims appear on the Health Care Claim Payment/Advice (835) transaction. This delay is intended as an opportunity for the provider to appeal the Payer s overpayment determination. Due to timing of the appeal review and actual check/ EFT reduction, providers are encouraged to NOT wait until the 60 day limit approaches to appeal the refund request. With the exception of difficult refund cases, this new process will eliminate the form letters providers receive from Payers that contain the details of an overpayment. In the Health Care Claim Payment/Advice (835) transaction, the Payer-identified overpayment reversal and correction claims with a 60 day delay to offsets will be separated to a second LX loop (LX01 = 2). Because the resulting overpayment amounts for the claims in this LX loop are not being deducted from this check/eft, a negative amount which cancels out the reversal and

7 correction overpayment claims is reported in the Provider Adjustment PLB segment. The PLB segment will have the following codes and information: Provider Adjustment Reason Code WO, Overpayment Recovery. Reference Identification will contain the claim number from the reversal and correction claim followed by the word DEFER with no space. Example: DEFER. Claim Interest If an interest payment was made in connection with the original claim payment, recoupment of the interest corresponding to the overpayment will also be deferred. Deferred Interest will be individually detailed in the PLB Segment to assist the provider with account reconciliation. The PLB Segment will reflect the following codes and information: Provider Adjustment Reason Code L6, Interest Owed Reference Identification will contain the claim number from the impacted claim followed by the word DEFER with no space. Example: DEFER. Both a positive and negative interest (L6) adjustment will be shown in order to not financially impact the current Health Care Claim Payment/Advice (835) payment. If an appeal is not filed before the 60 day review period expires, the Payer will assume the provider agrees with the refund request. The overpayment refund will then be deducted from a current check/eft, and that refund amount will be reflected in a Provider Adjustment PLB segment. Note the reversal and correction claim detail is not repeated in the Health Care Claim Payment/Advice (835) after the 60 day review period. The following codes and information will be used in the PLB segment for this purpose: Provider Adjustment Reason Code WO, Overpayment Recovery. Reference Identification will contain the claim number from the reversal and correction claim. If Interest related to this claim was previously deferred, the current refund amount being collected will include the interest amount. In the event the full refund amount cannot be deducted from the current check/eft, then the remaining balance will be moved forward to a subsequent check/eft using the Provider Adjustment Reason code of FB Forward Balance in the Provider Adjustment PLB segment of the Health Care Claim Payment/Advice (835). The Payer uses the standard Balance Forward Processing methodology as defined in the ASC X12/005010X221A1 Health Care Claim Payment/Advice (835), Section Balance Forward Processing

8 Conclusion This paper is in no way providing guidance on how the overpayment recovery process should occur, rather it is an educational paper to help educate the industry of the various impacts these overpayment recoveries are having. There is an effort to get more practice management systems engaged in these discussions and to help the industry to develop solutions that will allow the providers to post these transactions in an automated fashion. The solution for the next ASC X TR3 is also up for discussion what is the best way for Overpayment Recovery to be done going forward - should we keep the solution in version or adapt the version with some minor additional changes? Maybe some of the methods in this paper will work and changing would not be the best idea. These topics need to be explored in order to save the industry from major development of a new solution that might not solve all the issues. This workgroup agrees that the creation of the best in breed solution for OPR will come from close collaboration between Practice Management System Vendors and groups like WEDI, ASC X12, CAQH CORE, and Cooperative Exchange. We hope you have found this issue brief to be educational and ask that you join us as we discuss other issues that affect the industry adoption of the ASC X transaction. Acknowledgements a. Charlie Myers b. Mary Lynam c. Debra Strickland The co-chairs wish to express their sincerest thanks and appreciation to the members of the 835 Sub-workgroup who participated in the creation of this document. The contributors to this document include payers, providers large and small, practice management vendors, clearinghouses, consultants, vendors, financial services and industry standards co-chairs.