Recently, some providers may have received written notices from “a large commercial payor” stating their intention to resume overpayment recovery efforts beyond the 365 day limit. Providers should be reassured that the law for the 365 day limit has not changed despite the language used in these letters.

California Code of Regulations, Title 28, Section 1300.71, Subdivision (b) (5) imposes a 365 day limit for a health plan to request reimbursement of an overpayment, unless the overpayment was caused by fraud or misrepresentation on the part of the provider.  This large commercial payor was attempting to go beyond the 365 day period in recovering overpayments, claiming the reviews were for upcoding or unbundling practices. In July 2012, DMHC issued a cease and desist order and this large commercial payor filed for a writ of mandate saying that upcoding and unbundling can be fraudulent; therefore they can review beyond the 365 day limit.

In December 2014, Sacramento County Superior Court issued a writ of mandate and granted declaratory relief (Case No. 34-2014-80001733), which only partially agreed with the payor. That ruling ordered the payor to stop all attempts to request reimbursement for the overpayment of a claim more than 365 days unless it provides written notices to the provider that include a clear explanation of why and on what basis the payor believes the overpayment was caused by fraud or misrepresentation on the part of the provider. It should be noted that “miscoding” is not fraud or misrepresentation when “miscoding” was from an honest but mistaken belief that the coding complies with the billing standard.

So before a payor can take steps to recover overpayment of claims beyond the 365 day limit, it must provide a detailed explanation to the provider with sufficient amount of information to allow a provider to make an informed decision about whether to contest the reimbursement request.

How should the provider handle these notices? Contractually and pursuant to regulations, providers still have all legal rights to dispute the attempt to recover an overpayment beyond the 365 day limit.

• Provider may object to the payor’s notice to resume recovery beyond the 365 day limit.
• Provider should immediately demand a detailed claim-level explanation when it receives an overpayment recovery request beyond the 365 day limit. The provider’s request must be submitted within 30 days from the overpayment notice.
• Provider should object to the payor’s attempt to recover beyond the 365 day limit. This objection must be submitted within 30 days from receipt of the claim-level detailed explanation letter.
• Provider may file legal action/demand arbitration against the payor for its attempt to recover beyond the 365 day limit period. The payor, in order to go forward, will have to meet its burden of showing fraud and/or misrepresentation on the part of the provider. If it cannot meet this burden, it will be precluded from pursuing overpayments beyond the 365 day limit. In practical terms what this last point means is that as a condition of the payor even being able to present its substantive position showing an overpayment occurred, if the overpayment recovery activity began more than 365 days after the overpayment, the payor will have to prove there was fraud or misrepresentation in the coding. If they are unable to establish this, they cannot proceed to recover on the overpayment even if they could have shown that an actual overpayment occurred.

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