Payment Processing
Overpayments happen. A carrier processes a duplicate claim, coordination of benefits gets miscalculated, or a retroactive coverage change invalidates a payment the practice already received. The refund itself is straightforward. The compliance deadlines are not. Multiple timelines apply simultaneously. Federal programs mandate 60-day reporting. State laws impose separate requirements for patient refunds. Miss the wrong deadline and a routine accounting correction becomes a False Claims Act violation with treble damages and per-claim penalties that dwarf the original overpayment. This article breaks down the specific deadlines by payer type and explains what happens when practices miss them.
Dec 6, 2025
Federal Requirements: The 60-Day Rule
The federal government requires Medicare and Medicaid providers to report and return overpayments within 60 days of identification. This deadline comes from Section 1128J(d) of the Social Security Act, added by the Affordable Care Act.
The clock starts when the practice identifies the overpayment, not when investigation concludes. CMS defines identification as the point when a provider has determined, or should have determined through reasonable diligence, that an overpayment was received and the amount has been quantified.
A critical distinction: providers get time to investigate before the 60-day clock starts. CMS regulations formalized a 180-day period for good faith investigation of potential overpayments. This investigation period temporarily suspends the 60-day refund deadline. Once the practice completes investigation and confirms an overpayment exists, the 60-day window begins.
The six-year lookback period means any overpayment identified must be reported and returned if the original payment was received within the past six years. Overpayments older than six years fall outside this requirement.
To summarize the federal timeline: providers have 180 days to investigate after receiving credible information of a potential overpayment, then 60 days to report and return once the overpayment is confirmed.
State Requirements for Patient Refunds
State laws govern how quickly practices must refund overpayments directly to patients. These deadlines are typically shorter than federal program requirements. State-specific requirements include:
Texas law requires physicians and dentists to return patient overpayments within 30 days after determining the overpayment occurred. The Texas Medical Association notes there is no minimum balance exception. Practices must refund all amounts, even small ones. Continuing to refuse a refund, requiring patients to pick up refunds in person or insisting on retaining amounts as credit against future services can trigger Texas Medical Board action.
California Business and Professions Code Section 732 requires physicians and dentists to refund duplicate payments to patients. If a patient requests a refund, the practice has 30 days to return the money. If the patient does not request a refund, the practice must notify the patient of the duplicate payment within 90 days of discovering it and then refund within 30 days unless the patient requests the practice retain a credit balance. Violations constitute unprofessional conduct.
Florida follows similar 30-day patient refund requirements.
Given the variation across states, the practical approach is to default to 30 days for patient refunds to maintain compliance across most jurisdictions.
Insurance Carrier Recovery Periods
State laws also govern how long insurance carriers have to request overpayments back from providers. Understanding these timelines helps practices know when carrier recovery requests are valid and when they can be challenged. These deadlines are longer than patient refund requirements and work in the opposite direction: they limit carrier recovery efforts, not provider refund obligations.
California Insurance Code Section 10133.66 prohibits insurers from requesting overpayment reimbursement more than 365 days after the original payment date. The 365-day limit does not apply if the overpayment resulted from fraud or misrepresentation.
New York Insurance Law Section 3224-b prohibits health plans from initiating overpayment recovery efforts more than 24 months after the provider received the original payment. Exceptions exist for fraud, abusive billing, self-insured plans and government programs.
These carrier recovery limits protect providers from stale claims. They do not change a practice's obligation to return overpayments that have been identified internally. If a practice discovers an overpayment, federal and state refund requirements still apply regardless of whether the carrier could have demanded repayment.
How Overpayments Occur
Understanding common overpayment causes helps practices build detection systems. Common overpayment causes include:
Duplicate payments, which happen when the same claim processes twice due to resubmission after a perceived denial, system errors or confusion about claim status
Coordination of benefits (COB) errors, which occur when carriers miscalculate primary versus secondary coverage. A New York State audit identified $492,061 in overpayments from COB miscalculations over a four-year period for a single dental insurance program.
Retroactive coverage changes, which create overpayments when an employer terminates benefits but delays notifying the carrier. The ADA notes this is one of the most common reasons for refund requests. Claims paid during grace periods become invalid once coverage termination is applied retroactively.
Coding discrepancies, which can result in higher payments than procedures warrant. If an incorrect Code on Dental Procedures and Nomenclature (CDT) code generates a larger benefit than the actual service provided, the difference constitutes an overpayment once discovered.
Recognizing these patterns helps billing teams flag potential overpayments before they become compliance problems.
The Financial Exposure When Practices Miss Deadlines
Failing to return an identified Medicare or Medicaid overpayment within 60 days transforms the overpayment into an "obligation" under the False Claims Act. This single word carries severe consequences.
The False Claims Act imposes treble damages, meaning the practice owes three times the overpayment amount. Per-claim civil penalties range from $14,308 to $28,619 for violations assessed after July 2025. A $10,000 overpayment becomes $30,000 in damages plus potential penalties that can exceed the original amount many times over.
The Department of Justice collected $2.9 billion in False Claims Act settlements and judgments in fiscal year 2024. Healthcare fraud cases accounted for over $1.67 billion of that total. Whistleblowers filed a record 979 qui tam lawsuits that year, the highest number ever recorded.
Program exclusion adds another layer of consequences. The Office of Inspector General can exclude providers from participating in Medicare, Medicaid and other federal healthcare programs. Excluded providers cannot receive any federal program payments. Practices must screen employees against the OIG List of Excluded Individuals and Entities, and employing excluded individuals can trigger Civil Monetary Penalties against the practice itself.
Building Systems to Catch and Return Overpayments
Detection is the first challenge. The 60-day clock starts at identification, so practices without proactive monitoring may not discover overpayments until an audit finds them, potentially years later.
Payment reconciliation should happen routinely. Compare payments received against expected reimbursements for each claim. Flag duplicates, unexpected payment amounts and claims paid for patients whose coverage status changed.
Explanation of Benefits (EOB) review catches carrier-identified issues before they become compliance problems. When an EOB indicates a payment adjustment or potential overpayment, document the review and response.
Documentation matters for defense. The ADA recommends maintaining a compliance program that includes written policies, designated compliance oversight, staff training and internal monitoring. If a staff member commits fraud against a government program, a documented compliance program helps the practice defend itself.
The Office of Inspector General (OIG) Compliance Program guidance identifies seven fundamental elements: written policies and procedures, a designated compliance officer, training, communication channels, internal monitoring, disciplinary guidelines and prompt response to detected problems. Practices should also establish a dedicated refund processing workflow. When an overpayment is identified, document the discovery date, the investigation steps, the amount calculation and the refund method. For federal program overpayments, use the appropriate reporting mechanism: claims adjustment, credit balance reporting, self-reported refund or the OIG Self-Disclosure Protocol for more complex situations.
Together, these practices create a defensible compliance record and help billing teams catch overpayments within the required timeframes. Retain records for at least six years to cover the federal lookback period. State requirements may extend longer depending on the jurisdiction.
Protect Your Practice by Returning Overpayments Promptly
Overpayment compliance deadlines are strict, and the consequences for missing them far exceed the original amount owed. A $5,000 duplicate payment becomes a potential six-figure liability if it triggers False Claims Act exposure. The core requirements are clear: 60 days for federal program overpayments after identification, 30 days for patient refunds in most states.
Two operational gaps make overpayment compliance harder: billing bandwidth and staffing coverage. When claims pile up and the front desk is stretched thin, payment reconciliation falls to the bottom of the priority list. Overpayments sit undetected until an audit finds them months or years later.
Teero addresses both challenges. Teero's remote billing service takes claims processing off the team's plate, with dedicated billing specialists who catch discrepancies before they become compliance problems. For staffing gaps, Teero connects practices with qualified W-2 dental hygienists who can step in when coverage is needed, keeping administrative staff focused on accuracy instead of scrambling to cover clinical duties.
Ready to strengthen practice operations? Schedule a call with Teero to discuss how remote billing and flexible staffing can support compliance workflows.