When the Insurance Company Takes Back Payment

In a prior article I addressed the issue where an insurance company gives pre-certification and the doctor provides the medical services but payment is subsequently refused. In the present situation pre-certification is obtained. The physician provides the medical service and receives payment by the insurance company. However at a later date the insurance company advises the physician that the payment was made in error and unilaterally takes the money back from bills submitted from other patients. Does a doctor have to take this or is there a remedy?

The action by the insurance provider in the above scenario is a breach of contract. A contract comes into existence when the insurance company authorizes the operation on its insured and the physician provides the medical services. When payment is made to the doctor in accordance with the submitted bill the contract is then completed. Any mistake made by the insurance company is its problem not the medical provider's and an attempt to recover such funds from other patients constitutes a breach of contract against the services provided for the subsequent patients. These bills are unequivocally unrelated to the first services provided. 

The even more powerful legal argument is promissory estoppel. 

The concept of promissory estoppel is an equitable form of relief, wherein a party who relies on a promise to his determent is entitled to recover. 

The Court in Aircraft Inventory Corp. vs. Falson Jet Corp, 18F Supp 2d 409 (1998) p 416 states:

The elements of promissory estoppel are as follows: 

  1. A clear definite promise by the promisor
  2. The promise must be made with the expectation that the promise will rely thereon.
  3. The promise must in fact reasonable reply on the promise and reliance on the promise.
  4. Detriment of a definite and substantial nature must be incurred in reliance on the promise.

In our situation, the insurance company made a clear and definite promise to pay as evidenced by the pre-certification. There is no question that issuing the pre-certification for the operation the insurance provider expected the doctor would rely on it and perform the operation expecting payment. 

The physician did rely on the promise to pay; and by devoting the time and skills necessary for the operation, the physician suffered a detriment of a definite and substantial nature in reliance on that promise. The doctor cannot say give me the time and operation back. 

Medical providers have the legal tools necessary to force the Insurance Companies to return sums improperly taken from them.