Finding yourself in a situation where a patient is unhappy with their treatment and asking for a refund, what should be your response? For example, you may feel that your work is satisfactory, and you are unwilling to provide a refund to the patient considering all the time you spent on their care. Or you may be seeking a quick resolution to the situation. In this article, we’ll take a closer look at how to handle patient refunds.

Factors to Consider When a Patient Requests a Refund

Issuing a refund to an unhappy patient may seem like a simple solution to resolve what may be an unwelcome and complicated patient dispute. However, there are various issues to consider, some of which may not be readily apparent. Therefore, before you consider offering a full or partial refund to a patient, you should contemplate the following issues:¹

1. What is your assessment of the quality of the work?
2. What is the monetary value of the refund?
3. What is the temperament of the patient?
4. Are there third-party payer requirements?
5. Is a lawsuit being threatened?
6. What is the viability of maintaining the doctor-patient relationship?
7. Will the refund bring final closure?
8. Will a “release of liability” be prudent?

Additionally, will the refund trigger an obligation to file a report with the National Practitioner Data Bank (NPDB)? Generally, no. The NPDB information website states:

Payments by Individuals
Individuals are not required to report to the NPDB payments they make for their own benefit. Thus, if a practitioner or other individual makes a medical malpractice payment out of personal funds, the payment should not be reported. However, a professional corporation or other entity composed of a sole practitioner that makes a payment for the benefit of a named practitioner must report that payment to the NPDB. (See next section.)

Previously, the NPDB had required that all medical malpractice payments made on behalf of a practitioner - even payments made out of personal funds - be reported. However, on August 27, 1993, in American Dental Association v. Shalala, the U.S. Court of Appeals for the District of Columbia Circuit held that an NPDB regulation requiring a report from each “person or entity” making a medical malpractice payment was invalid when applied to payments made by a practitioner on his or her own behalf, because the regulation was inconsistent with statutory language requiring any “entity” to report medical malpractice payments to the NPDB. The NPDB removed previously submitted reports on medical malpractice payments made by individuals for their own benefit.

The amount of the payment is irrelevant; there is no de minimis exception. In addition, payments not made in connection with litigation (e.g., those made resulting from professional peer review proceedings) may need to be reported. Peer review committees and others investigating and resolving patient complaints against practitioners should consider notifying practitioners of reporting requirements before a payment is made.²

Patient Refunds are Not a One-Size-Fits-All Situation

Notwithstanding the guidance offered above, seeking counsel from a local attorney regarding this issue is always strongly recommended. There may be different and more demanding requirements regarding so-called refund payments under your state law.

Determining to offer or provide a refund of fees must be made on a case-by-case basis. Think of it as a business decision; most businesses want customers to have a good experience. Offering a full or partial refund is acceptable (the refund is not per se an admission of liability) to keep a customer happy. Clarify to the patient that the treatment in question was proper. The goal of providing the refund is to facilitate customer satisfaction. If refunding all or part of the fees will accomplish that, you are willing to discuss a settlement.

When deciding to offer a refund, you should consider whether the treatment, the source of the complaint, was accomplished as you intended. For example, does the patient complaint represent a common untoward complication of the procedure or a deviation from accepted standards of care? In the latter, expeditiously settling the dispute is prudent. Generally, refunding a fee is a small price if it
potentially precludes a board complaint or a lawsuit.

Negotiating the Patient Refund and What a Settlement Looks Like

If the treatment in question was paid in part or entirely by an insurance carrier, you must disclose the plan to offer the patient a refund. Once you clear that hurdle, be prepared to negotiate the refund amount, start with a percentage of what they seek, and work towards a mutually agreeable settlement. Avoid negotiating via text message, email, or with an unauthorized third party (potential HIPAA violation). Instead, it’s best to discuss in person or over the phone. If the patient brings an attorney into the negotiation, you should cease communication with them and alert your insurance carrier.

Should every refund be accompanied by a release of liability (“release”)? The simple answer is no. The value of a “release” is that it memorializes the settlement terms, for example, that the refund is not an admission of liability, helping to prevent future mischaracterization. It also signifies that the parties negotiated the terms and mutually agreed. Requesting a release of liability before disseminating
any funds is a case-by-case determination. Factors to consider are the emotional temperament of the patient, the amount of the refund, and the threat of a lawsuit, which are all relevant factors to consider. While a release of liability is a prudent consideration in certain disputes, a release is never a complete “bar” from the patient bringing subsequent legal or regulatory action. Do not disperse funds until the patient signs the document when utilizing a release. In some instances, patients may refuse to sign a waiver. However, that should not be a hindrance to the deal. If you decide to move forward, the patient cashing the refund check is some evidence of your goodwill to assist the patient and settle the dispute.

Irreparable harm to your relationship with the patient may result from the settlement negotiation. Terminating the relationship coincidentally with payment may be wise and necessary. Opinions will vary on the efficacy of providing refunds. It is a personal decision that hopefully ensures a difficult patient will go away peacefully.

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1. Contact PICA Claims if you feel the need for additional guidance.

2. https://www.npdb.hrsa.gov/guidebook/EMMPR.jsp

The information contained on the PICA Blog does not establish a standard of care, nor does it constitute legal advice. The information is for general informational purposes only. We encourage all blog visitors to consult with their personal attorneys for legal advice, as specific legal requirements may vary from state to state. Links or references to organizations, websites, or other information is for reference use only and do not constitute the rendering of legal, financial, or other professional advice or recommendations. All information contained on the blog is subject to change.