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Granting Patient Refund Requests: Risks and Benefits

August 26, 2019

Issuing a refund or reimbursement to a dissatisfied patient may seem like a simple solution to a potentially complicated problem. However, there are many different issues to consider that may not be immediately apparent.

Some of the issues involved with issuing refunds include:

  • The amount in contention
  • The clinical picture
  • Physician and patient personalities
  • Treatment history
  • The number of individuals and entities involved in treatment
  • Third-party payer requirements and regulations
  • Whether the outcome was unanticipated (or a known risk of the procedure)
  • Whether a lawsuit has been threatened

healthcare-refund-600x400Also, refunds and reimbursements do not guarantee closure of the issue. Some patients will seek additional funds or services, file lawsuits, and attempt to use the offer as an admission of liability—even after they have signed a waiver of rights to bring additional claims against you in exchange for the refund.

Because of the potential complexity of a refund demand, it is a good idea to obtain input from your professional liability insurance carrier’s risk management or claims department when patients demand refunds and reimbursements following dissatisfaction with services or an adverse outcome or event.

Policyholder Inquiries

Policyholders frequently call NORCAL Group Risk Management seeking advice about responding to a patient request for a refund, reimbursement, or fee waiver. Consider the following scenarios.

Refunding a patient’s co-pay:
The patient experienced extreme pain while an inexperienced medical assistant was doing an ear lavage. The patient was upset and demanded a refund of her co-pay.

Reimbursing a patient for a different physician’s services:
A piece of medical equipment fell on a patient during an examination in an FP’s office. The FP arranged for her to get an x-ray. The x-ray department was located in the same building, but was a separate entity. The FP did not charge the patient for the office visit, but the patient received the bill for the x-rays. She asked the FP to pay for them.

Waiving the fee for the initial procedure, even though there was no negligence, and refusing to reimburse the patient for the hospital stay:
A gastroenterologist perforated the patient’s colon during a colonoscopy, which resulted in the patient later being admitted to the hospital for observation. The patient was discharged after one day, and had no further issues. The gastroenterologist agreed to waive the fee for the colonoscopy, even though perforation was discussed in the informed consent. When the patient received the hospital bill, she wanted the gastroenterologist to pay for that too.

Waiving the fee for an initial, potentially negligent, procedure, but still charging the patient for the second, successful, procedure:
A dermatologist removed a lesion from the patient’s thigh. Because the margins were not clear, the patient underwent follow-up surgery. The follow-up surgery margins were clear, but the patient had a complicated recovery. The patient claimed the initial surgery was negligent and that it caused the residual problems. She demanded the fees for both procedures be waived. The dermatologist offered to waive the fee for the initial procedure, but requested payment for the second procedure. The patient never made a payment, and the matter was sent to collections. In response, the patient threatened to file a lawsuit and post negative comments on various physician review and social media websites.

Service Recovery

In general, patients are expected to pay for their medical treatment, even when the experience is unpleasant. However, in some circumstances, patient satisfaction may be more important than collecting a fee. Using a service recovery approach when a dissatisfied patient requests a refund can increase patient retention and de-escalate a situation that could result in negative online comments or malpractice litigation.

Service recovery refers to making things right following a service failure. In a physician’s office, service failures can range from long patient wait times to a patient’s dissatisfaction with a surgical outcome. Steps in a service recovery process may include apologizing for a service failure or making a small goodwill gesture, such as handing out a $5 Starbucks gift card or a parking voucher to a patient who had to wait for an hour to be seen by a physician. Good service recovery programs can turn a frustrated, angry patient into a loyal one who is more likely to comply with treatment recommendations and less likely to file a malpractice suit, make a report to the medical board, or write a negative online review.1,2

There are a variety of healthcare service recovery resources available online, including:

In all likelihood, patient satisfaction will require adequately discussing the patient’s issues and working out a solution. It is important to be able to frame the gesture as one of goodwill that is being made because the patient is unhappy and not because the doctor is guilty of malpractice or has rendered poor care.

More information and resources about apology and responding to unanticipated outcomes are available to NORCAL Group policyholders by contacting a Risk Management Specialist at 855.882.3412.

Risk Management Recommendations

Patient refunds, reimbursements, and fee waivers can be complicated. Refunds may not be necessary if the outcome is a known risk of the procedure and the patient has been informed of that risk. Therefore, requests should be considered on a case-by-case basis, balancing the benefits and risks of doing so and obtaining the input of legal or professional liability advisors when necessary. Consider the following recommendations:

  • Create standardized policies and procedures for patient refund requests.
    • Ensure that your policies on waivers and refunds do not violate agreements with private health insurers, Medicare and Medicaid.
  • Be aware of which types of transactions with patients trigger an obligation to report to the National Practitioner Data Bank.
  • If a patient requests a refund or reimbursement due to dissatisfaction:
    • Acknowledge the patient’s dissatisfaction, even if it initially seems unfounded or overreaching.
    • Determine, to the best of your ability, why the patient is unhappy (for example, excessive wait time, failure to notify of test results, etc.).
    • Apologize for any systems failures that contributed to the outcome.
      • Explain the steps you will take to have the systems issue evaluated in an effort to prevent similar outcomes in the future.
    • Try to answer the patient’s questions, but do not speculate as to liability.
    • If there is more than one party involved in a refund request, coordinate and determine whether they will also be waiving their fees and, if not, whether you will cover those fees and, if not, how the patient will be notified that a portion of the care and treatment will not be paid by you.
    • Determine whether third-party payers need to be involved in the refund request. Refunding copayments and deductibles may violate the policies of the patient’s health insurer or state and federal laws. Therefore, offers to waive, reimburse, or refund co-payments, deductibles, or fees to patients with private insurance or Medicare/Medicaid should be carefully considered.
    • Document in the patient’s record the refund request, the basis of the request, what has been offered to the patient, and the patient’s acceptance or refusal of the offer.
      • File in the patient’s record a copy of the refund check cover letter and any correspondence related to the refund.
      • Do not document in the medical record interactions with your liability insurance representatives or your attorney.
  • Use information gained from the service recovery process to identify systems and practices that could be improved.

This content from Claims Rx


1. “Strategy 6P: Service Recovery Programs.” Agency for Healthcare Research and Quality. January 2018. (accessed 7/26/2019)

2. Sandhya Pruthi, MD, et al. “Service Recovery in Healthcare: Movement from Reactive to Proactive.” Mayo Clinic. 2015. (accessed 7/26/2019)

Filed under: Article, Practice Manager, Business of Medicine



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