Navigating Payor Claw-Backs: An Overview for Healthcare Providers and Entities

By: Alexandra Garcia-Watts, BSN, Esq,
Founding Member at Garcia-Watts Law, LLC

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Navigating payor demands is daunting, especially when claw-backs are involved. Claw-backs are when a payor demands that a provider return payments for previously paid claims. These demands are routinely based on allegations of, among other things, non-covered services, lack of medical necessity, insufficient documentation, improper coding, uncollected patient responsibilities, or even fraud.

Understanding Claw-Backs

Unlike claim rejections or non-payments, claw-backs often occur years after a payor has already paid a claim, causing unexpected and serious financial strain. Payors often initiate these demands by misleadingly categorizing their first record request as part of a routine audit. However, routine audits are becoming rare since advances in technology now allow payors to review a provider’s claims data without notice, and to identify potential issues to providers before making their first contact. It is likely that by the time a payor requests records or information from a provider, the payor has already identified an issue they intend to pursue, and they are seeking documentary proof to support their position, and even to find additional areas to probe.

The Process of Claw-Backs

The processes used by payors varies, but in addition to the alleged routine audit request, we also see that payors will flag a provider’s allegedly high usage of a specific code compared to peers, and request records for review. They then allege improprieties in the record to establish an error-rate that they apply across all similar claims paid to that provider, a controversial method called extrapolation, leading to substantial repayment demands. For example, identifying alleged issues in 12 of 20 reviewed records could result in a demand for repayment of 60% of all payments made for the code at issue, potentially totaling a six or seven figure demand.

Defending Against Claw-Backs

Defending against these actions is complex. It is crucial for providers to be proactive and prepared to push back on these demands. Implementing a robust Compliance strategy is essential, but often not enough to prevent these over-reaches from payors. Engaging legal counsel to evaluate the initial record request and to submit the first response to the payor ensures that the provider is protected from step one, and may even deter the payor from further pursuit.

Proactive Strategies and Legal Defense

Even when the payor insists on seeking repayment, involving experienced legal counsel from the outset can significantly impact the outcome. Early protection may prevent unnecessary disclosures by the provider, and will leverage procedural protections that the provider may not be aware of. Our firm has successfully defended clients in these actions, regularly achieving significant reductions of the demand, or in some instances, a complete resolution with no liability.

Recent Successes

Our firm’s recent successes include:
• Settling a $1.8 million over-payment demand from HBCBS of NJ for $150,000.
• Reducing a 490K claw-back from Caremark to 76K.
• Resolving a 50K demand from United with no liability.
• Resolving a $1.9 million claw-back from Cigna with no liability.

The Importance of Compliance

Prevention is critical. Implementing a robust Compliance strategy, including clear policies, protocols and procedures, can help avoid payor traps and protect providers in today’s challenging environment.

Conclusion

Payor claw-backs pose significant financial risks to healthcare providers. By being proactive, engaging legal counsel to evaluate and submit the first response, and maintaining strong compliance strategies, practices can protect themselves from unreasonable and costly payor demands.


For more information on defending against payor audits, investigations, and claw-backs, contact Garcia-Watts Law, LLC. We are here for you.

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