Understanding Insurance Clawbacks

Learn the ins and outs of insurance clawbacks and how to defend your healthcare practice against them.

Many healthcare practice owners know the value of revenue from insurance reimbursement. After all, health insurance coverage is a cornerstone of modern healthcare delivery —  for better or worse. Unfortunately, relying on third-party payors to support the solvency of your business invites a host of legal issues.

One challenge you may face is a payor seeking recoupment from your practice. Recoupments are also called “insurance clawbacks.” How do these work? When can a provider expect them? How long can a provider rely on a “paid” claim?

If any of your practice’s revenue comes from insured patients, you’ll need to understand the process. Read on to learn the ins and outs of insurance clawbacks and how to defend your practice against them.

What are insurance clawbacks?

“Insurance clawbacks” describe when a third-party payor (usually an insurance plan) requests repayment of funds it initially paid to underwrite a service. Clawbacks occur when the payor later determines that the service was not covered. Sometimes such retroactive requests for repayment can be in the tens of thousands of dollars. Such large sums can put a practice at serious risk of insolvency.

From the provider’s perspective, plan terms can feel like moving targets. It may seem like a payor will cover a service one day, and, on a different day, deem the rendered service “not medically necessary” or “experimental.” Perhaps the payor will say that the amount paid was over the coverage terms. In any of these scenarios, a clawback is an insurer stating that a claim was not properly payable. Thus, the practice must repay it.

But the payor already paid for the claim. When can I finally “rely” on a payment?

States have different laws governing the timeframe for a payor to pursue recoupment from a provider. It can range anywhere from six months to a couple of years. Plan design — which varies widely by carrier — also plays a role. 

Individual states such as Illinois and Massachusetts have proposed to limit insurers’ recoupment rights. Their strategies include prohibiting recoupments until the payee has exhausted all appeals rights and shortening the time frame for a third-party payor to pursue a clawback.

Should I budget for recoupments?

It’s hard to budget for a repayment that is almost impossible to predict. Instead, consider devoting resources to training your billing and claims processing staff, especially when new codes roll out in your industry. Your best defense against an insurance clawback effort is correct documentation such as certificates of medical necessity, comprehensive diagnostic notes, and other records supporting the need for the services rendered.

Can I dispute a clawback?

If you have a dispute about claims processing with third-party payors, it’s usually a good idea to pursue appeal rights at every level available to you. Typically, insurance carriers have an internal appeals process, and the carrier’s representatives should give you directions on how to use it. If you believe the carrier isn’t following its procedures or policies governing its appeals process, your state’s Attorney General or Department of Insurance may also be able to facilitate an investigation.

There may be instances where the insurer paid the wrong amount. Or perhaps the policy expired, unbeknownst to you. An appeals process would uncover these errors by the payor. In those circumstances, an arbiter of the dispute would probably treat your practice favorably. Courts have prohibited a clawback if the initial payment resulted from the payor’s mistake.

Unfortunately, insurance clawbacks are common. However, you can take steps to defend yourself against a clawback effort. Invest resources into your claims department, accurately document your services, and routinely audit your claims for the best chance of success.

Know that you don’t have to navigate the appeal process alone. An experienced healthcare attorney can help you dispute clawback efforts, allowing you to focus on patient care. If you operate in any of the states where we have licensed attorneys, schedule a free consultation to find out how we can assist you.

This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.