Insurers Get Aggressive with Years-Old Audits

Private payers are following Medicare’s lead, reviewing lab payments made up to six years ago

CEO SUMMARY: Not only are health insurers looking back to find overpayments and funds paid erroneously, but payers also are requiring documentation for overpayments. If clinical labs and anatomic pathology groups do not appeal such claims quickly, they may be liable for any amount insurers deem to be overpayments, experts said. Health insurers also are taking any overpayments out of future funds to be paid to labs and pathology groups that did not provide adequate documentation, the experts added.

HEALTH INSURERS HAVE BECOME MUCH MORE AGGRESSIVE in pursuing what they call overpayments, even as much as six years after the fact. The actions being taken by private payers are significant. 

Clinical lab managers and anatomic pathology groups need to recognize three new billing and collections challenges associated with these aggressive payer actions so that they can respond quickly. The amount of money at stake can be considerable. 

“First, commercial payers are auditing lab claims following the example that the federal Medicare program set,” said Ann Lambrix, Vice President of Revenue Cycle Management Consulting for Vachette Pathology, a division of Lighthouse Lab Services in Charlotte, N.C. 

“When these audits are completed, payers then ask clinical laboratories, anatomic pathology (AP) groups, and other providers to return any funds the insurers classify as being overpayments or paid in error,” she explained. “Several of the nation’s largest health insurers have been doing these audits, including Anthem, Blue Cross Blue Shield plans, Cigna, and UnitedHealthcare, among others. 

“Second, health insurers are asking for more documentation from labs and AP groups,” Lambrix noted. “For example, once they audit past claims, health insurers are likely to request documentation on lab test claims they’ve already paid.

“We see payers also do internal audits on lab test claims paid going back two years and even as far back as six years,” she added. “Should the labs or the AP groups not respond quickly to any requests for repayment, the payers then claw back payments associated with those claims.

“Third, if the insurers determine that a lab test claim was paid incorrectly, then they do what they can to take that money back,” she warned. 

“The lab or the AP group can appeal. But when they do, health insurers will give them only 30 days to provide any supportive documentation for claims that were already paid. Providing that documentation is difficult for labs to do, especially given the need to respond in just 30 days,” she added. 

Legal Team Review

To protect themselves, clinical laboratories and AP groups should have their legal teams review their contracts with insurers to ensure that any time frames in current contracts are reasonable for the labs and AP groups involved. Any request requiring documentation within 30 days is unreasonable, Lambrix commented. (See sidebar, “Non-screening COVID-19 Claims Should be Fully Covered,” below,) 

“Technically, a pathology group and a clinical lab should have all the documents they need, unless they have switched their billing company or there is a change in ownership or corporate structure,” Lambrix said. “Even a change in leadership can be a problem if the lab or AP group doesn’t retain all the billing records it should keep. 

“When a clinical lab or AP group switches to a new billing company or outsources its billing to a new company, many times the previous billing company will purge the files it had from that lab client after two years,” she noted. “If the documentation the lab needs to support claims being audited or under review has been purged, then the lab may be unable to get the information needed to contest any payer’s claim of overpayment.

“Ideally, clinical laboratories and pathology groups will want to pull the patients’ medical records to review how those contested claims were paid and how they were posted in the billing system,” she added. “If those records are unavailable for some reason, the lab will need to pay that money back to the health plan.”

Looking Back Six Years

Another recent development in the way private payers are auditing payments to clinical labs and pathology groups is how they are pushing the review period for past lab test claims that go back as much as six years. 

“The federal Centers for Medicare and Medicaid Services said it has six years to recoup repayment from the date of receipt of any overpayment or payment made in error,” Lambrix noted. “That period is generally known as the look-back period to recoup overpayments. Now we see more private health insurers follow that same script.” 

Lab administrators and pathologists should understand how payers typically identify the claims they want to audit. “Typically, a payer will compare claims from one clinical lab or AP group against what they would say is normal utilization for a particular CPT code or a group of CPT codes,” Lambrix explained. “Health insurers will then use that data to set benchmarks in their systems.”

Automated Aggression

Using data they have collected, health insurers then will use automated tools to compare normal utilization against the lab or the AP group’s utilization levels. In this way, payers can identify potential over-utilization. 

“Once a payer establishes these utilization benchmarks, it will go back and pull the records from 20 or more particular patient cases to see what it has paid for those cases,” Lambrix explained.

“If there were any overpayments, the health insurer will ask the clinical lab or AP group to provide the supporting documentation,” she added. “To respond to that request, the group or clinical lab must provide the information about each patient’s clinical history that supports the lab test claims that were billed and now are being audited.

“Here is where labs often have problems. When payers go back a significant period—as much as six years—that alone is a challenge for labs and AP groups to retrieve the documentation needed to support the claims the payers are questioning,” she said. 

Clinical laboratories and AP groups can protect themselves from claims reviews and audits that can go back as far as six years by reviewing language in their contracts with insurers and revising that language as needed.

“Labs and AP groups will need to work with their legal advisers to review the language in their contracts with all health insurers,” she said. “If needed, the payer should be contacted and that language should be revised as soon as feasible.

Review Payer Contracts

“Such revisions may not be possible until the contract expires,” Lambrix added. “That said, labs would be well-served to have their legal teams review all contracts with health plans before they expire and prepare new contract language for review. 

“Typically, the language in the lab’s contracts will say that health insurers or the insurers’ designated auditors may notify the lab or anatomic pathology group of overpayments at any time,” she warned. “That contract language will require the lab or group to return any overpayment or any payment made in error. 

“Common examples of payments made erroneously include a payment that is a duplicate involving the same lab test claim or a payment issued on behalf of a patient who was not a member of that insurance company,” Lambrix explained. “Such a notification will require repayment within a reasonable period. 

What Is ‘Reasonable Time’

In that case, the lab’s reasonable period of time may be significantly different from that of the insurers,” she advised. “Therefore, it’s important for labs to review the language in their payer contracts and define the reasonable period of time as being within two years or less if possible.” 

If the health insurer is unable to get any overpayment or erroneous payment back within what it considers to be a reasonable period, the payer will reserve the right to offset that amount against any funds that the insurer would pay on pending or future claims, Lambrix advised. “If labs don’t repay those funds right away, health insurers will claw back those amounts out of the money they owe your lab or AP group for future claims,” she cautioned.

Non-screening COVID-19 Laboratory Test Claims Should Be Fully Covered

WHILE SOME HEALTH INSURERS HAVE BEEN MORE AGGRESSIVE IN GOING AFTER OVERPAYMENTS, clinical laboratories and anatomic pathology groups should know that testing for the SARS-CoV-2 coronavirus falls under unique protections enacted as part of the Families First and Coronavirus Response Act (FFCRA), said Danielle Sloane, a member of the law firm Bass, Berry and Sims PLC in Nashville. 

“Health plans are required to cover COVID-19 testing for patients who have been assessed by a healthcare provider,” Sloane explained. “The government payment for COVID-19 testing is limited to individuals who do not have insurance coverage. Labs should note, however, that insurers do not have to pay for general workplace, school, or camp screenings, as the federal Centers for Medicare and Medicaid Services has noted. 

“That said, I am aware of several audits that private payers have conducted involving COVID-19 test claims,” she added. “From what I’ve learned, such audits primarily are focused on respiratory-panel testing that includes testing for COVID-19 and a number of other pathogens at the same time.

“However, private health plans also could be looking for COVID-19 test claims where the test is not based on a practitioner’s individualized assessment that COVID-19 testing was necessary,” Sloane noted. “In which case, insurers could take the position that such testing is screening in nature, and they are not obligated to cover it. 

“In instances when a clinical lab or pathology group gets an audit notice from a health insurer, I’d be curious if any payers are trying to take the position that the COVID-19 tests the labs ran were not qualifying tests because they had not received or applied for an emergency use authorization (EUA) from the FDA,” she added. 

“Technically, the protections imposed under the FFCRA apply to COVID-19 tests with an actual or pending EUA,” Sloane noted. “That said, I have not seen insurers take that position, likely because it could be a politically unpopular position given that Health and Human Services (HHS) issued a statement in the fall of 2020 telling clinical laboratories that they did not need an EUA to provide COVID-19 testing. 

“My recommendation to clinical laboratories and pathology groups doing SARS-CoV-2 testing is to be prepared with a well-crafted response letter to any audit request,” she advised. “Such a letter should state that the laboratory is aware of and understands the payer’s obligations to cover COVID-19 testing provided during the public health emergency without cost-sharing and without any medical management.

“We have helped several lab clients craft such letters in response to the request of a payer’s auditors,” she added. “A little time and money spent on the front end to craft a good initial response may be able to help avoid a lot of denied claims and expenses later on.”

COVID-19 Test Claims Could Be Audited

NEWS THAT PAYERS ARE GOING BACK AS MUCH AS SIX YEARS when auditing lab test claims is a warning that labs should prepare in advance for audits that may lead to a sizable overpayment demand. 

Last fall, The Dark Report published a special report, “Getting Paid for COVID-19 Lab Tests.” The following are recommendations to help labs prepare for payer audits of COVID-19 tests:

Other common denial reasons are insufficient documentation errors. These include incomplete progress notes, unauthenticated medical records, and/or unsigned orders. Since many commercial payers follow Medicare guidance, it is important for providers to understand Medicare documentation requirements for the claims submitted; however, providers must still be sensitive to any payer-specific requirements. Due to the variety of guidance and requirements from payers regarding requirements for coverage and reimbursement of COVID-19 tests, clinical laboratories should, as a best practice, require signed requisitions for every COVID-19 test they perform. This is also a best practice for non-COVID-19 tests.

Contact Ann Lambrix at 517-486-4262 or, Danielle Sloane at 615-742-7763 or



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