✍ Responding to Payor Recoupment Demands After an Audit: A Legal Guide for Small Practices
There’s nothing more frustrating than being asked to return money you already earned—especially for services provided months or even years ago. But that’s exactly what happens when a payor issues a recoupment demand following a claims audit.
Whether the amount is $1,500 or $150,000, your response will determine whether you pay, appeal, or negotiate a better outcome. This guide explains why recoupments happen, how to respond strategically, and how to protect your practice’s bottom line.
🤔 Why Do Payors Request Recoupments?
Payors conduct routine and targeted audits to identify alleged overpayments. Common reasons include:
Incorrect coding (e.g., improper use of "incident to" billing)
Documentation errors or missing elements
Non-covered services under evolving policy rules
Suspected fraud or abuse—even if unintentional
Once an overpayment is flagged, the payor may issue a recoupment letter demanding repayment—and sometimes start offsetting future payments.
⚠️ Why You Should Never Ignore a Recoupment Letter
Silence = Acceptance. If you don’t respond, most payors will begin withholding payment from current claims to collect the alleged overpayment.
Even if the letter feels vague or unfair, failing to act means losing your right to challenge it.
✅ What to Do Immediately When You Receive a Recoupment Notice
1. Review the Recoupment Letter Carefully
Confirm which claims are involved
Check the dates of service and specific CPT/HCPCS codes
Look for a clear explanation of the reason for overpayment
Identify any references to provider manual or contract language
2. Pull and Review Your Payor Contract
Look for contract terms that may protect you:
Recoupment time limits (e.g., “within 12 or 18 months of payment”)
Audit rights and procedures
Notice requirements and dispute process
Language on retroactive policy changes
Some contracts limit how far back a payor can look—or restrict how they can recover money.
3. Check the Provider Manual or Policy Updates
If the payor cites a new rule or policy, ask:
Was the change clearly communicated to your practice?
Was it in effect at the time of service?
Did your contract allow unilateral modification of policies?
Payors cannot enforce retroactive policy changes unless your contract explicitly allows it.
4. Build a Strong Response or Appeal
Include the following in your reply:
A formal appeal letter explaining why the demand is incorrect or excessive
Relevant medical records and billing documentation
References to your contract and payor policy at the time of service
A clear request to reverse or reduce the recoupment
Use clear, respectful language. Assume your response could be reviewed by both payor executives and regulators.
🧠 Yes, You Can Negotiate Recoupments
Even if the payor won’t cancel the demand entirely, you may be able to negotiate:
A reduced repayment amount
A payment plan with no interest
Waiver of penalties or offset delays
Favorable settlement terms, especially for disputed documentation issues
💼 Legal Support Makes a Big Difference
Recoupment letters are intimidating by design—but they’re not always enforceable.
An experienced healthcare attorney can:
Identify flaws in the payor’s justification
Ensure your rights under the contract are respected
Draft a legally sound appeal
Help you negotiate from a position of strength
💡 Final Thoughts
If you’ve received a payor recoupment demand, don’t panic—and don’t pay without reviewing your rights. You may be entitled to appeal, negotiate, or dispute the demand entirely.
A well-handled recoupment response can save your practice thousands in lost revenue—and future audit exposure.
Hurley Law Group
Healthcare Law for Small & Midsized Providers
📞 308-383-1867
🌐 hurleylawgroup.com
✉️ eric@hurleylawgroup.com