Receiving a repayment demand letter from a payer is one of the most stressful moments in practice management. The letter typically contains a large dollar figure, a short response deadline, and language that implies the practice has already been determined to be wrong. None of that is necessarily true.
Payer repayment demands — whether from Medicare RAC auditors, commercial payer post-payment reviews, or Medicaid integrity contractors — are not final judgments. They are opening positions in what is typically a multi-step administrative process. Your response to that letter, and how quickly you respond, determines the outcome.
Step One — Don't Panic, Do Respond
The most important thing when you receive a repayment demand is to respond within the stated deadline, even if your response is simply acknowledging receipt and requesting additional time or documentation. Missing the response deadline is almost always worse than the underlying issue — it waives your right to appeal and makes the demand immediately collectible.
Before you do anything else, determine who sent the demand. Medicare RAC (Recovery Audit Contractor) demands, MAC (Medicare Administrative Contractor) demands, and commercial payer demands each have different appeal processes, timelines, and legal standards. The process for appealing a RAC demand is completely different from appealing a commercial payer demand.
Statute of Limitations on Payer Demands
This is one of the most underused defenses in healthcare billing: payers cannot recoup claims indefinitely. For Medicare, the overpayment recoupment statute of limitations is generally five years from the date of payment, but there are exceptions and nuances. For commercial payers, your contract likely specifies a lookback period — typically 12-24 months — beyond which the payer has agreed not to seek retroactive recoupment.
If a payer is seeking repayment for claims that are outside the contractual lookback period, you have a defense based solely on that ground, regardless of the merits of the underlying claims. Review your contract before assuming any demand is timely.
Building Your Documentation Defense
For audited claims, pull the complete medical record — not just the billing record. The clinical documentation that supports each audited claim is your primary defense material. Review it before the payer does.
Identify any gaps between what was billed and what's documented. If there are gaps, assess whether they represent a true documentation failure (the service was performed but not documented) or a billing error (the service documented doesn't match the code billed). The defense strategy is completely different for each scenario.
For documentation failures where the service was genuinely performed, late attestations and addendums that comply with CMS documentation guidelines can sometimes strengthen the record. For billing errors, the honest approach is to acknowledge the error, calculate the actual overpayment, and propose a repayment plan on the corrected amount rather than the full demand.
Downcoding — When Payers Change Your Codes
Downcoding — where a payer pays at a lower code level than you billed — happens both in post-payment review and as systematic edit policy. If a payer is systematically paying your 99215 claims at the 99214 rate, that's potentially a contract violation and definitely an appeal opportunity.
When you identify systematic downcoding, the first step is to quantify it: how many claims, over what period, and what's the dollar impact. Then pull a representative sample of the downcoded claims and perform your own clinical documentation audit. If the documentation supports the level you billed, you have the basis for a formal appeal.
Provide the clinical justification for each level in your appeal — don't just assert that the code was correct, demonstrate it by mapping the documentation to the specific MDM or time criteria that support the higher level. Including excerpts from the medical record (with appropriate redaction for non-audited patients) significantly strengthens downcoding appeals.
