Case Study Summary: Penstock uncovered $7.6 million in lab claim overpayments by analyzing high-volume, low-dollar claims that fell below standard payment integrity review thresholds. Applying CMS national coverage rules to nearly 500,000 claims across Medicaid and Marketplace plans in more than 30 states revealed significant overpayments missed by traditional workflows, demonstrating how deep, policy-driven data mining exposes risk that threshold-based reviews overlook.

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Background

During an ongoing payment integrity engagement, Penstock uncovered a widespread issue involving lab claims that should not have been paid based on national coverage rules. The problem wasn’t limited to one provider or one state, it appeared across Medicaid and Marketplace plans in more than 30 states, affecting nearly 500,000 claims. Most of the individual claims were small, but taken together they added up to significant claim overpayments. Because these claims fell below standard dollar thresholds, they were easy to miss and weren’t identified through traditional payment integrity processes.

The Challenge

Like most health plans, the client applied a minimum dollar threshold for claim adjustments, typically $25 per claim, to balance recovery value against operational effort and provider abrasion. This meant that while higher-dollar claims were reviewed and recoverable, hundreds of thousands of lower-dollar claims remained untouched, even when they were clearly non-payable under CMS coverage policy.

The question became: What happens when high-volume, low-dollar errors are examined holistically rather than individually?

The Discovery

Penstock reviewed lab claims using national coverage rules that spell out when certain lab tests should be paid and when they should not. We translated those rules into usable data, then compared them directly to paid claims to identify lab tests that did not meet coverage requirements. This review was applied across all eligible markets and lines of business.

The results:

• 400,000+ claims impacted

• 20,000–30,000 claims above the $25 threshold

• ~$3.3M recoverable under existing rules

• An additional ~$4.0M identified if the threshold were lowered to $5 per claim

Total potential recovery: ~$7.6M

Because of the volume involved, Penstock worked with the client to evaluate alternative recovery approaches, including:

• Automated claim adjustments where feasible

• Grouped provider settlements for manual environments

• Market-specific execution strategies based on operational maturity

The concept was approved for production at the standard threshold and is under active review for expanded recovery.

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