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Progenity to Cut Workforce as Third-Party Payor Seeks $27.4M for Alleged Overpayment

NEW YORK – In a document filed with the US Securities and Exchange Commission on Wednesday, Progenity said that it is trimming its workforce by around 10 percent and revealed that a commercial insurer is seeking recoupment of $27.4 million from the firm in alleged overpayments.

The company it is terminating approximately 67 employees, who will exit before the end of this year. The termination benefits will cost the company $1.3 million, it noted.

"The reduction in force is a component of the company's broader efforts to materially reduce its research and development expenses by focusing on key milestones and to limit progression of other costs to track its top-line performance," the firm said in its filing. 

Regarding the alleged overpayment, Progenity said that issue relates to previous legacy billing practices for the firm's non-invasive prenatal testing and microdeletion tests. It added that the recoupment relates to implementation of a new CPT code for its expanded carrier screening tests. The firm plans "to negotiate and/or dispute this claim of recoupment with the payor and seek to offset any amounts owed by the payor to us."

The firm also said it will separately negotiate with the undisclosed payor for in-network status, and last week the payor told Progenity that its claims will not be subject to prepayment review any longer, which the firm said it believes will lead to an increase in reimbursement. 

Progenity has a history of payor and government settlements related to improper billing, including a $35.8 million settlement with the US Department of Justice earlier this year for inappropriate coding and billing practices, namely using a fraudulent billing code to misrepresent the NIPTs it provided and offering kickbacks. The San Diego-based firm has also had issues with commercial payors including Aetna, United HealthCare, and Cigna, but agreed to settlements with all three insurers and is now in-network with Aetna and Cigna. 

Piper Sandler analyst Steven Mah said in a research note that the payor issue is disappointing, but he noted that disputes like these are common and Progenity has previously settled with three major payors and moved in-network or contracted with them.