Medical underpayment recovery identifies and addresses instances where healthcare providers receive less reimbursement than expected for services rendered. It typically involves analyzing claims, contracts, and payments to resolve discrepancies. For many healthcare providers, underpayments are a persistent and serious concern.
Underpayments by commercial payers cause providers to lose one to three percent of their net revenue each year, according to research published in Becker’s Hospital Review.
Underpayments are a problem that many healthcare organizations neglect in the revenue cycle management process. It leads to healthcare providers facing burnout and being underpaid for their work, and many healthcare workers are considering leaving their jobs for on-demand roles like travel nursing.
This article thoroughly discusses the reasons and solutions for the underpayment of claims.
What are Underpayments?
Underpayments for healthcare providers happen when providers fail to receive full compensation for the treatment they offer or the payor fails to repay the entire amount owed for services rendered to their beneficiaries.
Their agreement with the payer, governmental laws, or the share of the patient may determine the anticipated sum. Regardless of the cause, underpayments lead to more contractual write-offs, which reduces revenue.
However, there is a significant difference between underpayments and claim denials. Any claim that a payer refuses to pay is referred to as a denial in medical billing. On the other hand, an underpayment is a phrase used to characterize an expected value that is more than the actual amount paid for a claim.
Common Reasons for Underpayment
Underpayments can occur for various reasons, for instance, incorrect coding, denials, a misinterpretation of the payer contract terms, changing fee schedules, and health insurance errors, and often require significant time and effort to address the discrepancies and secure the full payment owed. The most frequent causes of underpayments at the filer’s end include incorrect coding, denials, misinterpreting the payer contract, shifting fee schedules, health insurance errors, and other factors. These reasons usually lead to denials and underpayment issues. Resolving these underpayments requires a significant investment of time and resources. Listed below is a discussion of some of the primary causes:
Coding Errors
Lower reimbursement rates could be the consequence of incorrect coding. It takes specialized knowledge to remain on top of all the current codes and standards because medical coding is complicated and subject to frequent changes. The mistake is frequently as simple as forgetting to include a necessary modifier, which is a sub-code that adds information.
Bundled/Unbundled Coding
Some processes can be presented with a bundled code, which consists of all the components of the procedure in a single code. Whereas some coding occurs when professionals bill each phase of a procedure separately because they are not aware of the bundling requirement.
Charge Schedules
If practitioners charge using the incorrect fee schedule or the insurer has reduced the reimbursement rates, they may receive less than what was invoiced.
Policy Changes
Practitioners may receive less money if insurers revise their policies and payment schedules.
How to Recover Underpayment?
There are four primary steps in the underpayment recovery procedure. The first step starts by establishing your premises, finding out the reasons for underpayment, and submitting the reimbursement.
Payers Contract
You must ascertain the rates and fees of reimbursement, the range of services the payer will cover, the number of days the provider has to file a claim following a service or visit, and other crucial terms of the agreement before entering into a contract.
Identify the Reason
Finding and fixing the problem should be your priority. Start by carefully reviewing your payment history, identifying patterns, and pinpointing the occasions causing underpayments.
Documentation
Collect all necessary documentation, including medical records, coding information, and insurance policies, which will help expedite the appeals process.
File Claims for Rectification
Healthcare providers must challenge the underpaid claims to receive full compensation for their services. To support your case, present documentation of the services rendered, the necessity of the services, and the relevant code and pricing schedules. The provider must submit a corrected claim in case of billing or coding errors.
How to Avoid Underpayments
There are a few measures you can take to avoid the underpayments of claims.
Periodic Audits
Conduct regular audits to review agreements signed with payors to ensure they are current and correctly reflect underpayments. You should audit your coding and invoicing processes as well to prevent issues later. Payment disparities can be found by analyzing data inputs entered into the contract management system. Additionally, healthcare practices can acquire external medical billing audit services to verify medical billing and coding accuracy and ensure compliance with state and federal regulations.
Using Latest Software
Technology may analyze payor performance and spot inconsistencies, whereas some systems can detect underpayments by analyzing data. You can identify payors, services, and procedures frequently connected to underpayments by leveraging the latest software or the expertise of underpayment specialists and their capacity for critical thought to assist workflow and anomaly identification through machine learning technologies.
Employee Expertise
Your staff needs to be fully aware of billing and coding procedures to help avoid errors that can lead to underpayments. Consider hiring medical underpayment recovery experts to look into the issues and persuade payors to reimburse you in full. Collaboratively informing the managed care team about identified underpayment issues results in a systematic resolution of payer difficulties.
Outsource Billing Process
Providers work with a third party for such cases that are large, complex, and have a lot of money at stake or hire a lawyer to pursue payment to help enforce the laws if correcting errors or filing appeals does not resolve the underpayment. It can decrease revenue loss by putting best practices into effect, such as routinely checking charge schedules, keeping an eye on the accuracy of the coding, and contesting underpaid claims. Numerous advantages come with outsourcing medical billing, such as improved cash flow, efficiency, and access to billing specialists.
Conclusion
Underpayments may occur due to issues with payer agreements, outdated fee schedules, coding mistakes, or miscalculations by insurers.
Healthcare organizations should improve their revenue recovery operations, safeguard their earned money, and simplify their payment procedures by implementing these best practices. A comprehensive strategy involving technology, analytics, teamwork, and a committed group of professionals is needed to address underpayments in healthcare revenue cycle management.
