Learn how complex fee schedules can increase payment variance and steps you can take to improve your practice reimbursement.
A recent study from the Medical Group Management Association (MGMA) estimates that insurers routinely underpay U.S. healthcare providers by an average of 7–11%. While it’s startling to realize your practice could be losing a tenth of its revenue to underpayment, it’s not surprising that a system of overly-complex fee schedules is mostly to blame.
Just as you struggle to analyze fee schedules, so do your payers. They often contract with thousands of providers, requiring a massive library of billing rules that feed denials, payment adjustments, and more. These rules can dictate how modifiers such as 50, 26, and TC affect reimbursement; they can also affect specific rules like first procedure payment versus secondary procedure payment or highest wRVU payment. And this is where 7–11% of your payments get lost.
To get paid accurately, you first need to know what accurate means.
Start by aggregating your fee schedules to establish a baseline. Confirm that your provider group and payers agree which fee schedule should be used. And make sure credentialing, facilities, and eligible service locations are up to date on the payer side.
Next, you’ll want to understand payer rules. Do they pay 100% for the first procedure and 50% for subsequent procedures? Do they pay the highest wRVU procedure and discount the rest? How do modifiers affect reimbursement? These questions, and many more, will help you establish a true baseline for estimating net revenue.
Identifying reimbursement variance (if you can even get the data) can be tricky. Look at the electronic remittance or ANSI 835 file for an explanation of benefits. These transactional files outline what’s allowed, what’s paid, and what’s a contractual adjustment.
A good variance model should include the payer, procedures billed, and units to forecast the net revenue. Other factors that affect reimbursement are denials and patient responsibility. These are reductions in payments and can easily be identified via Claim Adjustment Reason Codes (CARC), but these should not affect the total collectible balance.
To make remediation easier, look for trends across payers. Focus on the top volume payers and drill down to identify a batch of similar underpayments. Before you submit for reimbursement, make sure the underpayments you identify are still within the claim review period.
Correcting underpayments is easier than you think. If you’ve aggregated the billing logic (e.g., fee schedules and rules) and accurately identified underpayments, there are two usual remediation processes.
The first is to submit the claim numbers to the payer for review. Include the reason you flagged these for underpayment. For example: In March 2018 a practice realized that a commercial payer was still paying their 2017 rates. They submitted a batch of claims with the calculated net revenue and a brief description of the found issue. The payer responded with a sizable reimbursement.
The second process is to work directly with your payer/provider representative to have them reprocess your claims. Clearly, something went wrong the first time, so you need to verify with your rep that the correct elements are loaded into the payer system (e.g., providers, contracts, fee schedules) and save yourself some time submitting batch files.
The first step toward significantly improving profitability for your practice? Recouping the 7–11% you may be losing in underpayments. Not only will physicians appreciate receiving accurate reimbursement for services rendered, having checks and balances in place for complex fee schedules will enable your practice to focus on better care initiatives.
Medical underpayment recovery is a critical component of revenue cycle management (RCM), and technology can play a pivotal role in addressing the challenges associated with underpaid claims. By leveraging automation, analytics, and integration tools, healthcare providers can streamline their underpayment recovery process and improve overall reimbursement. Here’s how:
Advanced contract management systems and EHR-integrated platforms can automatically detect discrepancies between expected and actual payments. These tools compare claim submissions to payer contracts, identifying underpayments in real-time, saving your team valuable time and effort.
Aggregating and organizing complex payer fee schedules is a key step in ensuring accurate reimbursement. Modern tools allow for centralized storage and easy updates of fee schedules, ensuring consistency across all claims.
Technology facilitates the batch submission of claims flagged for underpayment, streamlining the process of appealing discrepancies. Providers can easily include detailed explanations and documentation to support their appeals, reducing the risk of denials.
Advanced analytics help identify trends in underpayments, such as recurring issues with specific payers or denial reasons. This data enables practices to proactively address the root causes of underpayment, such as coding errors or outdated payer contracts.
Automation tools can trigger alerts for follow-ups on pending claims, ensuring practices adhere to payer deadlines for claim review periods. This reduces the risk of missing opportunities to recover lost revenue.
Custom reports provide visibility into key metrics, such as the volume of underpayments, the success rate of appeals, and overall cash flow improvement. These insights are essential for healthcare organizations aiming to optimize their revenue recovery process.
By integrating these technologies into their revenue cycle process, healthcare organizations can recover significant revenue, improve efficiency, and enhance their financial health.
To learn how Rivet can help you improve your practice reimbursement by identifying payment variances, request a demo today.
Medical underpayment recovery is the process of identifying and addressing instances where healthcare providers receive less reimbursement than expected for services rendered. This typically involves analyzing claims, contracts, and payments to resolve discrepancies.
Underpayments can result from errors in payer contracts, outdated fee schedules, incorrect coding, or insurance company miscalculations. Denials and misinterpretation of contract terms also contribute to underpayment issues.
Recovering underpayments ensures providers receive the full reimbursement they’re entitled to, improving their cash flow and overall financial health. Addressing underpayments also strengthens relationships with payers and supports better revenue cycle management.
Automation tools and EHR-integrated systems can identify underpaid claims, flag discrepancies in real-time, and simplify batch claim submission. Analytics tools help pinpoint recurring issues, enabling proactive solutions.
Challenges include navigating complex payer contracts, managing denials, and adhering to claim review deadlines. Inadequate reporting and manual processes also slow the recovery process.
Underpayments reduce net revenue, strain cash flow, and can negatively impact a provider’s ability to invest in patient care and operational improvements. Addressing underpayments is essential for maintaining a healthy revenue cycle.
Providers can minimize underpayments by keeping payer contracts updated, using automation tools for claim submissions, and regularly auditing their revenue cycle process for inefficiencies.
Batch claim submissions allow providers to submit multiple claims for underpayment recovery simultaneously. This streamlines the appeal process, saving time and increasing efficiency in resolving discrepancies.
Payer contracts outline reimbursement rates and rules for specific services. Discrepancies in these contracts, such as outdated fee schedules or misapplied terms, are common sources of underpayments.
While many underpayments can be recovered if addressed promptly, some may fall outside the claim review period or lack sufficient documentation. Timely action and accurate records are critical for successful recovery.
