New regulations, ICD-10 codes, and value-based care are aimed at improving improve care delivery. However, as experienced medical billing companies know, physicians’ practices and hospitals need proactive strategies to optimize revenue cycle management (RCM) in the evolving healthcare scenario. One of the most significant challenges that providers face is claim underpayments. According to studies by the Medical Group Management Association (MGMA) insurers underpay practices in the U.S. by an average of 7%-11%. Costly to rectify, underpayments and denied claims cost healthcare systems billions of dollars every year. Hospitals and practices can manage inappropriate claim denials by identifying underpayments and taking steps to reverse them.
According to a Beckers Hospital Review report, there are four main reasons for underpayments:
- Incorrect medical billing and failure to submit proper clinical documentation to support services provided
- Use of incorrect contract terms by payers for pricing claims
- Errors made by payers in calculating the allowed amount and failure of providers to identify these errors
- Discrepancies in interpreting contract terms by payer and provider
The first step to dealing with underpayments is to identify them. Providers need to ask their medical billing and coding service provider to list the topmost performed procedures and top paying consult codes. Next, they should verify their contracts to confirm the rates that were agreed upon or ask their insurance company to provide them with the fee schedules for the listed procedures. Once the fee schedules are available, it will be possible to cross check the reimbursement rates against each claim. In fact, reliable medical billing companies perform this exercise on a regular basis as part of their accounts receivable (AR) management services, flag the discrepancies, and help providers follow-up on unpaid claims promptly. They integrate admissions, eligibility, patient payment, contract management, claims and AR management, into a single seamless process, allowing hospitals and health systems to identify, manage, and quickly respond to discrepancies so as to ensure appropriate reimbursement of each claim.
In addition to this, on their part, practices can take the following proactive steps to reduce the risk of underpayments:
- Know provider contracts and fees for all top paying codes: Before signing the contract, providers should how much they are going to be paid for each code. Moreover, it is important to stay updated on payer contracts and agreements as many insurers change regulations from time to time. Knowing the state’s laws on insurance payments is also necessary.
- Focus on complex areas of payment accuracy: Beckers Hospital Review recommends focusing on the following five key areas which present opportunities mainly due to complexity and difficulties in obtaining accurate, automated pricing of contract terms:
- Stop-loss terms
- Carve-outs such as implants and high-cost drugs
- Outpatient APC Medicare claims
- Medicare Advantage HMO claims
- Length of stay, billed amount and DRG outliers
- Document appeals correctly: Providers should clearly cite the contract terms and calculations to demonstrate an insufficient payment in their underpayment appeal letter. This is important to get the payer to explain why they arrived at a different amount and underpaid the claim.
- Track key performance indicators (KPIs) to identify detrimental payment trends: Monitoring cash flows and KPIs such as days in AR, net collections percentages and percent of AR over 120 days will help identify overdue payments. This can help in managing underpaid claims.
- Check for opportunities of negotiation: While reviewing contracts, providers should check for opportunities to negotiate reimbursement rates. Most private payers allow for contract negotiations every three years.
- Take steps to correct denials: Claims are often denied due to lack of proper medical eligibility verification. Checking patients’ eligibility for services and implementing a prior authorization system should be a routine part of the registration process. Reviewing the coding and documentation processes to identify errors is also important. If a claim is denied, proper steps should be taken to correct it and have the claim readjudicated. This could involve thoroughly documenting the treatment in question along with details about any unusual circumstances of the case.
Experienced medical billing and coding companies have the resources and expertise to implement these processes. Their streamlined approach can help healthcare providers reduce the volume of denied or underpaid claims, maximize collections, decrease operational expenses, improve workflow and boost revenue.