5 Ways to Minimize Underpayments in Medical Billing

underpayments in medical billing

Difficulties in getting paid for the medical services rendered are a reality for medical practices and healthcare enterprises. An article published (2019) by Revenue Intelligence states that Medicare and Medicaid reimbursements fell short by $76.8 billion in comparison to the cost incurred by healthcare enterprises. Even today, despite improvements in coverage, the reimbursement levels continue to be lower than the cost of care. Apart from below-cost reimbursements, there is also the added revenue challenge of underpayments in medical billing.

What are underpayments in medical billing?

Underpayment in medical billing is when the medical practice is reimbursed lower than the contracted amount by the health insurance company. Underpayments should not be confused with denials. A denial is a refusal by the payor to honor the medical claim or to pay for the healthcare services. Therefore, demarcating underpayments and denials is essential because you have a better chance of appealing an underpayment than a denial.

What are the top reasons for underpayments in medical billing?

Although you can’t eliminate payor underpayments, you can address the top root issues to stem this revenue leakage in your medical practice. Steps you can take to minimize payor underpayments are as follows:

  1. Understand your payor contracts and keep them up to date

The burden of proving that the insurance plan has underpaid its contractual obligations falls on the provider. Therefore, your medical billing staff or medical billing company must understand the terms of the existing contracts to pinpoint payor mistakes.

To avoid underpayments, ensure that your payor contracts are up to date with the latest fee schedules. Also, confusing contract language in healthcare legal agreements can lead to differing interpretations. Read the contract to ensure there is no ambiguity in the payment terms. All of this is made easier through a contract management tool.

A related piece of information is provider credentialing and CAQH profile updates. Ensure that this is done at least once in three months. No response on CAQH can threaten your insurance contracts.

  1. Ensure that your medical billing staff documents everything

Support each cost component filed in a medical claim with adequate medical documentation and cost calculations. Also, cite the insurance contract terms as proof along with the claim. Once you have successfully claimed a case of underpayment, you can cite it as an example when claiming similar other underpayments from the insurer.

  1. Updated service fee schedule and patient insurance eligibility check before appointment.

Contractual adjustments are one of the main reasons for claim underpayments. To avoid these medical practices must do two things- (a). ensure that the medical service-fee schedule is up to date, and (b). ensure that the patient’s insurance eligibility check is performed before performing the medical service. This will ensure that the medical claim amount is as per the patient’s insurance coverage and that the remaining cost of service is collected from the patient.

  1. Ensure underpayments are appealed timely

Payors can take up to 30 to 45 days to pay claims, which means it is several weeks before you notice an underpayment. Typically, a claim appeal must be filed in writing within 90 days of the date on the EOB (explanation of benefits) or provider remittance.

Tracking payor payments is possible only if you have a robust reporting and payment reconciliation mechanism. This is one of the top reasons medical practices partner with an outsourced medical billing company. A professional medical billing service will ensure that all payments are reviewed and claim appeals are filed as soon as payments have been received.

Note: One payment best practice is to ensure you accept electronic fund transfers (EFT) from all payors.  EFTs will make it easier to collect and reconcile your bank payments versus the value of claims submitted.

  1. Understand the top contributors to underpayments for your medical practice

The claim underpayments in your medical practice will usually be contributed by specific payors or will be for certain codes and modifiers. Once you identify the top reasons, you can monitor those specific issues closely. If the underpayment is usually for a certain medical code and modifier, then identify what you can do to improve the accuracy of that category of claims. If it is a payor-specific issue, connect with your payor contract manager to discuss the payment errors and how to handle the claims in the future.

For hospitals, healthcare clinics, and private practitioners, underpayments are a silent revenue killer. As a medical practice owner, you must identify the root causes of underpayments and adjust your payor contract management strategies.

If you need assistance with reducing payor underpayments in medical billing, we are here to help. Our experienced medical coding and billing staff will track all claims submitted and identify cases of underpayment and denials for correction and resubmission. Our robust reporting and analysis will help you understand revenue leakages as per payor and practice location to prevent future underpayments and denials.  We have had many successes in recovering underpaid claims by working with payor reps on behalf of our clients. Contact us for a free consultation on minimizing underpayments and reducing your accounts receivables (A/R).

Parul Garg, CEO and co-founder of PracticeForces, has significantly contributed to the growth of over 1,000 U.S. medical practices through her expertise in medical billing and coding since the company’s inception in 2003. With a background in Computer Science and an MBA in Human Resources, her leadership and AAPC-certified coding skills have been pivotal in managing the company’s operations effectively.

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