Reducing Underpayments in Medical Practices
When insurers pay less than what is stipulated in a practice’s contract, it can lead to revenue loss without the doctors being aware of it. According to estimates, up to 3% of the expected revenue of a typical practice is lost due to underpayments. To recover underpayments, billing staff must first identify and then attempt to collect the correct amount from the insurer. However, both tasks can be challenging, and most practices do not systematically address them.
Many underpayments are caused by insurers, who may incorrectly calculate the due amount, interpret payment rules in the contract differently, or take unilateral actions, such as reducing an E&M code (Evaluation and Management), even though the documentation is correct. Additionally, billing staff can also contribute to underpayments if they do not code and document properly due to lack of training and resources.
Common errors in practices that lead to underpayments include: inadequate documentation, setting practice fee schedules too low, and intentionally undercoding for services. To combat underpayments, practices need to strengthen their billing staff and develop a strategy for addressing underpayments. Monitoring for underpayments should be conducted not only at the time of payment, but also on a monthly basis, as discrepancies may not be initially recognized.
Automating the process of loading contractually agreed-upon rates into the practice management system can help identify potential underpayments but still requires manual work to verify the underpayment. Practices should also be proactive in addressing overpayments, as insurers have the right to reclaim overpayments within a specific time period.
To address underpayments, practices should understand their contractually agreed-upon rates and payment rules. Software can aid in identifying potential underpayments, but resolving underpayments still involves manual work. Insurers are often willing to rectify simple underpayments, but complex issues may require communication with a claims adjuster or network manager. In extreme cases, practices may need to resort to arbitration to resolve disputes with insurers.
In summary, to address underpayments, practices must reduce billing errors, identify underpayments, and engage with insurers to ensure correct payments are received. Being proactive in understanding contract terms and payment rules is crucial in addressing underpayments, and practices should be prepared to escalate issues with insurers when necessary.