Submitted by Antonio Arias, MBA, CHBME on Fri, 01/9/2015 - 10:00

How to Put an End to Underpayments

Medical Billing Tips: Put an End to Underpayments

How to Put an End to Underpayments

Practices tend to consider their contracts with payers to be binding commitments… but are they? Data from the American Medical Association shows that most insurance companies pay practices just 86-92% of their contracted rates. 

If you’re not paying close attention to payer payments, your practice could be getting gouged. Eliminating underpayments is critical, but requires education, data, and a proactive approach.

Know What You’re Owed

Sorting through and reviewing your payer contracts can be tedious and time-consuming, but it’s important. You need to know exactly what your payers should be paying you before you can go out and get it.

Gather your contracts and list out each payer’s contracted rates by CPT code in a spreadsheet. (Use this opportunity to compare payer rates against each other. Not only is the information useful for the next step of determining underpayments, it’s important intel that will come in handy when you renegotiate your fee schedules down the road.)

Compile Your Data

Armed with your contract information, compile statements and reimbursement data from each payer for a given amount of time – one to three months – into another spreadsheet, code by code. At the end of the time period, compare actual payment data to the rates in your first spreadsheet. (If you use advanced medical billing software or work with a medical billing service, this process will be less time-consuming.)

Are payers coming up short? Is it happening rarely or sporadically, or is there a strong tendency to underpay? What’s the average percentage of each underpayment, code by code? Collect all of this information in a clear way, or summarize it into a written report explaining the scope of the issue.

Approach Your Payer

The most important step is to speak up and be heard. Make a game-plan beforehand; having your chief biller contact a low-level rep at the insurance company likely won’t result in any productive action.

Review your contracts very carefully, then have a physician or practice manager request a meeting with whichever person at the payer organization was responsible for negotiating the original contract. Come to the table armed with data and a pre-determined request (i.e do you expect back payment? or simply want accurate payments in the future?).

If the payer is nonresponsive or you fail to reach an acceptable resolution to the problem, consider legal action (being mindful, of course, about what your contracts say about filing court actions).

Stay Aware

Ideally, your practice manager walks away from the meeting with the payer with a positive outcome and a commitment from them for higher, more accurate reimbursements. If that happens, don’t let the resolution be a temporary fix. A payer could easily pay the contracted rates for a few months then fall back into underpayment territory. Pay attention!

Audit payments from all your payers every several months to make sure they’re paying as promised, and monitor key performance indicators regularly to spot unhealthy payment trends. If the problem persists, work with a medical billing company; they often have stronger, more enforced relationships with payers to help you get paid what you deserve.

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Topics: Medical Billing, Revenue Cycle Management, Resolve Patient Billing Problems, medical billing ending underpayments

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