Handling underpayments is a critical part of revenue cycle management. It’s not just about collecting payments—it's about collecting the right amount. Underpayments chip away at your bottom line, often unnoticed until they add up to significant losses. And they’re more common than you might think. Diagnosing and addressing these issues requires vigilance, a keen eye for detail, and a structured approach.
Recognizing the Signs of Underpayments
The first step is to acknowledge that underpayments exist. They can stem from various sources: payer errors, miscommunication, or even incorrect contractual adjustments. Common denial codes like CO-45 (charges exceed contracted/fee schedule) or PR-45 (charges exceed your contracted/legislated fee arrangement) can signal trouble.
Ensure your billing software flags discrepancies between expected and actual payments. Set parameters for alerting you when a payment falls short by a certain percentage or dollar amount. If your software doesn’t support this, manual reports will have to do the job. Tedious, but necessary.
Comparing Payments to Contracted Rates
Your contracts with payers dictate the reimbursement rates for services rendered. These contracts aren’t static documents—they’re often updated with new rates, terms, and conditions. Keeping track of these updates is crucial for identifying underpayments.
Create a detailed matrix of your contracted rates for common CPT and HCPCS codes. Cross-reference every payment against this matrix. Even a $5 discrepancy can tip you off to a larger issue. And don’t just check the numbers—verify the payer’s calculations, including adjustments and multipliers.
If you're not regularly auditing against your contracts, you're leaving money on the table. Conduct quarterly audits (at minimum) to ensure payments align with your agreements.
Common Payer Behaviors and Workarounds
Payers have quirks—they may honor contract terms inconsistently or apply rules you didn't agree to. Some might slow-walk claims processing (especially near year-end), leaving payments lingering just below acceptable thresholds.
To counter this, maintain a detailed log of payer communications and decisions. Document every interaction—who you spoke to, what was promised, when actions will occur. This log can be a lifesaver when disputes arise.
Use payer portals aggressively. They often contain hidden nuggets of info, like uncommunicated policy changes or obscure appeals processes. But be prepared for exasperating hold times and Byzantine menu options. Consider dedicating specific team members to this task to minimize disruption.
Recovering Underpaid Amounts
Once identified, recovering underpayments requires tenacity. Start by crafting a solid appeal letter. Detail the payment discrepancy, referencing your contract terms, and provide evidence: original claim forms, EOBs, and any supporting documentation. Be concise yet thoroughly explanatory.
Submit your appeal via the payer’s preferred method—usually through their portal, but sometimes fax or email (yes, some still use fax). Track the appeal's progress assiduously. And follow up relentlessly, especially if the response lags beyond their stated turnaround time.
In cases where initial appeals fall on deaf ears, escalate. Request a supervisor review, or if necessary, bring in your legal team for persistent offenders. Payers often respond more quickly when they sense a genuine threat of escalation.
Training Your Team
Everyone on your billing team should understand how to identify and address underpayments. Offer regular training sessions focusing on contract terms, denial codes, and payer behavior. Use real-world examples from your own practice—contextual learning sticks better.
Consider employing Arrow, an AI copilot for medical billers, to assist in highlighting discrepancies and suggesting resolutive actions. AI tools can scan thousands of claims rapidly, identify patterns, and even draft appeal letters based on previous successful submissions.
Final Thoughts
Underpayments are an unfortunate reality in medical billing, but they don’t have to be a persistent headache. By implementing vigilant monitoring processes, engaging payers effectively, and leveraging technology, practices can recover lost revenue and reinforce their financial health. Stay proactive, stay informed, and don't leave a cent unclaimed.
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