Hack #8 – Effectively Managing Underpayments
No doubt your practice has endured its share of claim underpayments. Thirty percent of claims are denied or ignored on first submission, and 60% of those claims are never resubmitted, according to a 2013 Healthcare Business Management Association article.
Four years after that article was written, there are still too many examples like the situation in Florida, in which an insurer reportedly incurred a pair of lawsuits last year over claims it underpaid out-of-network health professionals by millions of dollars for services they provided to the insurer’s HMO members. One of the suits alleged the insurer reimbursed its doctors and other personnel $42 million less than what state law requires.
Common reasons for denial of claims include incorrect patient information (such as a misspelled name or wrong date of birth), terminated insurance coverage, non-covered services, services requiring prior authorization, and late filing.
Claim rejections and denials are blatant, but when underpayments occur, they can go undetected unless you have a system like PracticeSuite that compares payments to contacted fee schedules and tracks what other doctors in your area are being paid for similar services.
To reduce underpayment of claims, practices need infrastructure that proactively addresses clinical documentation, coding, billing, and collections. Reinventing revenue cycle management processes and adopting an integrated approach to billing reduces underpayments and denials. By leveraging an integrated approach to the clinical and financial sides of the house, practices can more efficiently aggregate, assess, and apply valuable data from disparate systems.
In addition, integrated systems enable a practice to use analytics to improve internal processes and improve financial performance and sustainability.
Practices that aren’t ready to reinvent or revamp their processes can take other steps to stop or at least lessen underpayments:
- Educate patients about their payment options and responsibilities. Most patients don’t read the fine print that comes with insurance plans.
- Analyze payer contracts and agreements every three months. Most insurers change regulations often, and it is in the best interest of medical practices to stay updated.
- Know how much you are going to be paid prior to signing an agreement. Compile a list of CPT codes based on how often you them and what the top paying codes are. To save your practice from legal wrangles andunderpayments, ask your insurer to list the fee for each code.
- Monitor key performance indicators regularly to spot unhealthy payment trends. This will help quickly address underpaid claims.
- Take appropriate steps to correct a denial and have the claim readjudicated. This may mean thoroughly documenting the treatment in question and detailing any unusual circumstances of the case. Compile data about prevailing rates for doctors with the same training and qualifications.
- Know your state’s laws regarding prompt insurance payments.
Rather than battling internal administrators, pursuing a legal challenge against insurers can lead to faster, fairer remuneration—especially when the amounts are significant or there’s a systematic problem. Instead of giving up on a claim and getting nothing, physicians stand a good chance of getting at least some of the money they’re owed. The threat of a court case often leads to out-of-court settlements.
Of course, practices should carefully consider whether pursuing an underpayment claim against an insurance company is a sound business decision. Potential payoff notwithstanding, litigation involves significant investments of time and resources.
- Healthcare IT News, January 21, 2016, “Reduce claims underpayments and denials through integration,” by Bryan Hufnagle, //www.healthcareitnews.com/blog/reduce-claims-underpayments-and-denials-through-integration
- Law360, May 23, 2016, “2 Suits Claim Fla. HMO Underpaid Doctors By Millions,” by Nathan Hale, //www.law360.com/articles/799089/2-suits-claim-fla-hmo-underpaid-doctors-by-millions
- Healthcare Business Management Association, February 21, 2013, “Where Your Clients Might Be Losing Money in Their Practices,” by David Doyle, //www.hbma.org/news/public-news/n_where-your-clients-might-be-losing-money-in-their-practices
- BillingParadise, September 29, 2014, “How medical practices can put an end to underpayments? Be proactive,” by Erika Regulsky, //www.billingparadise.com/blog/how-medical-practices-can-put-an-end-to-underpayments-be-proactive/
- Law 360, Doctors Assigned Payment Rights Can Sue Insurers: 3rd Circ., Sept 11, 2015, //www.law360.com/articles/701845
- Becker’s Hospital Review, March 2, 2015, “5 things to consider before pursuing an underpayment claim: Tips from a healthcare litigator,” by Daniel R. Smith, //www.beckershospitalreview.com/legal-regulatory-issues/5-things-to-consider-before-pursuing-an-underpayment-claim-tips-from-a-healthcare-litigator.html