Is your practice losing money to Payer underpayments? Is your staff overwhelmed and unable to even review if you have been paid according to Payer contracts? You’re not alone! Payer underpayments occur when providers/entities receive less than expected from payers even when there is a contracted rate in place. Payers often “short” reimbursement for medical services rendered, it is not an uncommon practice. In addition to undercutting payment under the guise of a “payer error”, there are other common causes for receiving less than a contracted rate for a service, such as:
- CONTRACT MISINTERPRETATION
- CODING ERRORS
- INCOMPLETE DOCUMENTATION
Underpayments are different than a claim denial as part of the claim is paid. Underpayments can wreak havoc on a practice’s Accounts Receivable, and overall practice stability, as it is truly up to the staff posting payments for you or an EMR that posts automatically, to be able to identify when you are not being paid according to contract. That can be a very time-consuming process as it will also involve following up with that payer(s), to receive full payment. Becker’s Hospital Review found providers lose one to three percent of net revenue each year, from underpayments alone. https://www.beckershospitalreview.com/strategy/look-beyond-the-common-variance-report-to-find-and-capture-revenue.html. Similar studies have estimated that number to be upwards of close to eleven percent. https://www.beckershospitalreview.com/finance/3-keys-to-staying-on-top-of-your-underpayments.html
Healthcare insurance companies increase their denial tactics each year, according to a webinar by the American Hospital Association. Additionally, it’s not only private payers who are reducing payments, In 2022, the AHA’s “Cost of Caring” https://www.aha.org/costsofcaring, the American Hospital Association’s insightful report, “Cost of Caring,” illuminated a staggering reality: Medicare and Medicaid collectively underpaid U.S. hospitals by a daunting $130 billion. This significant shortfall highlights a pressing need for reform in how these crucial programs support healthcare providers. Furthermore, it’s important to note that the challenges of underpayment don’t stem solely from these governmental payers. Mistakes arising from the complex processes within providers’ revenue cycle offices also contribute to this troubling financial landscape, underscoring the multifaceted nature of the issue.
While payment discrepancies can be identified through payment variance reports, these reports miss many. In recent years, providers have turned to revenue cycle management systems that upload and digitize all contract and fee schedule terms and rates and then compare them to all payments coming in. Underpayments can impact healthcare providers’ revenue cycle and operational sustainability. Revenue leakage is a loss of revenue where a healthcare provider fails to get timely payment for services. This problem starts when many billable accounts remain unpaid for a long time, usually over three months. The longer you take to follow up on the payments, the harder it becomes to recover the money. If preventative measures aren’t taken, revenue leakage within a healthcare organization can lead to operational inefficiencies, compromised patient care, and reduced investments in infrastructure and technology.
The 2020 Change Healthcare Revenue Cycle Index report indicated that 11.1% of claims were denied upon initial submission. Various factors can lead to claim denials, including but not limited to the following:
- Medical necessity: The insurance companies may not determine the services provided as medically necessary.
- Preauthorization: Preauthorization was not secured from the insurance company.
- Out-of-network provider: The provider does not belong to the patient’s insurance network.
- Patient responsibility: The patient has not fulfilled their deductible or coinsurance requirements.
Additionally, underpayments in medical practices can occur due to coding errors, contract issues, and processing errors.
- Coding errors
- Inaccurate or improper medical coding can result in lower reimbursements from payers.
- Contract issues
- Misinterpreting the terms of a payer contract can lead to underpayments.
- Payors may not fully pay as outlined in the contract.
- Processing errors
- Payors may make mistakes when calculating the owed amount or processing a claim.
- Inaccurate pricing or charge capture errors can result in underpayments.
- Failing to capture all billable services can lead to underpayments.
- Not adhering to healthcare regulations, billing requirements, or payer policies can result in underpayments.
- Credentialing issues can result in delays in claim reimbursement, financial penalties, and more.
- Bad debt occurs when patients are unable or unwilling to pay their outstanding medical bills.
- Inadequate insurance coverage.
- High-deductible health plans.
- Rising out-of-pocket costs.
- Poor patient balance management can decrease the percentage of claims reimbursements.
Change Healthcare reports that denials result in a permanent loss of 3% of total net value, despite 90% being preventable. Healthcare facilities spend around $25 per denied claim, making appeals costly. Proper documentation and follow-up can help avoid denials. Most insurers underpay providers by 7% to 11%, leading to significant revenue loss. Underpayment errors cost providers $17 billion annually. Improving documentation and coding accuracy can reduce these losses.
Patients are less likely to pay medical bills that exceed 5 percent of household income, according to the Advisory Board Co., a consulting firm for hospitals. With the median household income in the U.S. at approximately $53,000, this indicates that when out-of-pocket charges surpass $2,600, hospitals may encounter difficulties in collecting the remaining amount.
Denial management software can identify and flag underpayments from insurers by comparing returns with bills and codes. It schedules workflows for underpayment detection, and reviews payments manually if needed. The software can alert billing staff to rebill insurers and track underpayment patterns to monitor specific payers. This technology is more accurate than humans, freeing employees to focus on other important tasks.
Partnering with a reputable billing company such as ZENMED SOLUTIONS, INC. can enhance your Revenue Cycle Management (RCM) processes through our advanced AI software, BLISS. ZENMED Solutions has developed an RCM tool named BLISS – “Barometric Live Intuitive Solution(S).” This intuitive tool can track, categorize, strategize, correct, and learn (TCSCL) the specifics of any practice in real-time, thereby improving all aspects of RCM. We specialize in automating back-office tasks within the healthcare industry. The team at ZENMED Solutions Inc. understands the challenges practices face with submitting clean claims, which directly impacts coding and billing departments. Our teams are available to assist with these challenges as needed.
Some of these processes BLISS can assist with include the following:
- Correct Procedure code(s)/CPT
- Correct Diagnosis code(s)/ CD 10CM /ICD 10PCS
- Correct HCPCS codes
- Correct Modifier(s)
- Keeping abreast of Payer Reimbursement policies and LCD/NCDs for CMS
- Date of denial/rejection if a denial is received, as the payer only allows a certain amount of time to appeal
- Description of Denial / Rejection Code(s)- coding error, patient registration error, precertification
- Remittance identification number
- Charge capture, a crucial step in the revenue cycle.
- Automating and tracking claims submissions
The landscape of artificial intelligence (AI) offers numerous possibilities, with rapid advancements, particularly in the healthcare sector. Implementing AI, along with tools like BLISS, streamlines billing, coding processes, and revenue cycle management (RCM), resulting in more efficient and expedited workflows. BLISS can analyze and process large volumes of data swiftly, identifying documentation that may be overlooked by humans. By integrating an AI system into coding and billing operations, certified coders can concentrate on more intricate cases requiring human judgment, while routine tasks are managed by AI.
ZENMED SOLUTIONS, INC, is based out of Diamond Bar California and we have over 75 clients around the U.S. So if you are tired of revenue bleeding out from your practice, give us a call at (844)-307-0806, or email us at: Info@ZenMedInc.com. We can help you, if you take the first step and call or email us.
CPC, CRC, AAPC Certified
MBR AAPC/NAMAS
Director of Compliance and Education, ZENMED Solutions INC.
https://www.mgma.com/resources/revenue-cycle/you-might-be-losing-thousands-of-dollars-per-month
https://www.healthcareitnews.com/news/ama-blasts-insurers-193-percent-claims-error-rate
https://www.outsourcestrategies.com/blog/proactive-strategies-to-manage-claims-underpayments/
https://www.changehealthcare.com/insights/rethinking-denials-management
https://www.hfma.org/revenue-cycle/charge-capture/capturing-all-charges-the-operational-reality/
https://claimocity.com/what-is-charge-capture-a-physician-guide/
https://www.advisory.com/daily-briefing/2016/02/26/even-with-aca-some-hospitals-face-bad-debt
MBR AAPC/NAMAS
Director of Compliance and Education, ZENMED Solutions INC.
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