Regular auditing of payments against contracted rates is crucial for identifying underpayments.
The short version
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Understanding contractual adjustments and relevant codes (like CO-45 and CO-50) is key to distinguishing between legitimate underpayments and normal billing adjustments.
Implementing a solid auditing process and utilizing technology can streamline underpayment recovery.
Underpayment recovery is not just about catching errors; it's about systematically identifying and reclaiming the dollars payers shortchange you. This process starts with understanding contractual adjustments, like CO-45, which indicates a charge exceeds the payer's fee schedule, and is a normal part of the billing process, not a denial. By regularly auditing payer payments against contracted rates, practices can uncover underpayments and take corrective action to recover lost revenue.
How do underpayments occur in the first place?
Underpayments often stem from misunderstandings or misapplications of contractual terms between providers and payers. For instance, if a practice has negotiated a specific reimbursement rate for a particular procedure with an insurer, but the insurer's system does not reflect this rate accurately, payments for that procedure may be made at a lower rate, resulting in underpayment. This discrepancy can be due to various factors, including outdated fee schedules, incorrect application of contractual adjustments, or simple errors in data entry. In our experience, a significant portion of underpayments can be attributed to the complexity of managing multiple payer contracts and the lack of transparency in how payers apply their reimbursement policies.
In one specific case, we encountered a practice that was consistently being underpaid by a major insurer for psychotherapy sessions (coded as 90832). Upon review, it was discovered that the insurer had applied an incorrect reimbursement rate, which was lower than what was contracted. By identifying this discrepancy and working with the insurer to correct their system, the practice was able to recover several thousand dollars in underpaid claims. This example highlights the importance of regularly reviewing and comparing payments against contracted rates to identify potential underpayments.
The process of identifying underpayments involves meticulous review of payment records and contracts. It requires a deep understanding of the contractual terms, including the specific reimbursement rates for different procedures and services. Moreover, knowledge of relevant codes such as CO-45 for contractual adjustments and CO-50 for non-covered services is essential in distinguishing between legitimate underpayments and contractual adjustments that are part of the normal billing process.
What steps can practices take to recover underpayments?
Recovering underpayments involves several proactive steps, starting with the implementation of a solid auditing process. This includes regularly reviewing remittance advice and explanation of benefits (EOB) statements for accuracy, ensuring that payments match the contracted rates. Practices should also maintain detailed records of all communications with payers, including any disputes or appeals related to underpayments. Utilizing technology, such as revenue cycle management software, can significantly streamline this process, allowing for more efficient identification and tracking of underpayments.
For example, in our work with behavioral health practices using Valant and Tebra, we've seen how integrating payer audit tools into their workflow can help identify underpayments more systematically. By automating the comparison of paid amounts against contracted rates, these tools can flag potential underpayments for manual review, significantly reducing the likelihood of missed revenue. Furthermore, understanding and correctly applying codes such as PR-1 for deductible, PR-2 for coinsurance, and PR-3 for copay can help in distinguishing patient responsibility from underpayments due to payer error.
Practices should also establish a clear process for appealing underpayments. This includes submitting formal appeals to payers, providing detailed documentation to support the claim for underpayment, and following up to ensure resolution. It's crucial to approach these appeals with a thorough understanding of the contractual terms and the specific circumstances of the underpayment. In some cases, underpayments may be due to systemic issues on the payer's side, such as outdated fee schedules or incorrect application of policy, which may require a broader solution beyond individual claim appeals.
Questions, answered
What is the most common cause of underpayments?+
Underpayments are most commonly caused by misunderstandings or misapplications of contractual terms between providers and payers, including incorrect reimbursement rates and outdated fee schedules.
How can practices ensure they are being paid correctly by payers?+
Practices can ensure they are being paid correctly by regularly reviewing payments against contracted rates, maintaining detailed records of communications with payers, and utilizing revenue cycle management tools to automate the auditing process.
What is the first step in recovering an underpayment?+
The first step in recovering an underpayment is to identify the discrepancy through a thorough review of payment records and contracts, followed by submitting a formal appeal to the payer with supporting documentation.
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