Is Underpayment Robbing Your Practice of 7–11%?

Learn how complex fee schedules can increase payment variance and steps you can take to improve your practice reimbursement. 
A recent study from the Medical Group Management Association (MGMA) estimates that insurers routinely underpay U.S. healthcare providers by an average of 7–11%. While it’s startling to realize your practice could be losing a tenth of its revenue to underpayment, it’s not surprising that a system of overly-complex fee schedules is mostly to blame.

Just as you struggle to analyze fee schedules, so do your payers. They often contract with thousands of providers, requiring a massive library of billing rules that feed denials, payment adjustments, and more. These rules can dictate how modifiers such as 50, 26, and TC affect reimbursement; they can also affect specific rules like first procedure payment versus secondary procedure payment or highest wRVU payment. And this is where 7–11% of your payments get lost.

Here’s how you can improve your practice reimbursement by correcting payment variance in three steps: 1) preparation, 2) identification, and 3) remediation. 

1. Preparation

 To get paid accurately, you first need to know what accurate means.

Start by aggregating your fee schedules to establish a baseline. Confirm that your provider group and payers agree which fee schedule should be used. And make sure credentialing, facilities, and eligible service locations are up to date on the payer side.

Next, you’ll want to understand payer rules. Do they pay 100% for the first procedure and 50% for subsequent procedures? Do they pay the highest wRVU procedure and discount the rest? How do modifiers affect reimbursement? These questions, and many more, will help you establish a true baseline for estimating net revenue. 

2. Identification (This Is the BIG ONE)

Identifying reimbursement variance (if you can even get the data) can be tricky. Look at the electronic remittance or ANSI 835 file for an explanation of benefits. These transactional files outline what’s allowed, what’s paid, and what’s a contractual adjustment.

A good variance model should include the payer, procedures billed, and units to forecast the net revenue. Other factors that affect reimbursement are denials and patient responsibility. These are reductions in payments and can easily be identified via Claim Adjustment Reason Codes (CARC), but these should not affect the total collectible balance.

To make remediation easier, look for trends across payers. Focus on the top volume payers and drill down to identify a batch of similar underpayments. Before you submit for reimbursement, make sure the underpayments you identify are still within the claim review period. 

3. Remediation

Correcting underpayments is easier than you think. If you’ve aggregated the billing logic (e.g., fee schedules and rules) and accurately identified underpayments, there are two usual remediation processes.

The first is to submit the claim numbers to the payer for review. Include the reason you flagged these for underpayment. For example: In March 2018 a practice realized that a commercial payer was still paying their 2017 rates. They submitted a batch of claims with the calculated net revenue and a brief description of the found issue. The payer responded with a sizable reimbursement.

The second process is to work directly with your payer/provider representative to have them reprocess your claims. Clearly, something went wrong the first time, so you need to verify with your rep that the correct elements are loaded into the payer system (e.g., providers, contracts, fee schedules) and save yourself some time submitting batch files.

The first step toward significantly improving profitability for your practice? Recouping the 7–11% you may be losing in underpayments. Not only will physicians appreciate receiving accurate reimbursement for services rendered, having checks and balances in place for complex fee schedules will enable your practice to focus on better care initiatives.

To learn how Rivet can help you improve your practice reimbursement by identifying payment variances, request a demo today.     

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