What is Underpayment in Medical Billing?
An underpayment in medical billing refers to a billing situation where practices are expecting higher payments for delivered services while insurance carriers have paid a lesser amount for the same services. Usually, denials arise due to incorrect patient information while underpayments stem from incorrect billing prices. Underpayments are tricky since insurance carriers won’t let you know they aren’t paying you the full contracted amount. In your contract, insurance carriers might have already mentioned that they will pay the billed amount instead of the contracted amount. They can pay the lesser of the two and are not obligated to give you the amount you could’ve received. As underpayments are not highlighted as denials, their lasting effect could severely affect your bottom line. Efficiently managing underpayment will definitely lead to an increase in your practice collections. Managing underpayment fairly straightforward process and spending time tracking your payments will be worthwhile down the line.
Common Reasons for Underpayment
Insurance carriers always look for a reason to deny claims. Careless billing makes it easy for them to highlight your inefficiency resulting in denied or partial payment. Some of the top common reasons for underpayments are as follows:
- Old billing schedule: Practices keep on billing various procedures as per the old fee schedule. Providers or billers unaware of the revised fee schedule enter a lesser charge amount than insurance carriers allow.
- Fear of payer audit: Practices always try everything to avoid external payer audit requests. Due to fear of payer audits, their billing team keeps on charging the same amount year after year.
- Missing information: Billers sometimes leave out critical information that supports the claims. Early in the scheduling process, note what documentation is needed to receive full reimbursement.
- Insurers miscalculating payment: In the case of therapy service, insurance carriers might come to different monetary conclusions. You can appeal in such a case by maintaining detailed notes regarding the sessions and segregating billable vs. non-billable hours.
- Contract misinterpretations: Confusing contract language in healthcare legal agreements can lead to differing interpretations. During contract disagreements, legal intermediaries may be the only viable solution.
Healthcare practices actually consider their contracts with insurance companies as a binding commitment. It’s unfortunate to reveal that if given the opportunity, insurance carriers are ready to pay 10 to 14 percent less than their contracted rates to practices. For the financial sustainability of your practice, it’s important to be proactive. Some of the common processes for efficiently managing underpayments are listed below.
Efficiently Managing Underpayment
Find out the Fee Schedule
You won’t be able to pinpoint underpayments if you don’t know what you deserve to be paid. You can request all insurance carriers with which you participate to provide a current fee schedule. Rather than asking for a fee schedule for all procedure codes, you can ask for the fee schedule for your practice’s top 50 procedure codes. Most insurance carriers may ignore your request. The good news is that Medicare and Medicaid reimbursements are publically available; the Centers for Medicare and Medicaid Services (CMS) offer a fast and easy online look-up tool for Medicare. Most states also post their Workers’ Compensation rates online. Commercial reimbursement, however, remains a challenge.
Getting a fee schedule for procedure codes is just the first step. Now, you need to set up a review process to ensure that you get them 100 percent of the time. True, your staff could manually compare each incoming Explanation of Benefits (EOB)/ Electronic Remittance Advice (ERA) against the insurance carrier’s rate schedule. Once you start reading electronic remittances you will be able to pinpoint even a single underpayment. Follow up on underpayments with the same vigor and tenacity as you would a denied claim. Remember that like denials, underpayments should be identified on a line-item basis. Don’t accept reimbursement for one line item as ‘payment in full.’ Inspect by line item, not by the encounter.
It’s challenging for providers to keep track of payer-wise billing guidelines and reimbursement policies. As providers are busy in patient care, getting help from medical billing company could be beneficial for your practice. Medical billing companies are aware of billing industry updates so they can guide to avoid underpayment. As they are working with various other practices of the same medical specialty, following billing guidelines and avoiding underpayments is easier for them.
Healthcare practices annually lose revenue that gets written off as contractual adjustments when insurance carriers underpay according to the contractually allowed amount. Medical Billers and Coders (MBC) identifies and corrects such underpayments, incorrect adjustments, and zero payments from all insurance carriers. To know more about our complete billing and coding services, email us at: firstname.lastname@example.org or call us at: 888-357-3226.