May 22, 2023

How to Know If Your Claims Are Being Underpaid

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Underpaid Claims

Medical billing is a vital part of healthcare administration and can be especially challenging for smaller medical businesses such as independent labs and specialist practices. Accurate and timely billing is crucial for practitioners to receive payment for their services, keep their offices running smoothly, and provide high-quality care to patients.

Insurance companies and government payers often deny or reject claims, leaving practitioners unsure if they are receiving fair compensation. Underpayment in medical billing is a common problem that can significantly impact a medical business’s financial health. Unfortunately, there’s no way around it—denial management in healthcare is an unavoidable part of the billing process.

Understanding the Difference Between Claim Denials and Claim Underpayments

When we are talking about the claim cycle in medical billing, it is important to differentiate between denied and underpaid insurance claims. “Claim denial” refers to when an insurer or payer refuses to pay for a service or treatment. This is often due to billing errors, missing documentation, or services that are not covered by the insurance policy.

“Underpayment” is when the payer reimburses the practitioner for less than the billed amount for a service or treatment. There are many reasons underpayment can occur.

Common Reasons for Underpaid Insurance Claims

  • Coding Errors: Incorrect coding may result in lower reimbursement rates. Medical coding is complex, and it changes often, so being able to stay on top of all the current codes and requirements demands focused expertise. Even minor coding errors can lead to significant discrepancies in reimbursement rates (or entire claims being rejected). Often the error is something as simple as the omission of a required modifier, which is a sub-code that adds information, such as which side of the body was treated or examined.
  • Unbundling Bundled Procedures: Some procedures are submitted with a bundled code, meaning one code includes all the parts of the procedure. Unbundling happens when practitioners are unaware of the bundle requirement and bill each step of a procedure separately. This practice may result in higher reimbursement rates on paper, but is likely to result in underpayment if the insurer denies the unbundled claims.
  • Downcoding: Downcoding occurs when an insurer reimburses the practitioner for a lower-level service than what was performed. This practice is common when the insurer thinks the practitioner is using a code for a higher-level service than was necessary for the diagnosis.
  • Fee Schedules: Insurance companies have different fee schedules that dictate the amount they will reimburse for a particular service. Practitioners may receive less than the billed amount if they bill according to the wrong fee schedule or the insurer has lowered the reimbursement rates.
  • Policy changes: Insurers may update their policies and reimbursement rates, resulting in lower compensation for practitioners.

Important Steps in Claim Denial Management

There are several steps that can be taken in the billing and claims management process to reduce denied claims.

  • Regularly Review Fee Schedules: As fee schedules vary between insurers, it’s essential to stay up to date with any changes and ensure that you are billing according to the correct fee schedule.
  • Monitor Coding Accuracy: Ensure that your medical coders are knowledgeable and experienced in the latest coding guidelines. Regularly reviewing all claims that have problems can help identify any coding errors early on and avoid future underpaid claims when the uncorrected error is repeated.
  • Verify Insurance Coverage: Verify patients’ insurance coverage before providing any particular services. Some payers require pre-authorization and will refuse payment for a covered service if it was not obtained prior to treatment.
  • Implement a Claims Tracking System: A claims tracking system can help practitioners monitor the status of their claims and identify any underpaid claims. A good tracking system will allow you to track claim submissions, rejections, and payments, ensuring that you can quickly identify any discrepancies and take action. The system must include follow-up on appeals.
  • Stay Up-to-Date on Insurance Policies: Regularly reviewing policies can help practitioners identify changes in reimbursement rates, coverage, and coding requirements. Each insurer will make different changes, so it is important to review the policies for each one that you work with.
  • Use Automated Solutions: Automated solutions, such as billing software and electronic health records (EHRs), can help practitioners streamline their billing processes and reduce the risk of underpaid claims. The more your system can automate coding and billing, the less risk of coding errors you’ll have. It is much easier for software to keep track of all the correct fee schedules and submission requirements than for a human to try and keep up with all the details.
  • Continually Train Your Staff: Even if you hire certified billers, you have to continually update them on insurance coverage and changes in billing practices to reduce the risk of underpaid claims. It’s important to ensure that your staff is knowledgeable and up-to-date on the latest codes, guidelines, and insurance policies.

How to Monitor and Track Your Claims

Monitoring and tracking your claims is crucial for identifying underpaid claims and taking corrective action. Some of the actions we have found to be most effective are:

  • Use a claims tracking system: As previously mentioned, a claims tracking system can help practitioners monitor the status of their claims and identify any discrepancies. These systems can alert practitioners to any rejected or underpaid claims, allowing them to take prompt action.
  • Review Reports: Regularly reviewing billing reports can help practitioners identify any underpaid claims. Reports can provide valuable insights into reimbursement rates, coding accuracy, and insurance coverage.
  • Follow up on Claims: Following up on unpaid or underpaid claims can help practitioners identify any issues with the billing process or insurer policies. Practitioners can contact insurers to verify any discrepancies or negotiate for fair reimbursement rates.

Filing Appeals Is a Regular Part of Healthcare Underpayment Recovery

Providers need to appeal underpaid claims to receive fair compensation for their services. You will need to figure out what the problem was and correct it. That can be time-consuming, so many claims get abandoned when there is a denial. You should proactively appeal any underpayment that you disagree with. If a service is not covered, the payer will not pay you, but the following are common occurrences that you should appeal.

  • The insurer underpays due to incorrect coding or fee schedule errors.
  • The insurer denies coverage due to partially incorrect information or lack of documentation.
  • The insurer downcodes a service or procedure that was appropriate and medically necessary.
  • The insurer fails to pay for services that are covered by the policy.

The Appeal Process: Tips and Strategies

Appealing underpaid claims can be a complex process. Here are some tips and strategies that may help:

Familiarize yourself with the insurer’s appeals process, including the timeframe for filing an appeal, required documentation, and the steps involved in the process.

  • Gather Documentation: Collect all necessary documentation, including medical records, coding information, and insurance policies. Having this information readily available can help expedite the appeals process.
  • Be Persuasive: Make a strong case for your appeal, providing evidence of the services rendered, the necessity of the services, and the correct coding and fee schedules used.
  • Follow Up: Following up on the appeal can help ensure that the insurer receives and processes your appeal promptly.

Negotiating with Payers for Fair Reimbursement Rates

Negotiating with payers for fair reimbursement rates is an aspect of medical billing that requires some skill. Here are some tips for negotiating:

  • Know Your Value: Understand the value of your services and the costs associated with providing those services. Having a good understanding of your costs can help you negotiate better reimbursement rates for more complicated procedures.
  • Research Reimbursement Rates: Research reimbursement rates for your specialty in your local area to ensure that you are receiving fair compensation.
  • Be Prepared: Come to negotiations prepared with documentation to support your case, such as data on your costs and expenses. Having this information readily available can help you make a strong case for fair reimbursement rates.
  • Be Assertive: Be confident and assertive in your negotiations, making it clear that you are seeking fair and reasonable reimbursement rates.
  • Consider Outsourcing Medical Billing: Outsourcing medical billing can provide practitioners with access to billing experts who have experience negotiating with payers.

The Benefits of Outsourcing Healthcare Claims Denial Management

Managing denied claims takes a lot of time and requires a different set of skills. Outsourcing denial management as part of your medical billing can provide many benefits, including:

  • Reduced Administrative Burden: Outsourcing medical billing reduces the administrative burden of medical businesses, allowing practitioners to focus on providing quality care to patients.
  • Improved Cash Flow: Having your medical billing handled by experts who are fully focused on billing and revenue cycle management can improve cash flow by reducing the time it takes to submit claims and deal with any rejections and denials.
  • Increased Efficiency: Medical billing companies have experience and expertise in coding accuracy, insurance policies, and reimbursement rates. Outsourcing medical billing increases efficiency and reduces underpaid claims.
  • Access to Billing Experts: Medical billing companies have a team of billing experts who have experience negotiating with payers and securing fair reimbursement rates. Outsourcing medical billing can provide medical businesses with access to this expertise and help ensure that fair compensation is received.

Ensuring Fair Payment for Your Services

Accurate and timely medical billing is crucial for medical businesses to receive fair compensation. Underpaid claims can significantly impact a medical business’s financial health, and it’s essential to identify and address them promptly. Any medical billing company should be willing to take responsibility for following up on underpaid claims to maximize revenue for their clients.

Implementing best practices such as regularly reviewing fee schedules, monitoring coding accuracy, and appealing underpaid claims can help reduce revenue loss. Outsourcing medical billing provides many benefits, including increased efficiency, cash flow, and access to billing experts.

Medcare MSO has developed a system for tracking and managing claims that has consistently resulted in increased revenue for our clients. Our experienced billing staff follows up on all unpaid and underpaid claims, relieving clients from all the hassle of interpreting denial codes and negotiating with payers. If you would like to find out how much we can increase your revenue, give us a call today at 800-640-6409. We are offering a free AR analysis to show you just where you may be losing money that we can routinely recover.

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