Payor Underpayments Part 1: How to Identify This Sneaky Tactic!

Payor Underpayments Part 1: How to Identify This Sneaky Tactic!

You’ve seen it before. A payment comes in. Your staff manually posts the payment and the corresponding contractual allowance. Without a detailed understanding of contracted rates, terms, and conditions, the staff member who posts the payment may or may not get it right. It’s never audited … but it works its way through the system. You end up with a zero balance on the procedure. It falls off everyone’s workload. Without you knowing, it’s written off.    A recent review performed by our office found that on one particular plan, our new client was underpaid an average of 31% on their claims from one of their top payors.   What should you do?  You must first identify the problem.  There are several different types of underpayments.  

• Inaccurate or deficient clinical documentation for services
• Missing fee schedule items or incorrect coding for procedures, high-value supplies, and pharmaceuticals
• Incorrect claims pricing based on incorrect contract terms
• Inability to identify accuracies in payments calculated by payors
• Incorrect interpretation of contract terms
• Incorrect network

To identify these payment variances, you will need to ensure that you have loaded your fee schedules with your allowable rates based on your negotiated contract.  Your payment posting team should validate that all of the payments (both paper and ERA) are balanced.  To know where your main weakness is, we suggest that you post all payments at the line item level.  When you post at that lowest level you can identify specifically which services are not being paid according to your agreed upon contract.  You will be surprised at how many items you may have in your fee schedule that falls below the actual allowable rate which means you are potentially losing money.  Once you have compared your allowable rates to what your payor states is allowed, any variance from the negotiated contract should be challenged.  Payors, like anyone else, can make a mistake and load an old rate and/or not properly update a newly negotiated rate chance.  When you find an issues such as this, you should work with your Contract Specialist at the payor office to have them identify and reprocess the affected claims.  Make them do the heavy lifting of claim correction.  Your team will already have enough to do once the payments are reprocessed because each corrected payment will result in a void payment and corrected payment for each claim.  

Other items that you should consider when developing any type of underpayment review includes:

1) Do you have an effective feedback loop to your providers to ensure that any under coding trends are addressed? 
2) Do you monitor remittance advice for a time period for new contracts to confirm that they are being paid appropriately? 
3) Analyze recovery trends and frequency of payor payment errors.  This should be a part of the ongoing meetings that you have with your payors to review contract performance, payment processing, etc. 
4) Flow chart the revenue capture technique for your organization paying close attention to claim edit rules you may have built into your system.  The rules should be reviewed at least annually to ensure that they are still warranted and performing properly.  

In our next post, we will talk about payor recoupments. See you then!  

Stacy