How underpayment is slowly taking a big chunk of your revenue out?

Medical billing is a complicated process, and one of the biggest challenges faced by healthcare providers is underpayment. Underpayment occurs when the actual payment received is less than the contracted rate with the payer. This can happen for a variety of reasons, and in this article, we'll explore some of the most common causes of underpayment and what healthcare providers can do to address them.

What Causes Underpayment in Medical Billing?

There are several reasons why healthcare providers may receive less than the contracted rate for their services. Some of the most common causes of underpayment include:

1. Underbilling:

Underbilling is when healthcare providers bill less than the payer's allowed amount. For example, if the insurance company's allowed rate for a specific code is $120.00, but the provider bills only $110.00, the insurance company will pay only the billed amount of $110.00. Underbilling can occur for two reasons:

• ✓ Providers bill all their insurance claims with universal charge amounts, not realizing that some payers may have higher allowed rates, which means they need to increase their charges.
• ✓ Payers update their fee schedules every year, and if providers have kept their charges close to the previous year's allowed rates and haven't reviewed the new changes, it could result in underbilling.

It may not seem like a big deal, but if you bill a code frequently, and there are more such underbilled codes, you'll end up losing a lot of money. To avoid underbilling, healthcare providers must remain up to date on their contract rates. They should prepare a spreadsheet of their current contract rates for each insurance and mark a date on their calendar to check every three months for any updates in the fee schedules.

2. Underpaid Even If Billed Correctly:

Most insurance companies tend to pay just 85 to 90% of what is in the contract, leaving healthcare providers to bear the remaining 10 to 15% of the cost. This can be a huge loss for medical practices, especially those already struggling to make ends meet. If you feel you're being underpaid, here are some steps you can take:

• ✓ List down the CPTs you most frequently bill in your practice.
• ✓ Before initiating any new contract with an insurance company, ask them to give you the fee schedule for your CPTs.
• ✓ Review payer contracts and agreements every three months. Most payers change their regulations often, and it's a best practice to keep ourselves informed.
• ✓ Keep a check on how much your claims are getting paid compared to the contract rate. Manually checking each line might not be possible, but you can alternatively check with your EHR if they have any such functionality.
• ✓ If the payer is frequently underpaying, take the issue to a higher level. Speaking to any low-level rep at the insurance company won't fix the issue. Request your network manager to set up a call, give them the list, and ask them to fix the problem from the origin.

3. Higher Patient Balance and Slow Recovery:

With the increasing trend of higher deductible and copayment plans, patients are now responsible for a greater share of their healthcare costs. This means it's crucial to have an efficient collection system to ensure that you're not losing out on revenue due to higher patient balances. If you don't have an efficient system in place, you may end up losing a portion of your contract rate, and sometimes, you may even lose patients because of it.

How to Improve Patient Collection

Here are some tips to improve your patient collection:

• ✓ Train your front desk staff to communicate effectively with patients regarding their financial responsibility.
• ✓ Make it easy for patients to pay their bills by offering multiple payment options.

In conclusion, underpayment can have a significant impact on the financial health of a medical practice. It is crucial for healthcare providers to remain vigilant and take necessary measures to avoid underpayment. By staying up-to-date with contract rates, regularly reviewing payer contracts and agreements, and maintaining an efficient patient collection system, healthcare providers can minimize the risk of underpayment and maximize revenue.

If you're struggling with underpayment or any other billing issues, don't hesitate to reach out to us. Our team of billing experts can provide you with a free consultation and help you optimize your revenue cycle management. Let us take the burden of medical billing off your shoulders so you can focus on providing quality care to your patients.