What are the common causes and solutions for underpayments and overpayments?
Underpayments and overpayments are common challenges in revenue cycle management (RCM) that can affect the financial performance and compliance of healthcare organizations. In this article, we will explore the causes and solutions for these issues and how to prevent them from recurring.
Underpayments occur when a payer reimburses a provider less than the contracted or expected amount for a claim. Overpayments occur when a payer reimburses a provider more than the contracted or expected amount for a claim. Both scenarios can result from errors, discrepancies, or fraud in the billing and coding process, the payer's policies and procedures, or the provider's contract negotiations and verification.
In order to accurately and timely address underpayments and overpayments, a robust RCM system is needed to track, monitor, and analyze claims data and payment information. Variations in payment rates or amounts for similar services or codes, inconsistent or incomplete EOBs or RAs, discrepancies between the provider's charge master and the payer's fee schedule, unresolved or denied claims due to eligibility, authorization, or documentation issues, and duplicate or incorrect payments due to clerical or system errors are some key indicators of underpayments and overpayments.
In order to address underpayments and overpayments, it is important to have a dedicated team of RCM staff who can communicate effectively with payers, providers, and patients, and follow the established policies and procedures for appeals, refunds, or adjustments. To ensure that these payments are resolved promptly and appropriately, some best practices include verifying the accuracy and validity of the claim and payment, contacting the payer or provider to request clarification, submitting a formal appeal or dispute with supporting documentation if the payment is incorrect or unjustified, processing a refund or an adjustment if the payment is excessive or erroneous, and documenting and reporting the resolution and outcome of the payment issue.
To prevent underpayments and overpayments from recurring or escalating, a proactive and continuous improvement approach is necessary. Strategies to do this include regularly updating and auditing the provider's charge master and the payer's fee schedule, verifying and validating the patient's insurance coverage and benefits before rendering services, obtaining and documenting the necessary authorizations and referrals for services, coding and billing accurately according to the latest guidelines, educating and training the RCM staff on best practices for payment processing and implementing internal controls for payment accuracy. By following these steps, you can improve RCM performance, reduce denials and collections, and enhance revenue and compliance.
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I think to effectively handle this, you have to have a team constantly updating fee schedules and contracts in your RCM platform. One of the biggest issues I seen is we didn’t have the correct expected amounts loaded into our system therefore shows as short or under paid. This creates false work and if you don’t have a team trained correctly they may send unnecessary appeals and/or refunds. Part of this is also being able to add to the system if a payer doesn’t pay for a certain code. Example 99100 is not paid by a Medicare product but is some commercial. If you can setup system to bill out as $0 knowing you won’t be paid it solves a lot of issues.
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I understand what you are saying about billing $0 if you aren’t expecting to get paid, but I see issues with that. Patient transparency for one. A couple who use the same healthcare system go in for services. They get their respective bills. They both know they have 20% coinsurance, but the Medicare member owes nothing on that charge while the partner owes a copay. Explains contracted rates is easier than payer rules. Also though, having a $ amount attached to a procedure can help in contract negotiations. Medicare won’t care, but if UHC pays it ands BCBS does not…its easier to go to BCBS in a negotiation and say “we billed you $xxx,xxx and received nothing because of your rule, but UHC paid us. Let’s talk about evening out the field.
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As someone who worked on the front lines a variance analyst early in my revenue cycle career, you need a competent team dedicated exclusively to all things variances. They should be working with your EHR Rev Cycle IT build team to update benefits build in your EHR system. This is a very time intensive, heavy effort task. If done right, it will save you $$$$$$ in staff resources in the long run.
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