Healthcare is well-known for the complexities and red tape associated with billing and insurance. On each the provider, payer and patient side, this is due to a wide range of complex, multifaceted factors, including complicated documentation and coding guidelines, billing problems and complex contract terms. There’s often a back-and-forth dance between all three parties to determine who pays what and how much – and unfortunately, hospitals are often left bearing the financial burden of significant discrepancies known as underpayments.
Underpayments occur when a provider is paid less than it costs to deliver care. A major source of underpayments comes from government-sponsored plans like Medicare and Medicaid. In fact, a recent report issued by the American Hospital Association indicates that for 2019, combined underpayments for Medicare and Medicaid totaled $75.8 billion. 63 percent of hospitals received Medicare payments less than cost and 58 percent of hospitals received Medicaid payments less than cost. The report also says hospitals are receiving payment for just 87 to 90 cents for every dollar spent delivering that same care. Commercial plans are also guilty of underpayments, and with many hospitals struggling to make modest margins as it is – addressing the issue is a top priority for many providers.
Many organizations choose to identify an outsourced partner that offers advanced software tools who can help manage the retrospective chart review process to identify underpayments that internal teams may not notice. Regardless of how you handle identifying underpayments, here are some key strategies to addressing this critical topic:
Get to Know Your Underpayments. Healthcare providers need to understand where their underpayments are coming from. Are most coming from a single payer or a single plan? If so, you can work together with plan administrators to discuss and mitigate future problems. Are they due to inconsistencies in clinical coding, or inaccurate billing? Or they could be related to misinterpretations of contact terms on the payer side. Regardless of the primary cause of your underpayments, getting to the bottom of it can help guide your future improvement efforts. To identify underpayments, it’s critical to audit regularly to get the appeals process started early.
Understand Your Contracts. Managed care contracting has become increasingly complex – particularly for large health systems managing dozens of payers and contracts. Since providers are largely responsible for identifying and proving underpayments, having an expert on your team who is the ‘go-to resource’ for contract terms and questions can help reduce the occurrence of underpayments. Similarly, there are numerous contract management tools and advanced software platforms that can automatically detect underpayments.
Call in the Experts. Every revenue cycle management team needs an expert in underpayments. Whether it’s an internal resource or an outsourced partner, this role ensures underpayments are promptly identified, tracked and studied in aggregate to recognize trends. This helps ensure the organization doesn’t lose sight of potentially valuable underpayments that could otherwise fall through the cracks in a busy RCM department that’s also focused on getting claims out the door, tracking accounts receivable, addressing denials and the many other critical aspects of managing an efficient revenue cycle.
Appeal, Appeal, Appeal (literally). When underpayments are identified, there’s much more work to be done, and many experts believe payers depend on the fact that many providers won’t actually invest the time and resources into the process. However, healthcare providers are allowed three state-level appeals – and it’s important to take advantage of this process. While it’s time-consuming and resource-intensive, it’s critical to stay the course to maintain a positive bottom line since underpayments can add up to millions of dollars annually.
Prevent Future Underpayments. Perhaps one of the most critical strategies is to avoid underpayments in the first place. Doing so requires a comprehensive focus – including an ongoing evaluation of clinical documentation and continuing education around best practices and their impact – often managed by Clinical Documentation Improvement (CDI) teams.
Underpayments can result in significant revenue losses for health systems that truly can’t afford another reason for shrinking margins. Focusing on underpayments is a critical RCM strategy that requires a dedicated focus from a highly skilled team of experts.
GeBBS Healthcare Solutions offers an expert team that can focus on underpayment which can leave health systems financially vulnerable. Keeping a keen eye out for underpayments is an essential function that should be a top priority – and one that should be managed by both internal and external (outsourced) teams for optimal results. To learn how GeBBS Healthcare Solutions can assist you with your RCM operations, please visit: www.gebbs.com or Request Consultation with one of our solutions experts.
