How to Identify and Resolve Underpaid Claims: A Guide for Revenue Cycle Management Teams

Underpaid claims can quietly drain revenue from healthcare organizations if not identified and addressed promptly. While denials often take center stage in revenue cycle management (RCM), underpayments can have an equally significant impact on financial performance.

Does your RCM team have a strong process in place to catch underpaid claims? Do you know if payers are reimbursing claims according to contract terms? And most importantly, once you identify an underpaid claim, do you know how to follow through effectively?

Here’s an actionable guide to help healthcare organizations identify and address underpaid claims, ensuring that they receive the reimbursement they’re entitled to.

Why Underpaid Claims Matter

Underpayments occur when a payer reimburses a claim for less than the amount specified in the provider’s contract. Common reasons for underpayments include:

        •       Incorrect application of contracted rates or discounts.

        •       Miscalculated co-pays, co-insurance, or deductibles.

        •       Bundling or down coding of services.

        •       Misinterpretation of contract terms.

Left unchecked, underpayments can accumulate into substantial revenue losses over time. This makes it essential for RCM teams to have a proactive process for identifying and recovering underpaid claims.

Do You Have a Process in Place?

A good process for managing underpaid claims includes:

        1.      Monitoring Payments Against Contracted Rates: Comparing each payment to the contracted terms ensures that you’re receiving the agreed-upon reimbursement.

        2.      Automating Detection: Leveraging technology, such as contract management software, can help flag discrepancies between expected and actual payments. Some practice management systems have contract management tools that you can set up to help identify expected contracted rate vs actual payments received, however, even these tools are not able to detect all underpayments. Understanding what technologies are out there and how to properly utilize your own system for tracking is a great place to start.

        3.      Addressing Trends: Understanding recurring underpayment issues enables organizations to implement targeted corrective actions.

If your organization doesn’t have these steps integrated into its workflow, you may be leaving money on the table.

Steps to Identify and Tackle Underpaid Claims

1. Conduct a Payment Accuracy Audit

        •       Pull a sample of paid claims and compare the payment amounts to the contracted reimbursement rates.

        •       Identify discrepancies where claims were paid less than expected.

        •       Use contract management tools to automate the auditing process and reduce manual effort. Even if these tools can't get you 100% accuracy in identifying underpayments, they can get you closer than you might be today.

2. Validate the Discrepancy

        •       Review the Explanation of Benefits (EOB) or remittance advice to understand the payer’s rationale for the payment.

        •       Check for errors such as incorrect codes, misapplied modifiers, or bundling of services.

3. Escalate to the Payer

        •       Once you’ve confirmed an underpayment, contact the payer to dispute the discrepancy.

        •       Provide supporting documentation, such as the contract terms, EOB, and claim details, to justify your appeal.

        •       Be persistent and escalate the issue if necessary, especially for high-dollar claims.

4. Review and Adjust Contracts as Needed

        •       If underpayments are recurring, review your contracts with payers to identify any ambiguous terms that could be leading to misinterpretations.

        •       Renegotiate contracts to address these gaps and ensure clarity for both parties.

5. Track and Report Trends

        •       Regularly analyze underpayment trends to identify systemic issues, such as specific payers or services that are frequently underpaid.

        •       Use this data to improve internal processes, such as claims submission accuracy or negotiation strategies.

Best Practices for Managing Underpaid Claims

        •       Invest in Technology: Use tools like contract management systems and RCM software to automate payment comparisons and flag discrepancies in real time.

        •       Train Your Team: Ensure staff are well-versed in contract terms and payment posting to identify underpayments effectively.

        •       Focus on High-Impact Claims: Prioritize high-dollar or high-volume claims when auditing for underpayments to maximize recovery efforts.

        •       Proactively Negotiate: Build strong relationships with payers and review contracts periodically to ensure fair reimbursement terms.

What to Do Next

If your organization isn’t actively tracking and addressing underpaid claims, now is the time to start. Here’s how you can begin:

        •       Audit Recent Payments: Perform a quick review of claims paid in the last 90 days to identify potential underpayments.

        •       Evaluate Your Tools: Assess whether your current RCM systems provide the visibility and functionality needed to track underpayments.

        •       Build a Task Force: Create a dedicated team or assign specific staff to focus on underpayment identification and recovery, especially with high dollar claims.

        •       Engage Your Clearinghouse: Work with your clearinghouse to add payer-specific rules to minimize errors leading to underpayments.

Conclusion

Underpaid claims can erode revenue without drawing much attention, making it critical for RCM teams to proactively monitor payments, identify discrepancies, and recover lost funds. With the right tools, processes, and persistence, healthcare organizations can ensure they’re paid accurately for the services they provide.

By prioritizing payment accuracy, training staff, and leveraging technology, you can protect your bottom line and maintain financial stability.