Underpayment Management: Strategies and Best Practices

To efficiently navigate underpayments, healthcare organizations need to understand the causes and implications and implement a seven-step framework to quantify the issue of underpayments. Adopting a comprehensive approach that encompasses the entire revenue cycle continuum beginning with patient scheduling and extending through payment posting helps organizations identify underpayment capture opportunities within this continuum. Our final article in our series discusses strategies for creating a tech-enabled underpayments workflow and best practices to stay ahead of underpayments and optimize the process for maximum revenue recovery.

Creating a Tech-Enabled Underpayments Workflow

Managing underpayments involves juggling various data inputs, including 837 claims, 835 remittance advice files, payment adjustments, supplemental master files, and more. Given the complexity and volume of these inputs, it is not advised to rely on manual processes or spreadsheets. 

A more effective approach is to use a robust contract management system that leverages technology, artificial intelligence (AI), and machine learning engines to load contracts, audit accounts, scrub data, and identify discrepancies between expected and actual payments. This forms the foundation of an efficient workflow for underpaid claims.

Steps in a tech-enabled underpayments workflow include:

1. Data analysis and input: Data inputs fed into the contract management system can be analyzed to identify discrepancies in payments.
2. Output review and auditing: Thoroughly analyzing the output from the system through line-level reviews of claims ensures accurate identification of underpayments.
3. Managed care team engagement: A collaborative approach to informing the managed care team of identified underpayment issues ensures payer issues are addressed systematically.
4. Systemic issue resolution: If large systemic issues are identified, bulk reprocessing of claims may be necessary. This can be done either through spreadsheets or by liaising with payers to resolve issues collectively.
5. Appeal and recovery: Claims that do not fall under systemic issues can be appealed or followed up on individually.
6. Recovery collections: Successfully pursuing underpayments results in improved revenue recovery collections and reduces the underpayment inventory.

Additionally, dashboarding and analytics tools can provide insights into payer behavior, claim lifecycles, and resource efficiency to measure and manage underpayments. Metrics to monitor can include the number of claims in inventory, total underpayment exposure, cost-to-charge ratio, and more.

Best practices for staying ahead of underpayment issues include:

• Ensure payment of earned revenue: Protecting revenue involves understanding the complexities of claims adjudication. Technology plays a crucial role in aggregating and processing information to prevent revenue leakage.
• Optimize payment strategy: Healthcare organizations can reduce the cost of collecting payments by optimizing their strategies and streamlining workflows using technology.
• Consider global partners: Reducing the cost to collect can be achieved by partnering with global resources that offer cost-effective solutions without compromising quality.

Analyzing, recovering, and remediating underpayments are crucial steps in the underpayment recovery process. Best practices for remediation include:

• Ensuring the right staff with expertise is dedicated to underpayment analysis.
• Standardizing the approach to auditing claims for appropriate reimbursement.
• Identifying and addressing payer issues through close collaboration with the managed care team.
• Continuously monitoring and updating payer-specific rules and pricing.
• Looking beyond recovery to identify and resolve the root causes of underpayments.

Effectively managing underpayments in healthcare revenue cycle management requires a holistic approach that encompasses technology, analytics, collaboration, and a dedicated team of experts. By adopting these best practices, healthcare organizations can enhance their revenue recovery efforts, protect their earned revenue, and streamline their payment strategies to achieve financial sustainability.

Watch our webinar, "Underpayment Recovery and Its Impact on Your Bottom Line" to learn more about actionable insights and best practices that enable healthcare organizations to quantify and stay ahead of issues with underpaid claims.

Originally Published at AGS Health’s Blog: Underpayment Management: Strategies and Best Practices

Ags Health - Ags Health is a leading revenue cycle management company, providing end-to-end Rcm solutions that help hospitals, health systems, and physicians improve efficiency and maximize revenue.