Healthcare providers often encounter significant challenges in receiving full payment for valid claims. Medicare has paid just 82 cents for every dollar hospitals spent on patient care. It has been estimated that hospitals lose 1-3 percent of their net revenue to underpayment. This not only affects the bottom line for a medical practice but can also affect patient care. Experienced healthcare attorneys understand the complexities of underpaid claims and are dedicated to helping providers identify, address, and recover lost revenue from underpaid claims. Providers should consider retaining the services of healthcare law attorneys to recover underpaid claims.
About Underpaid Claims
It is essential to distinguish between underpaid claims and denied claims, as these payor reimbursement disputes have distinct implications for healthcare providers. Denied claims are completely rejected by the insurance company, which means the provider receives no payment at all for the services rendered. In contrast, underpaid claims are only partially paid, meaning that the insurer has processed the claim but issued a reimbursement amount that is less than what the provider is contractually owed.
Legitimate Reasons That Claims Are Underpaid
Claims can be underpaid for legitimate and illegitimate reasons. These are some legitimate, common reasons that claims are underpaid:
Coding Errors: Mistakes or omissions in medical coding can result in insurers reimbursing at a lower rate or rejecting claims altogether.
Contractual Misunderstandings: Disagreements or unclear terms between providers and payers regarding reimbursement rates or covered services can result in payments falling short of what providers expect based on their contracts.
Improper Bundling of Services: Failing to correctly bundle related services into a single claim may result in reduced reimbursement.
Insufficient or Inaccurate Documentation: Inadequate clinical or billing documentation can prompt insurers to request additional information, delay claims processing, or issue lower payments due to a lack of proper support for the billed services.
Unresolved Claim Denials: When claims are initially denied and resubmitted without fully addressing the reasons for denial, insurers may issue only partial payments or underpay the claim.
Healthcare Insurance Companies’ “Bad Faith” Practices
Claims can also be underpaid for illegitimate reasons, including when healthcare insurance companies engage in what is known as “bad faith” practices. Bad faith occurs when an insurer intentionally denies, delays, or underpays a valid claim without a reasonable basis, acting unfairly or dishonestly toward the healthcare provider or insured patient. Insurers may engage in these tactics to protect their financial interests by minimizing payouts and maximizing profits. By underpaying claims, they reduce their overall liabilities and increase their bottom line.
This conduct not only leads to financial harm for providers but can also violate legal obligations that insurers have under insurance contracts and state laws. Recognizing and addressing bad faith practices is critical to protecting providers’ rights and ensuring they receive the payments they are owed for legitimate medical services.
- Deliberately undervaluing a claim or settlement
- This occurs when an insurance company intentionally assigns a lower value to a claim or settlement than its actual worth. It can involve ignoring important evidence, applying incorrect calculations, or undervaluing damages and medical expenses.
- Refusing to pay part of a claim that it acknowledges is due
- An insurer may admit that a portion of a claim is valid but nevertheless refuse to pay for that portion without a legitimate reason.
- Denying a valid claim and forcing litigation
- Sometimes, insurers wrongfully deny claims that are clearly valid. The insurance company is aware of the high costs and delays associated with litigation and uses this to discourage claimants from fighting back.
Proactive Steps a Provider Can Take to Receive Proper Compensation
The best thing that providers can do to avoid claim underpayment is to prevent it from happening as much as possible. Assistance from an experienced healthcare law attorney is crucial at this step, as it will help the healthcare practice get every dollar it is owed in a claim.
- Understand and Verify Insurance Coverage
Before providing services, it is important to confirm patients’ insurance coverage to ensure that the planned services are included in their benefits. Verifying insurance eligibility and benefits ahead of appointments helps prevent unexpected payment issues. Additionally, obtaining necessary pre-authorizations or pre-certifications for certain services is essential.
- Reinforce Appropriate Documentation and Coding
Ensure that all services provided to patients are accurately documented and coded. Precise coding helps prevent underpayments caused by errors or inconsistencies. Train staff thoroughly on proper documentation and coding practices, and perform regular audits to maintain compliance with current coding guidelines. Stay informed about coding updates to ensure ongoing accuracy and compliance.
- Keep An Eye On Claims and Reimbursements
Consistently monitor claims and reimbursements to quickly detect any discrepancies or underpayments. Establish a system to track claims throughout the entire reimbursement process. Carefully review remittance advice and explanations of benefits (EOB) to ensure accuracy.
- Make Sure There Are Clear Billing Policies and Procedures
Create clear, standardized billing procedures and guidelines for staff to follow. Communicate billing policies and expectations to patients upfront to ensure transparency. Offer training to staff on billing processes and compliance with relevant regulations to maintain accuracy and consistency.
Continuously stay informed about changes in healthcare reimbursement policies, market trends, and established industry benchmarks to ensure reimbursement agreements remain competitive and fair.
- Negotiate Contracts for Fair Compensation
Engage in thorough contract negotiations with insurance companies and payers to secure reimbursement rates that accurately reflect the value of the healthcare services provided.
Recovering Underpayment
To address a denied insurance claim, first review the denial notice to understand the reason, which could relate to diagnoses, treatment plans, or documentation issues. If the denial is disputed, file an appeal by submitting a written justification, which may involve an independent review. If the appeal is denied, consider negotiating with the insurer, which may include adjusting treatment costs to facilitate reimbursement.
Contact a Healthcare Law Attorney
Despite delivering necessary medical services, physician practices may face underpayment issues due to a variety of factors, including complex billing rules, payer errors, and contractual disputes. These underpayments can have a subtle but serious impact on a provider’s financial stability and operations. Our firm helps practices capture money owed.