With financial pressures continuing to increase, healthcare providers constantly need to find ways to improve their bottom line. One often overlooked area with significant potential for impact is effective contract management, especially when it comes to addressing and preventing underpayments to unlock missed revenue potential.
Understanding the Impact of Underpayments
Underpayments occur when payers do not fully reimburse providers for the services delivered, based on the terms of their managed care contracts. This can happen through outright denials or more subtly, through reduced payments that providers may mistakenly accept as complete.
These issues can significantly impact the financial health of healthcare organizations, as the American Medical Association (AMA) estimates the accuracy rate of payments by insurance companies at only 77%. This means more than one in five claims are not appropriately reimbursed according to managed care contracts. Research indicates that this discrepancy translates into a net revenue loss of 1% to 3% for providers - a significant figure for healthcare organizations where each percentage point of loss can equate to substantial amounts of forfeited revenue.
The Power of Prevention
Contract management and denial prevention strategies not only identify underpayments upfront but also help avoid them. Several reports estimate that a typical hospital could recover $5 million to $10 million from more effectively managing its denials and underpayments. For large integrated delivery networks, the potential revenue recovery could be even more significant. Given that about two-thirds of denials are recoverable, health systems can recoup significant amounts using a strategic approach that prioritizes contract management and underpayment recovery.
Effective contract management involves a thorough understanding of payer agreements and the diligent application of contract terms to billing processes. By ensuring that claims are accurately submitted according to the specifics of payer contracts, providers can significantly reduce underpayments.
Leveraging Technology and People
One effective strategy to combat underpayments is through strategic partnerships that leverage managed services and contract management technology. This comprehensive solution uses skilled resources and a strategic approach to working identified underpayments using contract management tools and technology, fostering collaboration between the revenue cycle operations team and the managed care team. Not only does this help tackle the issue of underpayments, but it also ensures that healthcare providers maximize the use of invested technologies that could otherwise remain underutilized.
The integration of technology into contract management processes allows for more efficient identification, management, and appeal of underpaid claims, translating into recovered revenue and improved financial health for healthcare organizations. Using a two-pronged approach that focuses on high-dollar accounts and high-volume trends helps in identifying and working underpayments for faster recovery and maximized return on investment (ROI). Leveraging technology to retroactively review zero balance claims enables healthcare providers to confirm that the claims have been paid in full, enables prioritization in identifying underpayments, allows for root cause analysis, and can group bulk issues together to look at the best, highest recovery scenarios. Performing prospective reviews of underpaid claims in real-time allows for proactive remediation of underpayments to accurately and quickly adjudicate claims.
Addressing Underpayments to Impact the Bottom Line
To effectively address underpayments, healthcare providers need to adopt a multifaceted approach. This involves implementing advanced contract management technologies, training staff to address and appeal underpaid claims, and optimizing the use of data and analytics to improve claims processing accuracy. Insights beyond employee performance can include a trend analysis of existing underpayment inventory for work stratification and bulk issue identification, user productivity reports, quality audit reports, and cash recovered reports.
Underpayments represent a critical yet often neglected area where healthcare providers can recover lost revenue and improve their financial health. Incorporating technology with skilled resources proactively working on identified underpayments, while also retroactively reviewing historic zero-balance claims can have a significant ROI. By focusing on strategic contract management, leveraging technology, and proactively addressing underpayments, healthcare organizations can unlock missed revenue potential and substantially improve their bottom line. Embracing strategies for underpayment recovery will not only enhance financial performance but also improve overall operational efficiency, maximizing revenue potential and improving financial stability.
Effective partnerships among internal teams facilitate the escalation of potential contract load errors, enabling contract management and IT teams to remediate. By providing valuable insights, managed care teams can prepare for contract negotiations to not only strengthen their negotiating position but also increase payer accountability, making the process more efficient and effective for all parties involved.
Access our underpayments ROI calculator to help quantify the issue of underpayments and more effectively manage underpaid claims to optimize your organization’s revenue recovery efforts, protect earned revenue, and streamline payment strategies to achieve financial success.
Matthew Bridge
Ryan Chapin
