Is It Worse To Get Denied a Payment Or To Be Underpaid?

Revenue management in the healthcare industry is a constant challenge, as healthcare providers often face the issue of not receiving the full payment they deserve. This can happen from both payers and patients. While there is always a risk of patients not paying their share, insurance companies are supposed to ensure payment. However, two problems arise when it comes to insurance payments: denials and underpayments.

Denials occur when an insurance company refuses to pay a claim submitted by a physician practice. This can happen if there is incorrect or missing information in the claim, and in some cases, the denial can be reversed if the necessary corrections are made. However, there are also hard denials that will never be paid, such as when a patient is not covered by a specific payer. Research estimates that 50-65% of denials are never reworked, but the good news is that 86-90% of denials are preventable.

On the other hand, underpayments happen when the payment received for a claim is lower than the expected amount. This can occur if the claim did not request the full contracted amount from the payer. Insurance companies may not inform providers about underpayments, as they can choose to pay the lesser of the billed amount or the contracted amount. Providers need to prove to the payer that their claim should be paid, whether it is for a higher amount or any payment at all.

Both denials and underpayments pose challenges to healthcare providers, as they result in lost revenue. While denials can sometimes be corrected and paid, underpayments may go unnoticed unless providers proactively identify them. Ultimately, both issues need to be addressed in order to secure full and fair payment for healthcare services.

Denials and underpayments can result in financial losses for healthcare providers. While denials mean no payment at all, underpayments are more challenging to identify and analyze. It is easier to detect a missed payment than a payment that could have been higher. Reconciling underpaid claims requires additional work, with an average cost of $25 per claim in time alone, which can obviously accumulate vast revenue leakage over time.

Receiving additional payment for underpaid claims may be difficult, as insurance companies can argue that by accepting the original amount or not acting promptly, providers waived their right to contest the amount. Providers need to review their contracts and go through the insurance company's appeals process to recover the payment.

To prevent denials, providers must submit clean claims that include all necessary information, such as provider, patient, and health plan subscriber details, date and place of service, coverage eligibility, and required documentation. Failing to include any of these elements can lead to claim denials.

Preventing underpayments involves actively flagging and analyzing past underpayments. Providers should review their fee schedules and contracts to identify discrepancies and take appropriate actions such as adjusting charge prices or undergoing the insurance company's appeals process.

BillingAuditors uses a proprietary reimbursement software, offers a solution to handle denials and underpayments. It provides a comprehensive view of payer contracts, fee schedules, denials, and underpayments, while also offering eligibility checks and accurate patient cost estimates. By aggregating fee schedules and claims data, Rivet helps increase revenue and reduce accounts receivable days for healthcare providers.