Payer Underpayments: Steps Healthcare Leaders Can Take to Increase Revenue

As underpayments and inaccurately adjudicated claims become more prevalent than ever, how can healthcare leaders ensure that their organization is securing their revenue? Stephanie Rickard, Enterprise Revenue Cycle Director at TPS, details the ways technology, plus the right strategy, can power revenue cycles to succeed.

Denials are on the rise and payer underpayments are at the forefront of discussion among front-office billers, physicians and the C-suite. Recent data shows that healthcare payers underpay up to ten percent of claims. This metric may come as a shock to many in the healthcare world, because the truth is that underpayments are incredibly difficult to accurately identify. Underpayments account for tens of millions in lost revenue annually, and an audit of these zero balance accounts can no longer afford to be placed on the backburner.

In my opinion, one of the main issues leading to revenue loss due to underpaid claims is the manual nature of the identification process. Revenue cycle staff can try their best to address disputed payments, but it’s hard to capture even a fraction using old school methods, such as spreadsheets. Staff members would have to possess the knowledge and expertise to understand hundreds of fee schedules and millions of payer rules, that’s simply not feasible. Basically, the current methodology is outdated. During the adjudication process, human error is also a concern. Perhaps the wrong pricing rule was applied, or maybe they just remitted the wrong amount. Regardless of the intent, mistakes affect reimbursement.

Another major problem that organizations have faced in recent years, especially during the pandemic, are budget constraints. Funds are strained for a multitude of reasons, but ultimately the impact put an impediment on additional funds that could have been spent on revenue cycle management needs. This also negatively impacted personnel at many practices and hospitals, big and small. Staffing constraints, whether due to budget limitations or safety concerns, mean there are less hands to work claims. Claims then take longer to process, denials are not given the attention they deserve, and then a backlog begins to form. Leaders need to ask themselves: Are the resources in place to handle the claims that need to be addressed? If not, then additional resources may need to be allocated.

Even with monetary or staffing constraints, leaders must ensure that they have a digital transformation strategy in place. Many systems, as a whole, have not yet adopted a revenue integrity strategy. What is your organization’s plan to ensure you are realizing every dollar contractually owed to you? Part of this strategy needs to include the adoption of intuitive technology and automation. Assigning staff to manually dig into the root cause of these problems takes an enormous amount of time, but utilizing adjudication level real-time technology and automation will streamline this process significantly. We also know that the processing of appeals can be costly – as much as $24 per professional appeal and $100 per hospital appeal. At the end of the day, I believe we will agree, it is much easier, and much more cost effective, to utilize technology to ensure we take on a proactive stance to payer recoveries.

The adoption of contract compliance technology is crucial to the success and effectiveness of any revenue integrity program. When searching for the right technology to incorporate, what should practices, hospitals and health systems look for in a contact compliance platform? Organizations need technology that truly replicates the claim adjudication process. What you don’t want is a solution that only analyzes historical remit data to report on payment trends. You do not want this technology guiding your appeal efforts. You have to be confident in the technology you select as false positives or negatives can tarnish payer relations and reduce recovery propensity in the future. Here are three critical characteristics a platform must have in place:

1. Real-time operating capabilities, optimized to the organization’s contractual specifications
2. Ability to mimic the adjudication process, including the audit of both payer contracts and rules and edits
3. Custom and automated appeal scenarios, eliminating DDE, and expediting the submission process

If the technology you are considering does not contain these core competencies, I encourage you to have more partner discussions.

I also recommend establishing and nurturing payer relationships. Not only can a designated internal contact streamline follow up communications and protocols, it aids in holding them accountability for your relationship with that payer. It’s a critical step toward creating a custom appeal strategy.

With increased automation and the right technology in place, revenue collection can be simplified. Discover why partnering with a trusted RCM organization is a good strategy to ensure the collection of otherwise unrealized payer funds by visiting

About the author:
Stephanie Rickard has been a part of the healthcare revenue cycle industry with TriZetto Provider Solutions, a Cognizant Company, for 10 years. As an experienced and enthusiastic professional, Stephanie’s extensive knowledge and passion for this ever-changing industry fuels her continued success and desire to increase revenue for her clients. By leveraging her optimization-oriented skill set, Stephanie works with clients to create efficiencies and reduce costs through automation-enabled platforms and services.