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Health Works Collective > Business > Finance > Payor Contract Compliance and Tracking Reimbursements: Are You Being Paid Correctly?
BusinessFinanceHospital Administration

Payor Contract Compliance and Tracking Reimbursements: Are You Being Paid Correctly?

Andy Salmen
Andy Salmen
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Payor_Contract_ComplianceIf you are a practicing physician in this market, you may wonder why you are working long hours and seeing as many patients as you can, yet the amount of money you are collecting seems to be decreasing. You cannot identify the problem and it seems as though your billing system is working.

Payor_Contract_ComplianceIf you are a practicing physician in this market, you may wonder why you are working long hours and seeing as many patients as you can, yet the amount of money you are collecting seems to be decreasing. You cannot identify the problem and it seems as though your billing system is working. Bills are going out and collections are coming in but something is just not right.

If this is happening to you, you need to analyze the management of your revenue cycle and focus on your payer contracts.  You must start to track reimbursements to see if you are being paid correctly.  Healthcare Information Services (HIS) has found many examples where payers are not paying according to the terms of the negotiated contract that is in place. This results in underpayments.  These underpayments can amount to thousands of dollars and some cases have been found where the underpayments have reached as much as $75,000 to $100,000 in one year.

You can fix this by using a system that will compare the payments you are receiving with the actual negotiated rate of your payer contract. You may even see a pattern of underpayments from the same payer.  Here are some steps you can take in your revenue cycle management so that you can identify and rectify the underpayment problem.

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1. Prepare a payer matrix: You may provide the same service to several different patients, all of whom have different insurers with different payment schedules according to their individual contract terms.  It is time consuming and essentially impossible to pull out each contract every time a payment is received.  A billing service or software program will have a way to create a matrix for easy monitoring of your payer contracts or you can create your own matrix.

The matrix can be a simple chart with the name of each payer with whom you contract, the top twenty or so most common procedures and the contracted rate for each.  It should include the contact information and terms of the contract. It should also contain reminders to you for the dates for renegotiating payments so that you do not continue working under the terms of an outdated contract.

These payor contracts should be loaded into your practice management system for utilization of the often included, reimbursement tracking / contract compliance module.

2. Compare payments received to the contract terms: Many software programs are designed to flag underpayments, but a business manager needs to know how to use the tool to create underpayment reports.  If you do not have the software program, payments received should be compared to the contract terms to identify underpayments.

While most practice management systems do have modules for contract compliance anlaysis and review, in our experience, we have found them to be generally inadequate on accurately and successfully tracking reimbursements.

At HIS, we have employed third party software and when necessary a good old fashion spread sheet to ensure that everyone of our clients’ payments are reviewed in comparison to their contracted rate.

3. Do not ignore underpayments that appear insignificant: It may seem easier to ignore underpayments that seem insignificant.  However, at the end of a year, underpayments of only $50 to $100 each can add up to thousands and thousands of dollars of uncollected revenue. Furthermore, this is all profit that is being lost.  You have already paid your overhead and these underpayments can be a crushing blow (if uncollected) or much needed infusion to your bottom line if and when the payors rectify their error.

4. Analyze the problem and take action:

a. If the underpayment is due to the payer not complying with the contract terms, notify them and be sure they rectify the discrepancy.  This is not just a request. Send a demand letter requiring payment according to the terms in the mutually agreed upon and executed contract.
 
b. Be sure the billing codes and/or modifiers are correct.  If the wrong codes are resulting in the underpayment, change your billing practice to ensure the correct codes are being used.
 
c. Be alert to contract termination and renegotiation dates.
 
d. Be aware when payors update or change their system or database.  We have seen that when one payor updated their software, they loaded the wrong fee schedule and drastic underpayments where issued to our client.  Thankfully, we were monitoring this and were able to recover the underpaid claims on behalf of our client.

5. Consider outsourcing your billing: Professional services for your revenue cycle management is one way to deal with your payer contracts and for tracking your reimbursements.

Image courtesy of: phasinphoto / Freedigitalphotos.net

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