Accepting denials and underpayments as the status quo is one of the most common reasons why practices struggle to remain profitable. Without a focused strategy to analyze payer reimbursement—and dive into the root causes of any problems—practices run the risk of leaving money on the table, and that’s no way to run a business, says Sandra Jacobs, founder and CEO of Jacobus Consulting in Irvine, CA.
Many practices claim they don’t have the time or staff to oversee payment accuracy, but that’s usually not true, says Jacobs. “Practices do have the staff to do this. They just need to put a strategic plan in place to do it,” she adds.
Making Payment Analysis a Priority
Why is it important to analyze payer reimbursement today—in a predominantly fee-for-service world?
It helps lay the foundation for payment analysis as the healthcare industry continues to pivot toward value-based payments, says Jacobs. “With value-based payments, you should know what to expect and have an action plan in place for responding when you don’t get paid this amount,” says Jacobs.
Analyzing payer reimbursement ensures practices are paid correctly for every service they provide. “You want to legitimately maximize reimbursement for your practice,” she adds. “Every time you’re not being paid correctly, you really diminish the ability of your practice to grow and thrive. You start to operate within a margin that inhibits you from expanding.”
Practices that take the time to analyze their reimbursement—and fight denials and underpayments, when appropriate—may even find that payers ultimately become more communicative and open to corrective action, says Jacobs. “If your payer knows that you follow your denials, look at your underpayments, and fight for every penny, the payer representative treats you differently,” she says. “They take your call. They see that you have a focus and strategy for getting paid the right way.”
3 Tips to Analyze Payer Reimbursement
Jacobs provides the following three tips to help practices analyze their reimbursement:
1. Recruit a staff member to focus on payment trends.
This individual—likely a coder or biller—can review the practice’s top 10 codes (by volume) per payer per month for six months, says Jacobs. Ask these questions: What should the practice have been paid according to its payer contract? What was the practice actually paid? Is there a discrepancy? If so, why?
“This gives you some data to understand what’s being denied, what’s being underpaid, and what’s the root cause,” she adds. “You need this information before putting processes and procedures in place. Otherwise, you could be focusing on the wrong spot.”
Practices may find it helpful to purchase contract management software to identify these payment gaps more easily, says Jacobs. However, they can also perform this type of analysis manually using a contract matrix to identify reimbursement trends with the overarching goal of bringing these trends to the payer’s attention and/or fixing processes internally. Click here to download a sample contract matrix that includes two tabs—one for payer-specific payment provisions and another to help practices analyze payments monthly.
2. Know why claims are denied.
Some practice management vendors offer robust billing analytics to help practices understand the root of the denials, but some practices may need to do this manually by analyzing the claim adjustment reason code (CARC) and remittance advice remark code (RARC) that are included in each transaction, says Jacobs. Payers—particularly local Medicaid and Medicaid managed plans—may also use their own non-official reason codes. When these codes aren’t readily available on the payer’s website, practices should call them to obtain the list, she adds. “If you really narrow it down to your practice and what you do, you can learn your payer codes pretty easily,” says Jacobs.
3. Don’t let underpayments fall through the cracks.
Underpayments are tricky because there are no associated reason codes, she says: “With underpayments, you get paid, but you don’t know whether the payment is accurate. This is where I see a lot of practices lose money.”
Jacobs says underpayments typically occur because a coding error, a fee schedule misalignment, or both. For example, with coding, practices may incorrectly report a level 3 evaluation and management (E/M) code even though the documentation actually supports a level 4 E/M code. With fee schedule misalignments, payers may neglect to update their adjudication systems to reflect new codes and updated relative value units effective January 1. “I’ve seen a lot of practices lose money between January 1 and February 28,” says Jacobus.
Ultimately, practices should strive to prevent denials and underpayments proactively rather than manage and address them retrospectively, says Jacobs. This requires a team approach that emphasizes the importance of data integrity and coding compliance—a process redesign that takes some effort but is certainly well worth it in the long-run.