What Are Commercial Insurance Claim Underpayments?

Commercial Insurance underpayments are exactly what they sound like – they’rpayment requests that are only partially paid. Your hospital sends out payment requests to these commercial insurance companies. Their billing departments examine the bills, but instead of paying them in full, they only submit enough money to cover part of them. This happens more than you’d think. In some hospitals, as many as one in four of these bills end up being underpaid. Why are these underpayments problematic? Well, you already know that many hospitals operate on thin financial margins. The underpayments, combined with the billing process (they can be appealed up to three times by your billing department) create quite a conundrum. The billing process requires money, since you need to pay your employees, and the underpayments cut into your revenue. This causes a downward financial spiral that ends with hospitals getting put on financial watch or even going under.

Causes of Payor Underpayments

According to a survey by the American Hospital Association, payor-related underpayments accounted for 15.2% of all underpayments in 2019, while revenue cycle-related underpayments accounted for 84.8% of underpayments in 2019. Some of the most prevalent causes include:

· Contractual underpayments: Payers may only partially pay per the terms outlined in their contract, including complex terms such as high-dollar stop-loss, carve-outs, escalators, and lessor-of language.

· Processing errors: Payers may make mistakes calculating the owed amount or processing the claim for payment.

The Issues With Claims Underpayments

Once the commercial insurance company issues the underpayment, the process isn’t over. Every hospital is allowed three state-level appeals. The problem is that these appeals take time. Your billing department needs to handle those appeals, while at the same time sending out new bills for recently conducted procedures. None of this happens in a vacuum, and it’s not like your hospital sits empty while the billing is done. There are always patients. It takes a lot of people-power to get those accurate bills sent out and appealed, if necessary.

A Viable Solution

Fortunately there is a solution that requires very little time or ‘lift’ on the part of your staff. When you engage with Reed Advisory Group you have access to our expert provider and their proprietary software. Within this software they create custom algorithms for each of your third party contracts. This allows them to forensically analyze the last 12-24 months of remittances after your team has completed their work and determined them to be a zero-balance due. All of this work is done on a contingency basis, so hospitals only pay a share of the ‘found money’ recovered.
With a minimum recovery to date being 10% of gross third party receipts it represents a great opportunity for hospitals, health systems, and large medical groups. That's the value proposition. If they can't produce results for you then you will never be billed. That's putting their money where their mouth is.

Take control of your underpayments and drastically reduce the amount of write-offs by contacting us today to schedule a call.