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Published 8/1/2014
A.J. Johnson

Getting a Handle on Denials and Underpayments

Five steps to improving your billing performance

A.J. Johnson

In the average physician office, there can be a wide gap between expected and actual claim reimbursement. In fact, payers make inaccurate payments on one out of every 14 healthcare claims (7.1 percent), according to the 2013 American Medical Association (AMA) National Health Insurer Report Card. This missing revenue isn’t easy to see when it’s hidden. However, if left unchecked, these underpaid and denied claims can significantly reduce revenue.

Using the AMA data, for every 1,000 claims, payers are making 71 inaccurate payments. To see the impact claim denials and underpayments can have, consider the total number of claims your orthopaedic practice submits each year. For example, if a healthcare provider submits 130 claims per week (6,760 claims submitted annually), and payers reduce the payment of the contract amount by as little as $10 on just 7 percent of those claims, the provider would lose $4,732 annually. In a multispecialty orthopaedic group with 10 providers, that would add up to a loss of more than $47,000 annually.

The following five tips can help you manage underpayments and denials, ensuring that your practice gets paid correctly.

Verify eligibility
Verify the patient’s insurance eligibility prior to each visit and again at the time of service to potentially eliminate filing claims with the wrong insurer. One of the most common reasons for front-end claim denials is that the claim was filed with invalid or incorrect patient insurance.

Check up on payers
Maintain copies of your payer agreements and check whether the payer is paying according to your contractual agreement. As reported in the AMA’s National Health Insurer Report Card, underpayments are frequent.

Review remittances
Review each remittance from the payer to quickly address delays, denials, and reductions. Organize and address denials by category to create efficiencies.

Create a reporting strategy that allows you to identify outliers related to underpayments and denials. Use benchmarking data for comparison to identify outliers compared to your peers.

Make changes
Implement a plan to effect change within your organization regarding those issues that are increasing your cost of doing business with the payer. A claim scrubber—an automated claims editor that validates the appropriateness and accuracy of information (such as patient, provider, and insurer data as well as services provided) before the claim is submitted—is one tactic that can be employed. This will increase the first payment accuracy rate and reduce administrative expenses.

Similarly, using a reimbursement management program, such as the one available through the AAOS Member Advantage Program, can help verify that payments correspond to contracted amounts.

A.J. Johnson is director, reimbursement products, TriZetto Provider Solutions.

Reprinted with permission Copyright © 2014 TriZetto Corporation

Get Help Through AAOS
If you are using a claims clearinghouse, does your vendor offer a service that compares actual payments with contracted amounts? If not, is your coding/billing staff checking actual payment versus contracted amount billed? How are you addressing this payment shortfall?

The AAOS Member Advantage Program Revenue Management Program powered by Trizetto offers a low-cost reimbursement manager program that tracks actual payments against contract and automatically generates communication to the payer seeking the corrected amount. For more information, visit www.aaos.org/pracman