Imagine that your radiology practice realized a $750,000 in underpayments in two years. Now consider the impact such a shortfall would have on your practice’s ability to grow or even sustain itself. In this actual case, a payer was reimbursing 10 of the group’s physicians correctly while underpaying another 15 for the same procedures at the same time. This is a vivid lesson in the importance of continually monitoring third-party payments to ensure payers are reimbursing you at your contracted rates.

It’s a natural expectation to believe that you are being reimbursed properly, but AMA’s 2012 National Health Insurer Report Card reveals that the participating third-party payers underpaid radiology/imaging procedures as much as 15% of the time. With the downward pressure on radiology reimbursement, it’s imperative to have the revenue cycle processes in place to ensure that you are maximizing the value of your contracts.

While both parties enter into a contract with the best of intentions, the complexity of implementing its terms can be a daunting process. Underpayments may be due to third-party payer errors, such as failure to load a current fee schedule, paying from the wrong fee schedule, inappropriate application of edits or other clerical errors. A clerical error detaching some of the physicians in a practice was responsible for the $750,000 shortage cited in the example. Left unchecked, this kind of revenue leakage can erode your profitability on an ongoing basis.

Using Automation to Monitor Underpayments

Manual, periodic audits will not be effective in managing your contracts. Radiology billing consists of high volume, low value transactions. If you are able to identify variances, they will typically be small and may appear insignificant when viewed in isolation. Resolution of individual underpaid claims can be costly and has limited success. If you find a variance for a particular CPT code, in all likelihood, your contracted carrier is systematically underpaying this procedure.  Your billing system should have the capability of accepting electronic payer remittance. It should provide the functionality to compare your electronic remittance or manually posted payment data to your contracted rates and identify variances when they occur. Regular reports should identify the source of the variances at the claim and line item level so you can appeal them. You should be able to sort the data into a variety of views to ascertain trends such as the underpayment of a particular CPT within or across payer plans. The ability to demonstrate an ongoing pattern can increase your chances of successful resolution. Assigning dedicated billing specialists to specific payers can streamline the resolution process. They become familiar with the payers' appeals processes, can manage individual nuances and build relationships that streamline the process.

How to Get Started

Actively managing your contracts is really about maximizing profitability and minimizing risk. Implementing this process allows your practice to:

• access your contract details in a single location,
• detect and appeal underpayments,
• accurately forecast collections by applying your contract terms to your A/R.

Make sure your billing system can provide automated contract management at the line item level. Identify the sources (insurance classes and plan types) of the top 80% of your charges. Contact these payers and request copies of the fee schedules to load into your practice management system. If you already have this information, make sure it is up to date.

Keep Your Guard Up

In order for your radiology practice to thrive today, you need to monitor your payments proactively, ensuring they are both accurate and timely. The case study cited shows that underpayments can seriously affect your practice when they occur. Ongoing surveillance must be part of your day-to-day operation, serving as an “early warning system” for underpayments before they become pervasive. Ongoing monitoring, analysis and resolution will help you protect and maximize your practice profitability in this difficult reimbursement environment.