-Contractual Underpayments- WHAT YOU DON’T KNOW COULD BE
HURTING YOU
Presented by: Marilyn Happold-Latham, MBA, FACMPE
Objectives:
Educate managers about contractual underpayments
Improve knowledge of health plan contracts Share experience regarding payment audits Provide tools to perform payment audits Use audit information in contracting process
Contractual Underpayments –What are they???
Medical group contracts with a health plan to pay a specific amount for a specific service
Payments usually based on a conversion factor multiplied by a RBRVS Relative Value Unit (RVU)
Tracked by reviewing Allowables or Contractual Adjustments when payments are received.
When health plan pays LESS than what was contractually agreed upon = contractual underpayment
Understanding the Payers
Different types of payers• Health plan that is a single payer
Providence Health Plan, Great West, Healthnet, Lifewise
• PPOs, many with multiple payers (100+)Providence Preferred, MHN, MultiPlan, First
Choice Health Network, Coventry, First Health Set up practice management system to allow you to track
charges by payer contracts• Insurance Groups = set up at contract level• Insurance Carriers = set up at payer level
Understanding the Payers
Understand WHO PAYS THE CLAIM• PPOs are the “middle man” and only price the
claim and don’t pay it• Claims sent from PPO to the “Payer” who sends
the check and EOB to the provider• Some PPO payers price their own claims• Some payers contract with 3 or more different
PPOs in the Portland areaNeed to track these as separate carriers in the PM
system
Same Payer with Different PPOsASSURANT HEALTH / MULTIPLAN
ASSURANT HEALTH/ COVENTRY
ASSURANT HEALTH/ MHN
ASSURANT HEALTH/ FIRSTCHOICE HEALTH
ASSURANT HEALTH/ PROV PREFERRED
BENEFIT PLANNERS/ FIRST CHOICE HEALTH
BENEFIT PLANNERS INC/ MULTIPLAN
BENEFIT PLANNERS / MHN
BENEFIT PLANNERS/ PROV PREF
A & I BENEFIT PLAN/ FIRST CHOICE HEALTH
A & I BENEFIT TRUST/ PROV PREF
A & I BENEFITS TRUST/ MHN
HEALTH COMP /COVENTRY
HEALTH COMP / PROV PREF
HEALTH COMP / MHN
HEALTH COMP/ FIRST CHOICE HEALTH
Contracts – Improve your Understanding
Inventory ALL of your contracts – keep copies Important to READ your contracts Look for information needed for operations:
• Type of Fee Schedule proposed and the amount (request a Conversion Factor and RBRVS RVU year)
• Start date and end date of the contract • Number of days to file a claim• Re-coupment rights for overpayment by the Plan
(days/months to recoup payments)• List of payers if it is a PPO
Contracts – Improve your Understanding
Look for payment based on “site of service”• Facility versus Non-facility RVU• Make sure contract does not note the “lower rate”
Payment for drugs and vaccines (codes without RVU)• Use of AWP versus ASP• Compare cost to reimbursement annually
Identify the insurance ID cards for each health plan• Request samples of ID cards from the health plan or collect
copies at the front desk• Be able to identify cards from plan “products” that the practice
does not participate with United Healthcare/Pacificare products Secure Horizon HMO versus Secure Horizon Direct PFFS products
Contract negotiations
STAY ORGANIZED – develop a filing system for all contract related information.• Original contracts, amendments, Fee schedule
attachments, etc. Document all communications with health plans
• Keep a record of email exchanges, letters, etc.• Make notes from phone calls
Keep the negotiation process moving forward• Use timelines to remind you when contracts are nearing
time for re-negotiation throughout the year• Use a tickler file or task list to keep track of what
is needed next
Reimbursement Rates – How they Work
Most are based on RBRVS Relative Value Units (RVU)• Originally developed for Medicare in early 1990s• RVU change annually• Be aware of “transitioned” vs “fully implemented” RVU (2007 – 2010)• Published in Federal Register annually
http://www.gpoaccess.gov/fr/browse.html• Available from CMS website
http://www.cms.hhs.gov/PhysicianFeeSched/PFSRVF/list.asp#TopOfPage
Conversion Factors• Health plans make offers to providers• Negotiable
Conversion Factor x RVU = Allowable $$$$$
Fee Schedule Language-BNWA
“2007 CMS Relative Value Scale of RBRVS, fully implemented (available as of December 31, 2006). The RVUs will be adjusted for budget neutrality by applying the work adjustor. RVUs will be based on place of service and will not be geographically adjusted.”
Medicare Payment for 99213-Unadjusted
UNADJUSTED FOR THE BUDGET NEUTRALITY WORK ADJUSTOR
Using the 2007 Transitioned Non-Facility RVU in Portland Oregon Work Practice Expense Malpractice Total
99213 0.92 0.71 0.03GPCI 1.002 1.059 0.434GPCI Adj 0.9218 + 0.7519 + 0.0130 =1.6867
[(wRVU *wGPCI)+(peRVU *peGPCI) +(mRVU*mGPCI)] * CF = 1.6867 * $37.8975 = $63.92
Medicare Payment for 99213-Adjusted
Using the 2007 Transitioned Non-Facility RVU in Portland Oregon Work Practice Expense Malpractice Total
99213 0.92x0.8994* 0.71 0.03GPCI 1.002 1.059 0.434GPCI Adj 0.83166 + 0.7519 + 0.0130 =1.59657
[(wRVU *wGPCI)+(peRVU *peGPCI) +(mRVU*mGPCI)] * CF = 1.59657 * $37.8975 = $60.51• 2007 Budget Neutrality Work Adjustor. When applying to the RVU, you must round the product to two
decimal places before continuing the calculations!
• $3.41 or 5.6% less than the unadjusted fee
BNWA Effect on Reimbursement
Sample health plan conversion factor increased from $63 to $65 (3%) from 2006 to 2007.
Reimbursement increased only 1% from 2006 to 2007 when the BNWA was used to decrease the value of the work component of the RVU.
The practice’s volume of each CPT code determined gains or losses for the practice.
Use of the BNWA by (commercial) health plans reduced the value of every RVU by 5% to 6%.
Budget Neutrality Adjustor
The Good News• As of 2009 RVU year Medicare no longer used the
Budget Neutrality WORK Adjustor.• Commercial plans no longer could use a BNWA
The Bad News• As of 2009 RVU year Medicare used the Budget
Neutrality Adjustor to adjust the CONVERSION FACTOR and not the work component of the RVU.
[(wRVU *wGPCI)+(peRVU *peGPCI) +(mRVU*mGPCI)] * (CF * BNA) = Fee
Contract Negotiations
Don’t hesitate to ASK for contract changes and/or clarification• Type of fee schedule AND reimbursement rate• Elimination of the BNWA or a GPCI• Days to file a claim
Consider using the “date when the patient provides the correct insurance information” rather than the “date of service”
• Contract start date• Specific list of codes that will be bundled• Wording of specific contract clauses
Utilize information from payment audit in negotiations
Allowables and Contractual Adjustments
Allowables = what the health plan agrees to pay for a specific service.• e.g. 99213 = $100 allowable
Contractual Adjustment = the difference between your fee and the allowable.• Fee = $120• Allowable = $100• Contractual adjustment = $ 20
( aka a write-off)
How to know if Health Plans are Paying according to Contract???
AUDIT YOUR
PAYMENTS
Payment Audit Methods
Specialized payment audit software Special functions/features within a practice
management system Manual audit process
Payment Audit Software
Different software packages designed for different sized medical groups• Medical Present Value (MPV) 50+ doctors• Premier Data Plus – 50 or fewer doctors• Others
Software for larger practices may take a percent of dollars recovered.
Software may pay for itself in 1-2 years in dollars recovered
Payment Audit Software
Advantages• Allows a practice to audit virtually 100% of payments• Shows patterns of underpayment• Generates correspondence to send to payer• Can pay for itself in 1-2 years with revenue recovered• Often includes other capabilities – e.g. data mining
and reporting, contract management Disadvantages
• Have to pay up-front for the software or service• Requires considerable amount of initial set up time to
make it work with the PM system
Practice Management System
Many practice management systems allow loading of contract allowables.• Allowable must be posted when payment is posted• System identifies an underpayment by comparing
allowable posted to expected allowable.• Monthly reports show expected allowed versus
allowed per the EOB payment.
Practice Management System
Advantages• Current PMS may already have the capability• Gives good idea of extent of the problem
Disadvantages• Takes considerable set-up time in PM System• Provides no correspondence for health plans• Reporting capabilities may be very minimal
Manual Payment Audit
Advantages• If done with a random sample of payments, allows
extrapolation to a larger sample of all claims• Provides excellent opportunity to learn more about
payers, contracts and the process of reimbursement• Helps determine if underpayments are a problem
Disadvantages• Very labor intensive and time consuming• Requires knowledge of use of spreadsheets• May only provide anecdotal information about
underpayments if random sample is not used• Have to develop correspondence to health plans
Tools for a Manual Payment Audit
Organized contract information• Contract Names• Contract start and end dates• Reimbursement rate (CF x RVU year)
Table of Allowables by Health plan Contract• Use the 80/20 Rule for most frequently performed CPTs• RVU for each CPT code by RVU year
Select a sample to audit (random sample can be used) Copies of patient insurance ID card for each sample Spreadsheet to keep track of audit data EOBs that show the allowables and adjustments
Table of Allowables by Health Plan
Start Date 6/1/07 5/1/08 6/1/08 5/1/09 7/1/09
Conversion factor $60.00 $65.00 $62.00 $59.00 $60.00
RVU year 2007 2008 2008 2009 2009
2007 Tran
2008 Tran
2009Tran
CPT Description RVU RVU RVU Plan 1 Plan 2 Plan 3 Plan 4 Plan5
99202 New Pt II 1.73 1.74 1.76 $104 $113 $108 $104 $106
99203 New Pt III 2.56 2.55 2.55 $154 $166 $158 $150 $153
99204 New Pt IV 3.92 3.91 3.93 $235 $254 $242 $232 $236
99212 Est Pt II 1.02 1.03 1.03 $61 $67 $64 $61 $122
99213 Est Pt III 1.66 1.67 1.70 $100 $109 $104 $100 $102
99214 Est Pt IV 2.52 2.53 2.56 $151 $164 $157 $151 $154
Audit Data Spreadsheet
Contract Method One Method Two
Ins Ins Start Allowable Contractual Adj Total
Carrier Group CPT Date Fee Exp EOB Diff Exp Act Diff Diff
Earheart MHN 99213 $150 $120 $0 $0 $30 $40 $10 $10
81000 $25 $10 $0 $0 $15 $15 $0 $0
Cigna Prov Pref 99395 $300 $200 $180 $20 $0 $20
PPP Regence 99243 $250 $175 $0 $0 $75 $100 $25 $25
EBMS Coventry 99232 $175 $160 $150 $10 $0 $10
Portland’s Payment Audit Project
Grew from medical group managers’ concerns about contractual underpayments• Results from one office’s implementation of payment
audit software (Premier DataPlus) Chronic underpayment by most payers was discovered
• OMA’s attention to the problem Managers volunteered to perform manual audits OMA provided statistician for data analysis Objective was to determine the “scope” of
the problem in the area
Summary of What Was Found
Auditing payments pays off!• Vancouver Clinic recovered $260,000 in two years (160
doctors)• Metropolitan Pediatrics (20 doctors) estimated $77,000
in underpayments in one year (extrapolated from sample)
• Women’s Clinic recovered $30,000 in two years (7 doctors)
• Bend Memorial Clinic recovered $50,000 a month Many underpayments are $10 or less Rarely saw instances of payment MORE than contract rate Same codes are often underpaid repeatedly
Summary of What We Found
Manual payment audits are extremely time consuming Medicare is the least likely to pay incorrectly
• Don’t waste time auditing Medicare payments Specialty practices with small percent of Medicare business
(OB or Peds) may experience higher frequency of underpayment
Underpayments occur across the board, but PPOs are the worst offenders• PPOs do not audit their member payers for correct
payment – they “rely on the providers to identify incorrect payments.”
Summary of What We Found
Underpayments most likely to occur immediately after a new contract start date occurs• Plans forget to “load the new rates” for all providers in
a group practice• PPO Payers don’t update rates in a timely manner• Poor communication between PPO and the payer
Geographic areas that rely on an IPA to negotiate all contracts may experience fewer incorrect payments.
Rate of incorrect payment – as high as 12% of claims Payment audit software can pay for itself in 1-2 years
with revenue recovered
Reaction from the Health Plans Initial reaction from most was denial of the problem
• Many ignored requests for reprocessing and correcting the payment
• Some tried to deny using argument of “past timely filing” Plans requested EOB and 1500 form to reprocess each
underpaid claim– takes substantial staff time• Try to negotiate list of claims on a spreadsheet
After four+ years of finding errors – payment errors still occurred Plans were very slow to reprocess and pay correct amount Required constant follow up with the payer PPOs made no offers to audit payers
Next Steps
Take time to learn more about your contracts Gain a good understanding of your payers Develop your tools to perform a manual payment audit Select your sample to audit Perform the audit Determine the extent of the problem Follow up with health plans
