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Identifying and Monitoring Physician Managed Care Contract Underpayments

By Rupal Trivedi, Manager, Physician Services

To most providers the critical question they need to answer about physician managed care contracts is “Are we getting reimbursed according to the terms of the contract?”  Ensuring appropriate payment requires a vigorous monitoring process and metrics that can help identify underpayments.

Managed care payment variances can have many causes, but they typically occur in a couple of major categories: The first category is when a payer has updated their payment system to account for issues such a new contract fee schedule. The second major category is when practices do not update their contract management system to reflect new contract terms. The third category is when contract terms are interpreted differently by the payer and provider.

The goal is 100% underpayment identification and collection.  Here are a few suggestions for getting closer to this target: 

  • Run underpayment reports for all of your contracts and review all discrepancies including those that are as little as $1.00 to $5.00. The risk of underpayments for small-dollar drug pricing variances is very high since they can change quarterly.  Keep in mind that your contract management system may not be able to provide all of the analytics and reports needed for a comprehensive evaluation.  The use of additional reporting, or reporting outside of your contract management system, is highly recommended.
  • Monitor your contract management system frequently.  Updates are often needed quarterly.
  • Assign accountability to key players to identify problem areas.  Establish priorities for your staff for correcting underpayments.
  • Facilitate better communications with your payers.  Are you constantly getting underpayments for certain procedure and not understanding how the payer has arrived at the allowed amount?  The best way to correct this situation is to establish an agreement from the payer on payment conditions for specific procedures. Initiating these conversations can significantly reduce future underpayments.

In addition, establish internal triggers for effective date, term date and routing to ensure the accuracy of the payment reports that you are analyzing. In our experience, following these steps will enable you to make significant inroads into your managed care underpayments. 

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