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Catching the Six-Figure-Plus Mistakes: How to Tackle Underpayments
Bart Carmichael
AVP Recovery Services
PMMC
November 19, 2014
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About the Speaker
Bart Carmichael AVP Recovery Services
PMMC
• 20+ years experience working with the Revenue Cycle in Healthcare including A/R management and medical collections.
• Previously the Director of Professional Fee Revenue Cycle for Melbourne Internal Medicine Associates (a 120 physician multi-specialty group practice)
• Wharton School of Business
• MBA – University of Miami
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Today’s Agenda
• Introduction to PMMC
• Underpayment Stats and Impact
• Evolution of Payment Terms
• Types of Underpayments
• Accurate Calculations
• Steps for Collecting Underpayments
• PMMC Process and Recommendations
• Q&A
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• Solid Foundation
– Began in 1986 – Retains entrepreneurial spirit – Corporate Office – Charlotte, NC – Consistently Recognized on INC 5000 List
• Solid Financials – Privately-held with low overhead – Win-Win solutions for its clients
• Solid Client Base – Modern Healthcare Top 5 Largest Revenue Cycle
Firms in 2014 – 400 hospitals – 21,400 physicians – 35 states
Core mission is to assist healthcare providers with revenue cycle management tools that efficiently and cost-effectively address reimbursement and financial related issues.
Company Results
• Strategic Recognition / Partnerships – Designated Microsoft Solution Provider – Recognized DELL Business Partner – HFMA Peer Review Designation – HBI Solution Provider – SSAE 16 Certification
• Cost-Effective with Proven ROI Results – $120-plus million per year in underpayment
collections for Contract Management clients
– $46 million in contractual write-off recoupment for Recovery Service clients
– 1030% average ROI based on cash-flow improvements for Patient Estimation clients
About PMMC
4
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• ONLINE ANALYTICS - Comparative Pricing (charge) Analysis - Resource Consumption Analysis - RAC Coding Comparison
• REVENUE MASTER - Strategic Pricing - Net Revenue Modeling - CDM Review
Strategic Pricing
• CONTRACT PRO / PHYSICIAN PRO - Contract Rate Modeling - Reimbursement Auditing - Denial Code Monitoring - Financial Reporting
• RECOVERY SERVICES - Underpayment Collection Service
Contract Management
• ESTIMATOR PRO - Patient Estimates - POS Collections - Benefit & Eligibility Verification
Patient Access & Collections
Goal: Deliver Revenue Cycle-Oriented Software with Knowledge &
Commitment To Enhance Our Clients Bottom Line
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Today’s Agenda
• About PMMC
• Underpayment Stats and Impact
• Evolution of Payment Terms
• Types of Underpayments
• Accurate Calculations
• Steps for Collecting Underpayments
• PMMC Process and Recommendations
• Q&A
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Underpayment Stats
• What is an underpayment? – An underpayment occurs when
Claims to third party payers result in payments that are less than expected according to the contractual terms of your agreement.
• How big is the problem? • On average, estimates generally
run from 1 to 4% of facility revenue
• AMA survey suggests a payment accuracy rate by insurers as low as 62%
0
10
20
30
40
50
60
Underpayments in2012 (billions)
42.3
13.7
Medicaid
Medicare
Source: AHA
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Today’s Agenda
• About PMMC
• Underpayment Stats and Impact
• Evolution of Payment Terms
• Types of Underpayments
• Accurate Calculations
• Steps for Collecting Underpayments
• PMMC Process and Recommendations
• Q&A
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Evolution of Payment Terms 1965 vs. Today
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Evolution of Payment Terms
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Evolution of Payment Terms Payer Category Hospital Outpatient Hospital Inpatient
• Government Programs (Medicare/Medicaid)
• APC – Ambulatory Payment Classification (Hospital is reimbursed based on a set fee for the procedure performed)
• EAPG
• DRG – Diagnostic Related Group (Hospital is reimbursed a set fee based on DRG payment rate for the patient’s condition and related treatment)
• Commercial and other Third party payers (BCBS, Aetna, Cigna, Humana, etc.)
• Case Rate • Contract Rate • Fee for Service • Percent of Charges • EAPG
• Case Rate • Contract Rate • Fee for Service • Flat Rate • Percent of Charges • Per Diem
• Managed Care Plans • Case Rate • Contract Rate
• Case Rate • Contract Rate
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Evolution of Payment Terms
• What you need to know to get paid
– Charge Master
– Medical Record Support of Charges
– Facility Contract with the Payer
– Payer Policy Guidelines
– State Statutes
– Federal Laws
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Today’s Agenda
• About PMMC
• Underpayment Stats and Impact
• Evolution of Payment Terms
• Types of Underpayments
• Accurate Calculations
• Steps for Collecting Underpayments
• PMMC Process and Recommendations
• Q&A
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Types of Underpayments
• Know your Contracts with Payers
Fee Schedules Payment
Methodology
Carve outs and Thresholds
Time Elements
Precertification and
Authorizations
Other Contract Terms
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Types of Underpayments
• Know your Payer Policies – Could impact how you negotiate your contract – What is not addressed in your contract is subject to
the Payer Policies • Consolidation of charges into other billed items
– Limits the total charge in percent of charge contracts
• Method to determine the primary procedure – Lowest numbered CPT code is primary when surgical codes
receive equal allocation of charges impacts multiple procedures reimbursement
• Bilateral procedures are paid at the same single procedure rate
• Implants must remain in the body greater than six months – Vs. must be in the body when patient leaves the hospital
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11 Types of Underpayments
• Require an implant invoice to be submitted with the claim
• Certain surgical codes include payment for the implant 1. Implants not paid
• Condition code is not on the claim
• Charges consolidated into other codes reducing total charges below the threshold amount
• Charges denied based on payer policies
• Carve out items excluded from the calculation of threshold
2. Outlier Rate not paid
• Med/Surg rate paid when patient is in ICU
• Total days in the hospital were not paid
• DRG carve-outs are paid at the per diem rate instead
3. Per Diem Rates paid incorrectly
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11 Types of Underpayments
• Not on File
• Billed items do not match what was authorized
• Level of Care paid based on what was authorized not what occurred
• Denied when requested
• Number of days and areas authorized not paid
4. Authorizations
• DRG Rate underpaid
• Incorrect DRG Paid
• Payer Error
• Billing system/Intermediary drops ICD 9 Codes causing DRG Change
5. DRG Rate
• MRI/CT not paid
• Radiology rate not paid
• Carved out Ancillary not paid
• Incorrect rates
6. Ancillary
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11 Types of Underpayments
•Payer pays incorrectly
• Incorrect or generic Factors loaded by payer 7. Traditional
Underpayments
• Incorrect Network utilized to price the claim
• Incorrect Payment methodology 8. Payer delegates Pricing
•Pharmacy (250) vs Detailed Drug (636)
•Supplies (272) vs Implant (278)
•Pacemaker (275) vs Implant (278)
•Surgery (360) vs Treatment (700 Level)
9. Revenue Codes
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11 Types of Underpayments
• Total Billed Charges do not exceed the reimbursement
• Per Day Limitation
• Number of Days Limitation
10. Caps on reimbursement
• Patient registered incorrectly
• At the Payer or the Hospital 11. Registration issues
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Today’s Agenda
• About PMMC
• Underpayment Stats and Impact
• Evolution of Payment Terms
• Types of Underpayments
• Accurate Calculations
• Steps for Collecting Underpayments
• PMMC Process and Recommendations
• Q&A
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Accurate Calculations
• Percent of Charge
• Outlier
• Medicare Fee Schedule/APC (Outpatient)
• Per Diem
• Per Case
• Per Case by EAPG
• Carve Outs
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Percent of Charge
• Provider will be paid at 47.2% of billed charges
• LESSER of Logic
• When the Contracted Services rendered by Provider are paid on a fee for service basis, Provider shall be paid the lesser of the rate in this agreement or Provider’s billed charges.
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Percent of Charge Screenshot
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Outlier Calculation
• For any inpatient stay that exceeds 110,000.00, Hospital shall be reimbursed for the single admission at 74.83% of Covered Billed Charges, less:
– Applicable Copayments
– Co-insurance
– Deductibles for covered services rendered during the entire covered inpatient stay
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Outlier Calculation - Screenshot
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Medicare Fee Schedule/APC Outpatient and Multi Procedure Discount
• Ambulatory Surgery is paid at the Medicare Fee Schedule
• When more than one surgical procedure is performed, the first procedure is paid at 100% of the Medicare APC, the second and subsequent procedures are paid at 50% of the Medicare APC
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Medicare Calculation - Screenshot
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Outpatient CPT Fee Schedule
• For Outpatient covered services, reimbursement will be the lesser of billed charges or 148% of the applicable Outpatient Fee Schedule found in Attachment A.
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Outpatient by CPT Fee Schedule - Screenshot
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Per Diem • Hospital shall accept as full and final payment for all
covered services provided to participants who are admitted as inpatients the lesser of billed charges or the reimbursement in the applicable schedule. Such reimbursement covers all in patient covered services including and not limited to room and board, OR, hospital based physicians and other medically necessary services provided to a participant. Payer shall deduct any Copayments, Deductibles or Coinsurance from payment to the Hospital.
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Per Diem
Location Description Rate
Medical Surgical – Adult and Pediatric
Revenue codes 100-169 $1,900 per diem
All ICU including medical, Surgical, Cardiac and Pediatric
Revenue Codes 200, 201, 202, 203, 207-212, 219
$2,500 per diem
Intermediate intensive Care
Revenue Codes 206, 214 $2,300 per diem
C-Section Delivery MS-DRG Codes 765,766 $3,163.20 per diem
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Per Diem
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Per Case
• Hospital shall accept as full and final payment for all covered services provided to participants who are admitted as inpatients the lesser of billed charges or the reimbursement in the applicable schedule. Such reimbursement covers all in patient covered services including and not limited to room and board, OR, hospital based physicians and other medically necessary services provided to a participant. Payer shall deduct any Copayments, Deductibles or Coinsurance from payment to the Hospital.
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Per Case
Location Description Rate
Cardiac Valve and Other Major Cardiology
DRG 219 $55,000 Case Rate
Chest Pain DRG 313 $5,310 Case Rate
Revision of Hip or Knee DRG 468 $22,000 Case Rate
Major Joint Replacement DRG 470 $14,000 Case Rate
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Per Case - Screenshot
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Per Case by EAPG - Screenshot
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Carve Outs
• Exclusions
• When Hospital billed charges for the revenue code listed below, Hospital shall be reimbursed separately less applicable Copayments, Coinsurance, and Deductibles. Hospitals total billed charges for the revenue codes below will be excluded from the Hospital’s stop Loss calculation and any lessor of calculation for reimbursement.
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Carve Outs
Exclusion Description Threshold Rate
Orthotics and Prosthetics, Pacemaker Supplies, Implants
Revenue Codes 274, 275, 278
$1,500 38% reduction from billed charges
Drugs requiring detailed coding
Revenue Codes 636 $3,000 70% reduction from billed charges
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Today’s Agenda
• About PMMC
• Underpayment Stats and Impact
• Evolution of Payment Terms
• Types of Underpayments
• Accurate Calculations
• Steps for Collecting Underpayments
• PMMC Process and Recommendations
• Q&A
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Process for Underpayments
Without Contract Management Software support, a process must be established to identify potential issues:
• Threshold value for Outliers
• Review of specific Carve-Outs – Implants
– Drugs
• Full and Line Item Denials
• Authorizations
• Review of DRG payments compared to the expected amount
• Level of Care Reimbursed as expected
• Review Per Diem and Case Rate payment to contract
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Steps for Collecting Underpayments
BILL CLAIM
• Are the correct codes on the claim?
• Revenue, CPT, HCPCS
• Does the Medical Record Documentation Support the Billing?
RECEIVE PAYMENT
• EOBs will provide information on unpaid line items
EVALUATEPAYMENT
• Review the fee schedule, contract terms and payer policies
• Calculate what you should be paid
CONTACT PAYER
• Request information on why the claim was not paid as expected
• Reconsideration
• Appeal
• FOLLOW UP!
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Today’s Agenda
• About PMMC
• Underpayment Stats and Impact
• Evolution of Payment Terms
• Types of Underpayments
• Accurate Calculations
• Steps for Collecting Underpayments
• PMMC Process and Recommendations
• Q&A
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PMMC Process for Underpayments
• To identify underpayments, you need to know how much you are supposed to be paid!
• You need a defined process like PMMC CONTRACT PRO
• Contract Management System
Load contracts and patient accounting data
Identify potential underpayments
through software
Validate the underpayment
Contact the payer
(Phone, internet, letter)
Resolve the account
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PMMC Process for Underpayments
• Load contracts and patient accounting data
– Validate that the contract rate schedules have been loaded correctly
– Validate that the data is loaded correctly
– Affiliate patient accounts to the loaded payer contract for calculating allowable amounts expected
Load contracts and patient accounting
data
Identify potential underpayments
through software
Validate the underpayment
Contact the payer
(Phone, internet, letter)
Resolve the account
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PMMC Process for Underpayments
• THE FINDINGS PHASE
• Without software support, identifying underpayments can be a time consuming inefficient process for your staff!
• Identify potential underpayments through software support – Calculate the potential variance between what the payer has
indicated versus what the contract management software calculates
– Look for trends in the underpayment variance – Amount due from the payer (Calculated Contractual less Payer Contractual)
Load contracts and patient accounting data
Identify potential underpayments
through software
Validate the underpayment
Contact the payer
(Phone, internet, letter)
Resolve the account
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1. Findings Phase
Contract Complexity
Facility Billing Issues
Denials
Payer Policies
Underpayments
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2. Collections Phase
Validate Findings
Contact Payers
Request Information
Follow-Up
Follow-UP
FOLLOW-UP
Collect Money
Close Accounts
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Working Accounts: Communicating Underpayments
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3. Reporting Phase
Findings Summary
Project Summary
Areas for Improvement
49
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Recovery Tracking Report
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Recommended Next Steps
• Evaluate your process with internal staff – Ensure control systems in place for charge capture, billing
compliance, payment audit, and appeals staff
• Engage PMMC as your Recovery Payment Partner
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PMMC Recovery Arrangements
• Focus your staff on high dollars per collector collections
• PMMC Recovery Services
– Traditional Retrospective Review
– Concurrent Recovery Services
• First Dollar Recovery
• Second Dollar Recovery
• Denial Management and Recovery
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• No upfront cost outlay
• Ensures the appropriate payment for services provided and billed to third-party payers
• Designed to accelerate cash collections and increase net revenue by collecting contractual adjustments that were inappropriately written off based on the payer EOB
• Verifies reimbursement accuracy on ‘closed’ accounts and recovers the identified lost revenue
• Increases profitability without incurring additional overhead.
• Provides financial results with very little intervention on the hospital’s part.
A retrospective recovery review to identify and collect contractual underpayments with your
commercial, managed care and governmental payers.
Key Benefits
• Contingency-based service so compensation is based on delivered results
• Leverages PMMC’s contract management technology to identify and correct contractual underpayment issues
• Utilize industry experts that have experience and expertise in underpayment collections from payers that are often hesitate to pay
• Offers insight into underpayment variance trends, guidance for long-term corrections and consideration in future payer contractual reimbursement negotiations.
• Establishes a benchmark of actual recovery results
Retrospective Underpayment Recovery Service
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Ongoing Recovery Services • PMMC First Dollar Recovery
– Your staff is focused on getting payments on accounts
– PMMC Recovery evaluates the account for a variance. If underpaid, PMMC staff follows up so your staff stays focused on collecting
• PMMC Second Dollar Recovery – Your staff is focused on getting payments on accounts and follows up
on underpaid accounts for up to 90 days.
– After 90 days, PMMC Recovery evaluates the account for a variance. If the account remains underpaid, PMMC Staff follow up so your staff stays focused on collecting new and more collectable accounts.
• Denial Management and Recovery – When accounts are zero paid by the payer, PMMC will follow up and
work the accounts.
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Questions
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Thank You
Bart Carmichael
704-944-3057
PMMC
15720 Brixham Hill Ave Suite 460
Charlotte, NC 28277
www.PMMConline.com