catching the six-figure mistakes: how to tackle payer underpayments

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Catching the Six-Figure-Plus Mistakes: How to Tackle Underpayments

Bart Carmichael

AVP Recovery Services

PMMC

November 19, 2014


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


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


• 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


• 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


Today’s Agenda

• About PMMC







• Q&A


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


Today’s Agenda

• About PMMC







• Q&A


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Please continue to the next slide, or to see the full version, contact:

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Evolution of Payment Terms 1965 vs. Today

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Evolution of Payment Terms


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


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


Today’s Agenda

• About PMMC







• Q&A


Types of Underpayments

• Know your Contracts with Payers

Fee Schedules Payment

Methodology

Carve outs and Thresholds

Time Elements

Precertification and

Authorizations

Other Contract Terms


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


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



• 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



•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



• 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


Today’s Agenda

• About PMMC







• Q&A


Accurate Calculations

• Percent of Charge

• Outlier

• Medicare Fee Schedule/APC (Outpatient)

• Per Diem

• Per Case

• Per Case by EAPG

• Carve Outs


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.


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


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


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.


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.


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


Per Diem


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.


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


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.


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


Today’s Agenda

• About PMMC







• Q&A


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


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!


Today’s Agenda

• About PMMC







• Q&A


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



• 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


through software


Contact the payer


Resolve the account



• 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


through software


Contact the payer


Resolve the account


1. Findings Phase

Contract Complexity

Facility Billing Issues

Denials

Payer Policies

Underpayments

46


2. Collections Phase

Validate Findings

Contact Payers

Request Information

Follow-Up

Follow-UP

FOLLOW-UP

Collect Money

Close Accounts

47


Working Accounts: Communicating Underpayments



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3. Reporting Phase

Findings Summary

Project Summary

Areas for Improvement

49


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


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


• 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


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.


Questions




[email protected]




Thank You

Bart Carmichael

[email protected]

704-944-3057

PMMC

15720 Brixham Hill Ave Suite 460

Charlotte, NC 28277

www.PMMConline.com


http://www.pmmconline.com/



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