Payment variance in healthcare revenue cycle management (RCM) remains one of the most challenging aspects for providers to navigate. But what exactly is payment variance, and why does it matter to your healthcare organization?
Payment variance occurs when there’s a discrepancy between what a healthcare provider should receive from a payer for a claim and what the provider actually receives. According to the Medical Group Management Association (MGMA), payers underpay providers by a staggering 7-11%. These variances can significantly impact a provider’s bottom line and financial stability.
Common Mistakes Leading to Payment Variances
Payment variances often stem from errors on both the payer and provider sides. Payers frequently make mistakes such as:
- pricing claims using incorrect contract terms
- calculating allowed amounts incorrectly
- interpreting contract terms differently than intended
On the provider side, common pitfalls include:
- submitting claims incorrectly
- failing to include required documentation
- taking too long to identify incorrect amounts
Understanding these common mistakes is imperative because they can lead to substantial revenue loss over time. Healthcare providers must implement and maintain robust systems, plus develop advanced internal processes to prevent, identify, and address these issues promptly.
Contractual adjustments frequently occur due to specific coding rules and modifier applications in medical billing, such as:
- One common scenario is the Multiple Procedure Payment Reduction (MPPR), where performing multiple procedures on the same date of service can result in reimbursement reductions of up to 75% for subsequent procedures
- Another significant factor is partial procedures or early termination, where cancellation or reduction of a planned procedure can substantially impact the expected allowable amount
- Provider credentials also play a vital role, particularly when services are delivered by advanced care practitioners (ACPs) such as nurse practitioners and physician assistants—many states permit payers to apply reduced rates for these providers compared to physician rates
Understanding these coding-related provisions in your payer contracts is essential not only for accurate claim submission but also for identifying genuine underpayments that warrant appeals.
The Impact of Payment Variances
Payment variances, both small and large, can have a significant impact on your revenue cycle. From the seemingly minor $5 or $10 payment variance that can amount to tens of thousands of dollars in lost revenue when multiplied across numerous claims throughout the year, to the occasional payment variances worth over $100,000, the impact can be significant. While most healthcare providers utilize a contract management tool, many efforts fall short of perfecting this complex revenue cycle process.
The Role of Modifiers and Documentation
Modifier usage plays a significant role in accurate reimbursement, particularly for specialty practices and surgical procedures. Different procedures can be reimbursed at varying rates depending on factors such as whether it’s the first or fifth procedure. While Medicare sets specific limits for reimbursement after the fifth procedure, other payers may have different policies. Accurate modifier coding and detailed documentation are essential for securing appropriate reimbursement.
Fee Schedules and Contract Compliance: Staying Current
Maintaining current fee schedules and contract compliance policies is key for optimal revenue cycle management. Organizations must ensure their fee schedules are up-to-date and correctly loaded into their contract management tool. Additionally, establishing clear processes for handling underpayments is essential. For instance, implementing a system where demand letters are automatically generated and sent to payers when underpayments are identified can help ensure proper payment according to executed contracts.
Time Sensitivity: The Race Against Filing Limits
Time is of the essence in getting claims paid fully and accurately. Most payer contracts include strict time limits for addressing payment errors, making it critical to identify and correct errors leading to payment variances quickly. Organizations must know their timely-filing limits for each payer and create policies and procedures that account for these constraints.
Choosing the Right Vendor Partner
Selecting the right vendor partner can dramatically improve your revenue cycle management outcomes. The ideal partner should offer comprehensive services that include advanced, proprietary artificial intelligence (AI), payment variance verification, recovery processes, and optimization strategies to eliminate preventable payment variances. They should have proven expertise in identifying false positives that can bog down your team and the ability to prioritize and recover underpaid claims efficiently.
Aspirion stands out in the revenue integrity space by offering specialized knowledge in payment variance recovery. Our dedicated team works as an extension of your organization, verifying payment variances and relentlessly pursuing appropriate reimbursement. We specialize in verifying identified payment variances and tirelessly working with payers on your behalf to recover underpaid revenue. With a proven track record of recovering 80% of verified underpayments within 90 days, Aspirion helps healthcare providers maximize their recoveries before claims age into an unrecoverable status.
Ready to explore how Aspirion’s powerhouse team of incisive data scientists, 180+ attorneys/legal professionals, 80+ clinicians, and 900+ claims specialists—along with its advanced AI platform can revolutionize your RCM? Contact us about your specific RCM needs and challenges today!
