-Contractual Underpayments- WHAT YOU DON’T KNOW COULD BE HURTING YOU

1. -Contractual Underpayments- WHAT YOU DON’T KNOW COULD BE HURTING YOU Presented by: Marilyn Happold-Latham, MBA, FACMPE

2. 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

3. 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

4. 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

5. 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 area • Need to track these as separate carriers in the PM system

6. Same Payer with Different PPOs

7. 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

8. 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

9. 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

10. 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 $$$$$

11. 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.”

12. 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 0.03 GPCI 1.002 1.059 0.434 GPCI Adj 0.9218 + 0.7519 + 0.0130 =1.6867 [(wRVU *wGPCI)+(peRVU *peGPCI) +(mRVU*mGPCI)] * CF = 1.6867 * $37.8975 = $63.92

13. 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 0.03 GPCI 1.002 1.059 0.434 GPCI 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

14. 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%.

15. 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

16. 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

17. 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)

18. How to know if Health Plans are Paying according to Contract??? AUDIT YOUR PAYMENTS

19. Payment Audit Methods • Specialized payment audit software • Special functions/features within a practice management system • Manual audit process

20. 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

21. 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

22. 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.

23. 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

24. 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

25. 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

26. Table of Allowables by Health Plan

27. Audit Data Spreadsheet

28. 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

29. 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

30. 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.”

31. 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

32. 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

33. 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

34. Contact Information Marilyn Happold-Latham, MBA, FACMPE Marilyn.latham@comcast.net 503-284-6453