Underpayment

Underpayments are easy to miss because they look like success: money arrives, the line posts and the claim closes. The only way to see one is to compare what the payer allowed with what it should have allowed for that code, modifier, place of service, date of service and locality. That means the contract rates and fee schedules have to sit where payments are posted. For Medicare, the PFS look-up tool gives the amount for each code by payment locality.

The causes repeat. A payer applies an old fee schedule year or the wrong locality, ranks multiple procedures in the wrong order, ignores a modifier, cuts units, or files a reduction under a contractual code that the contract does not support. Medicare’s own multiple surgery rule pays the highest-valued procedure at its full fee schedule amount and the second through fifth at 50 percent, so a reduction on the wrong line costs real money². The remittance points to where to look: CARC 45 on a line allowed below the contract, CARC 59 on a line reduced under multiple procedure rules¹. Not every reduction is an error, though. CARC 253 marks the federal sequestration cut on a Medicare payment, and that one belongs on the claim¹.

The mistake is saving disputes for year end. Every payer limits how long you have to contest a payment. For Medicare, a redetermination request is due within 120 days of receiving the initial determination, which is presumed received 5 days after the date on the notice, and minor clerical errors go through a reopening instead of an appeal⁴. Flag variances as they post and fix the cause so the next claim pays correctly.