Battle to Recoup Healthcare Underpayments Continues

May 30, 2019

colorful paperwork Stacked files on isolated background

Healthcare underpayments from public and private insurers continue to plague hospital revenue recovery efforts with the battle spilling into court cases. What’s at stake? Around $77 billion in disputed payments from Medicare and Medicaid from a 2017 estimate, plus the continuing underpayments by commercial payers which can average 38% below costs, according to the American Medical Association, AMA. We take a look at the numbers with some suggested solutions.

The AMA has found that “payment accuracy rates among insurance companies dip as low as 62.08 percent,” in studies during the past decade. And, Revcycle Intelligence is reporting that “The largest public payers continue to underpay hospitals, data from the most recent American Hospital Association (AHA) Annual Survey of Hospitals revealed. Medicare and Medicaid reimbursement fell $76.8 billion short of the actual costs of treating beneficiaries in 2017.”

“Despite improvements in coverage, Medicare and Medicaid payment continues to fall further below the cost of providing care,” the AHA’s Vice President of Policy Research, Analytics, and Strategy Aaron Wesolowski told “While most hospitals have remained financially viable, one-third have negative operating margins, threatening access to health care in the communities they serve. These underpayments continue as hospitals and health systems continue to invest in alternative payment and delivery models and to develop approaches that address the social, economic, and environmental factors that impact health outcomes and costs.”

And it’s not just a matter of government underpayments. Big insurance companies have long made their own cases for revenue recovery on their side for what they regard as overpayments. But, in a classic battle pitting insurers against hospitals, Modern Healthcare reports that the hospital side won a key court decision recently when a federal appeals court “ruled against UnitedHealth Group over the insurer’s policy of withholding payments to out-of-network physicians and hospitals in order to recover previous overpayments.”

The court sided with several providers in a class action suit finding that “UnitedHealth overstepped administrative authority over its employer-sponsored health plans with a practice that recoups overpayments to a physician or hospital from one plan by cutting another plan’s subsequent payments to the same provider.” That practice is known as “cross-plan offsetting.”

But there are some success stories. An article in the Citrus County Chronicle recounts that “The Citrus County Hospital Board has recouped $2.65 million on behalf of the county after a year long battle with the Centers for Medicare & Medicaid Services (CMS).”

Three ways to tackle healthcare underpayments at your hospital

  1. Know your contract. Becker’s Hospital Review, in a 2015 article on things to consider before pursuing an underpayment claim, advises that “the burden of proving that an insurance company underpaid a claim falls on the provider. As the claimant, the provider must show what the insurance company’s contractual obligations were and prove that the insurance company failed to satisfy them. This can become complicated as provider agreements are often fraught with ambiguity.” This provider burden has remained the same during the past four years.
  2. Use experienced professionals to audit records. Without a doubt, this type of work needs handling by experts. Here at R1, our team comprises highly trained clinical nurses that perform the comprehensive audits and medical record reviews. This expertise is essential in determining how to best argue and collect clinically disputed underpaid claims for our provider clients. But we don’t stop there, we realize it is the combination of technology and people that makes the biggest difference. Our solutions combine leading-edge technology and industry experts bringing our clients the best approach in identifying underpayments, where we typically identify 1-5% of Net Patient Revenue in underpayments.
  3. Take a holistic approach to your underpayment solution. An article at Revcycle Intelligence advises you take “a complete insurance discovery approach.” This “involves searching beyond the self-pay population to find additional coverage for Medicaid, Medicare, and commercially insured patients. The task may seem futile because patients are already covered by a payer, but proactively identifying primary coverage sources for all patient populations can increase revenue, decrease costs, and help prevent bad debt.”

Visit to learn more about R1 Underpayment Recovery.

Subscribe to our email list to get the latest in your inbox