Why your EMR or PMS Isn’t Enough for Underpayment Recovery

Your EMR or PMS may claim to handle your underpayments, but do they ever find more than the most obvious?

When one five-location Minnesota ophthalmology group suspected their EMR wasn’t catching the depth and breadth of their underpayments, they decided to dig in and look harder for which payers and procedure codes were draining their revenue. 

With assistance from contract management software, they discovered that a common underpayment occurred when the payer would reimburse for a unilateral treatment when physicians had treated both eyes. Also, sometimes an error in the payer’s algorithm would throw off reimbursements for a certain code or groups of codes. Finally, sometimes payers reimburse providers using the wrong fee schedule.  

With root causes identified, the group achieved:  

• meaningful revenue recovery
• avoidance of additional hires
• identification of the payers, codes, and combinations of the two that triggered the most underpayments. With root causes revealed, they implemented permanent solutions.
• insights on underpayments that, in aggregate, amounted to the best revenue recovery opportunities
• consistent contract renewal compliance
• negotiation intelligence and strength

EMR and PMS shortcomings

This group ran into a struggle common to healthcare organizations: EMR and PMS tools underperform on underpayments and contract management. These vendors may say they can handle these tasks, but they weren’t custom-built to parse and analyze the complexities of today’s contracts and fee schedules.

EMS systems are expert at handling patient records. PMS systems grind through operational tasks. Engineers started building these decades ago and have improved them every year. They’ve only been adding contract management functionality – typically a revenue cycle rather than a documents management task – in the last year or so. 

Advanced contract management software is built from the ground up to examine contracts and fee schedules from top to bottom. These tools take into account the esoteric underpayment and contract details like escalators, procedure bundles, carve-outs, account combinations, and more. These purpose-built systems shunt payment variances and underpayments to the appropriate staff for rework. FTEs then complete these tasks free from manual and chaotic spreadsheet examination and juggling.

Depending on a PMS or EMR for underpayment recovery is like asking your brother-in-law who has a hobby Charles Schwab account what the impact geopolitical volatility combined with a weak dollar will have on the Fed rate structure going forward. He may have scored a few fortunate investments, but he’s not trained or experienced enough to advise you on everything from macroeconomics down to individual “puts” and “calls” (even though he may fake it).  

Here, you get some guidelines to help you determine whether your EMR or PMS shoulders your underpayments and contract management tasks sufficiently or if these tools are leaving your revenue on the table. 

What is underpayment recovery?

Underpayment recovery is the process of identifying and reclaiming earnings paid below contractual terms. Providers have every right to recoup the full amounts in the fee schedule. Underpayment corrections involve analyzing claims, identifying discrepancies between what was billed and what was received, and pursuing the difference to ensure that the practice is compensated fully and fairly. Effective underpayment recovery is essential for maintaining the financial health of a practice, as it directly impacts revenue and operational sustainability. 

To explore the most common healthcare industry challenges currently leading to underpayments and the various causes originating from both payers and providers, check out our comprehensive guide on healthcare underpayments.

Take a quick, self-guided tour through a powerful contract management tool that automatically alerts you to underpayments, deadlines, and compliance issues:

When the promises EMR or PMS make turns into time-consuming, manual staff work

Like so many physician groups, the Minnesota ophthalmology group mentioned above was juggling a dozen payer contracts. Their nearly 100,000 yearly patient visits involved both professional and facility procedures. Their PMS supplied some payment variance and underpayment data, but, often, the patient contracts manager found herself diving into contracts and payments one by one. 

When a reimbursement would come in lower than what she expected, she not only had to explore that case to find the error, she would end up going into all the cases involving that payer and the procedures involved. Had the payer made the same errors in all instances involving that procedure? She and her team had learned that their PMS wasn’t digging deep enough into modifiers, bundled procedures, carve-outs, and more. 

If even three percent of their 100,000 yearly visits triggered a check, each week, this senior contracts manager would need to chase 60 cases plus the cases that involved the same payers and procedures in that original case. With the group growing, the CFO knew this manual, time-consuming process was unsustainable. 

The current levels of underpayments in the U.S. today

The staffing shortage makes pursuing underpayments challenging, but too many payers keep significant provider revenue. Just recently:

• a judge cleared 100 Alabama hospitals to sue Blue Cross for $5 billion in underpayments 
• an arbitration panel awarded TeamHealth $10 million from UnitedHealthcare underpayments
• Envision Health won $92 million in UnitedHealthcare underpayments in court
• a 30-location orthopedics group detected and captured $10 million in underpayments via assistance from contract management software

Underpayments are widespread and impact large and small practices and physician groups alike. A study published in Becker’s Hospital Review found providers lose one to three percent of their net revenue annually due to underpayments from commercial payers. Another study put that figure as high as 11 percent. We often encounter physician groups with underpayments rates as high as seven percent, and even more that have no idea how much they’re losing in underpayments every year. 

Signs that your EMR or PMS isn’t pulling its weight in underpayment recovery 

Have you suspected a reimbursement isn’t meeting the amounts stipulated in your fee schedule? Or that your EMR or PMS is not catching the revenue-draining payer errors.

These signs indicate your PMS or EMR is missing underpayments, contract updates, and more. 

Your revenue reflects reimbursements that fall below industry standards

Watch for reimbursement rates coming in consistently lower than what similar providers in your region are charging. Use a service like Turquoise Health to help you come up with a ballpark of what your revenue should be based on the number of procedures you’re performing. 

Here’s one example: 

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Use Medicare rates as a baseline. The most recent RAND study reveals that in 2022, the relative prices for inpatient hospital services averaged 255 percent of what Medicare would have paid, outpatient hospital services averaged 289 percent, and associated professional services averaged 188 percent of Medicare prices for comparable services.  (Find Medicare's reimbursement rates here.)

Errors in your claims reimbursements

Spot-checking reimbursements also helps you catch payer shortfalls. Review a sample from time to time to ensure that payments correspond with contracted rates. Just as seeing one mouse can reveal a big nest nearby, one reimbursement error could indicate a cluster impacting many accounts.  

Watch for these common mistakes:

1. Accuracy of payment calculations: verify their arithmetic, including calculations made in adjustments for deductibles, co-pays, and co-insurance.
2. Failure to adhere to service agreements: Confirm that payments reflect all service-level agreements, such as penalties for late submissions.
3. Bundling and unbundling: Check that procedures that should be billed together (bundled) or separately (unbundled) are handled correctly according to coding guidelines and your agreements.
4. Improper Denial Management: If claim denials cite a lack of documentation or medical necessity that was clearly provided, appeal.
5. Timeliness of payments: Are your payers missing deadlines? If so, they’re subject to interest charges and possibly penalties. 
6. Administrative Oversights like data entry errors, misinterpretation of codes, or incorrect patient information that leads to claim rejections or incorrect payments.
7. Systematic software issues: These can be tough to track, but if you suspect technical issues in the payer's processing system are leading to repeated errors in claims processing, these must be addressed.
8. Benefits update failures: Payers might not update the patient's cumulative deductible or out-of-pocket totals correctly, affecting subsequent claim payments.
9. Significant processing delays:  Administrative backlog or inefficient processing systems, lead to late payments, but payers must meet their obligations,
10. Unbundling errors: Incorrectly separating procedures that should be billed together can lead to higher payments, while wrongly bundling can reduce reimbursement.
11. Incorrect coordination of benefits: When the primary and secondary insurances are not billed in the proper order, denials and underpayments can result. 

If you find inconsistencies, outside healthcare IT experts who specialize in EMR and PMS systems can provide perspective on potential system inefficiencies or failures.

More ways to know when your EMR or PMS isn’t managing contracts effectively

The two above signs lead you directly to revenue loss caused by contract stumbles. But an underperforming EMR or PMS can miss secondary issues that go on to impact revenue downstream. Missing renewal deadlines, compliance updates, and terms changes proposed by payers may take a while to drain revenue, but drain away, they do. 

Analysis of Revenue Leakage: Analyze denied claims to see if they stem from poor contract management, such as a failure to update contract changes in the system. Did your EMR or PMS promise to keep your contracts current without your input? Find any communications from payers relating to rate and term changes and explore whether they’ve made it into the contracts you’re accessing.  

Compliance audits:  A non-compliance notice can signal that the EMR or PMS is not effectively managing or integrating the latest contract details. If your software doesn’t include this functionality, consider bringing in an outside analyst. 

Feedback from billing and coding Staff: Gather feedback from staff members who handle billing and coding. They can provide insights into difficulties they face, such as accessing contract terms, understanding payer requirements, or integrating changes into the billing process.

Monitoring contract renewal dates and terms:  Check if the EMR or PMS effectively alerts the practice to upcoming contract renewals and changes. Missing these critical updates can lead to financial losses or compliance issu

Reporting and analytics: Utilize the system’s reporting and analytics tools to generate detailed reports on contract management, including contract performance, claim resolution times, and reimbursement rates. Poor or limited reporting might indicate inadequate contract management functionality.

Evaluation of user interface and usability: Assess the user-friendliness of the system. Does staff complain about it? Complex or non-intuitive interfaces hinder effective contract management.

Training and support evaluation: Evaluate the training provided for using the contract management features of the EMR or PMS. Inadequate training can indicate a lack of expertise in this important task. 

By actively investigating these areas, a physician group or practice can determine if their EMR or PMS can find the extent of payer underpayments and adequately support their contract management needs. 

Executing a potent underpayment recovery and contract management system

It takes courage to face a disorganized and outdated contract management system. Rest assured, yours is not the only organization to need work in this area. According to a recent MGMA poll, 33 percent of providers do not review their contracts annually. Additionally, 17 percent report they never review their contracts, while 16 percent examine their contracts every 2 to 3 years or less frequently. However, 58% of providers do review their contracts each year—a fairly positive number. 

Yet, of that 58%, it remains unclear how many engage in assertive renegotiations. Effective negotiation requires work to secure fair reimbursement from payers, especially considering that the contracts are initially drafted by the payers, who typically have more time and legal resources than providers. 

It is possible to negotiate assertively with payers for the best contract terms without jeopardizing payer relationships or risking the loss of a significant number of patients.  A few months of dedicated effort or investment in a specialist or dedicated software, however, can reap benefits that last for years. With proactive healthcare underpayment recovery, you can successfully navigate payer negotiations and demand the reimbursements your payers agreed on.

Pathways to improving your contract management system

During a staffing shortage, many healthcare organizations hesitate to load their current staff with more intensive work. If that’s your situation, consider two other good options: 

A contract specialist

A contract specialist could be someone already on your team or a new external hire. If your current team members lack experience, they’ll need specialized training. MGMA.org offers a reasonably priced payer contract management certificate.  

Looking outside your organization works, too. A well-trained contract specialist coming from outside should bring a legal background coupled with a deep understanding of healthcare regulations and compliance, significantly reducing the risk of contractual breaches. They should have solid referrals and data on the revenue they’ve recovered for other providers. They should detail how they plan to improve your practice’s net revenue by securing better reimbursement rates from payers, identifying and correcting underpayments, and effectively contesting denials.

If your practice has a limited number of contracts, hiring a contract specialist on a part-time basis might suffice. This arrangement can help reduce overhead costs and allows practices to assess the value of such a role before committing to a full-time hire. Full- and part-time specialists can also recommend the best contract management software to optimize operations.

To locate a part-time contract specialist, consider searching on LinkedIn or exploring the consulting branches of organizations like HFMA and MGMA.

Contract Management Software 

Using contract management software is akin to bringing in a contract specialist armed with automated, manual-work relieving technology. A software vendor specializing in contract management knows every area where providers get underpaid. The best conduct regular meetings and have dedicated representatives to help you optimize not only their software but your processes for using it.   

After ingesting and digitizing your contracts, it automatically sends alerts to staff:

• when underpayments occur
• as contract renewal dates approach
• when the payer is requesting a contract change
• when a compliance issue looms
• delegating underpayments tasks to the appropriate staff member (established on set-up) 

 In seconds, its analytics and reporting features can tell you:

• underpayments by specific payers or for particular CPT codes
• payers that offer the most advantageous fees and terms
• whether payers are applying administrative claim adjustments correctly, such as multiple procedure reduction, bilateral procedure reduction, and mid-level reduction 
• impact to the revenue cycle of a change in fees or terms (contract modeling)
• recommendations to improve future contract negotiations
• contracts that generate the most revenue.
• the financial impact of potential contract changes.
• key dates for contract renewals, helping you prioritize your attention.

A good software provider handles the initial uploading of your contracts, lifting this burden from your team and negating the need for additional hires. By minimizing the required input from your side, your staff need only review crucial data and act on notifications. These services can demonstrate potential financial recovery, giving you a clear view of the software’s effectiveness and its return on investment. Any software company you evaluate should estimate the return on investment their software can achieve. It should also provide references. 

Why dedicated contract management software beats EMR, PMS, and End-to-End RCM systems 

Going to court is grueling and expensive. While organizations like Encore and TeamHealth mentioned above won tens of millions from payers, it cost them millions to conduct those cases. When you get control of your underpayments and contracts, you avoid having to win your revenue from your payers in front of a judge. Instead, every month, you know you’re getting paid in full, according to your established contracts.

A brief history of healthcare technology

EMR and PMS systems are, of course, irreplaceable, and in the first instance, mandated by the federal government.  

A recent survey highlighted that 80 percent of physician groups rate their current EMRs as "good" or "very good" overall. However, when researchers asked about specific benefits, only half of the respondents considered their EHR systems "good" or "very good" at saving time. Additionally, just 47 percent rated them as "good" or "very good" in terms of cost savings, and 40 percent believed they effectively reduced staff workload and alleviated worker burnout. When striving to maximize net revenue, mediocre outcomes are inadequate. 

Your EMR or PMS does not afford you the ultimate control of your contracts. Like many providers, when using their EMR, Minnesota Eye Consultants had to comb through their Excel data to surface underpayments. While those technologies keep practices running, the complexity of today’s contracts requires software built specifically to optimize them.

To capture more of their clients’ business, major records management EMR systems like EPIC and Cerner have only recently added modules designed to handle and automate revenue cycle tasks like contract management. They have neither the experience nor the technology to optimize your revenue. 

End-to-end revenue cycle management vendors and contracts

It’s not just your EMR and PMS system claiming to handle your underpayments. End-to-end revenue cycle management vendors like Waystar, Experian, and R1 RCM now claim to track underpayments and contract renewal dates. 

These companies – which do not provide EMR records management technologies – have historically marketed their services as the comprehensive revenue cycle solution for healthcare organizations burdened by complex revenue cycles. They are strictly RCM companies and typically started with one RCM task like prior authorizations or A/R recovery and slowly expanded from there. Each of these vendors has a unique history and experience in the technology for a specific RCM task. Most are not purpose-built for contract management automation. Instead, as with your EMR or PMS, they’re adding these only recently in order to call themselves “comprehensive.” They just don’t go deep enough into the intricacies of underpayment recovery and contract management to recoup the full extent of your revenue. 

What are contract management point solutions? 

A contract management point solution is a bolt-on RCM solution built from the ground up to optimize underpayments and contract performance. They are engineered for high performance in particular tasks, contract management for example. Healthcare organizations value point solutions for their precision and effectiveness. They integrate seamlessly with other point solutions as well as with EMR and PMS systems. The point solution rep typically works with a contact at the provider group or practice to integrate the software. A contract management point solution rep will upload your contracts, direct integration with your other technologies, and help you hammer out new underpayment and contract management processes with your staff.

If you’re prioritizing contract performance this year, share with your team that contract management point solutions help you achieve:  

Lower Costs:  Opting for a specific, bolt-on solution not only wins additional revenue at a lower cost, but it also prevents the overlap and confusion that wastes budget. Smaller physician groups or clinics with tighter budgets can particularly benefit from point solutions, enabling them to invest only in essential functionalities. 

Simpler Onboarding: Contract management point solutions enable healthcare organizations to address this critical RCM area without overhauling your entire system. You can leave efficient workflows in place.  

Extensive expertise and support: Companies that provide contract management point solutions take pride in their specialized expertise. These firms – often smaller than those offering comprehensive solutions – ensure that if their representatives cannot resolve an issue quickly, they promptly connect you with an expert who can. 

Additionally, since successful integration is vital for their business, they are typically well-equipped to handle broader needs involving other solutions or your EMR. While end-to-end service providers offer extensive support, they may not possess the same level of specialization required to resolve specific, unique contract issues efficiently.

Enhanced control: Vendors of point solutions allow for strategic adjustments. Should a vendor increase prices, the impact is confined to a specific area of your revenue cycle. In contrast, price increases in an end-to-end solution could mean a significant cost hike across all services. For example, if a service like ADP, which handles multiple functions such as payroll and performance management, were to increase its prices by 20 percent, you'd face higher rates across all those services. Switching to another provider of end-to-end services could be both time-consuming and costly.

Moreover, if you are dissatisfied with a point solution vendor, you have the option to compare customer service, fees, and other aspects within your tech stack. If another provider offers superior performance, you might consider transferring relevant your contract management tasks from the underperformer to them.  

Make automated underpayments detection simple and lucrative for your organization

You can maximize your earned revenue through underpayment recovery without taxing your staff and decimating your budget. MD Clarity’s contract management and underpayments tool, RevFind, processes, digitizes, and analyzes payer contracts. It compares each payment against contract terms and alerts staff of any discrepancies. Addressing underpayments can increase recovered cash and improve profit margins.

Schedule a demo to see how RevFind can enhance your underpayment recovery efforts Ensure your payers fulfill their reimbursement obligations.