Revenue Cycle

Tip: Review managed care contracts to ensure prompt, accurate reimbursement

Patient Financial Services Weekly Advisor, November 5, 2004

Tracking and analyzing underpayments and denials to determine root causes and prevent recurrences will optimize your reimbursement from managed care contracts, says Todd Anderson, CPA, director of internal audit and managed care for Adventist Health System in Hinsdale, IL.

Use the following testing procedures:

Underpayment recovery

  • Review with a recovery specialist a sample of significant underpaid claims. Determine whether procedures are in place to ensure recovery of underpayments (e.g., tracking underpayments in spreadsheet, pursuing collection of underpaid claims, etc.).
  • Determine the nature of underpayments and review the following:
    - Insurance cards
    - Explanation of benefits
    - Insurance correspondence
    - Payer contracts
    - Patient information and coordination of benefits
    - Account transaction history
    - Account notes
  • Determine the method and time frame in which underpayments were resolved.
  • Determine whether the department analyzed the root causes and whether it recovered the underpayments.

    Denial management

  • Generate a report using denial-adjustment codes and convert it to a spreadsheet for trending and sorting.
  • Gather the following information and statistics for analysis, discussion with management, and inclusion in audit report:
    - Denials by type
    - Denials by payer group
    - Denials by patient type
    - Denials by facility
  • Based on the adjustment code and statistics gathered for denials by type, identify the most significant denials in terms of total dollars and number of cases. Document this for testing or review.
  • For significant denials, select a sample of large denial adjustments for review through the following process:
    - Determine the nature of denials
    - Verify that denials are appropriately written off to the proper adjustment codes
    - If denials are valid and acceptable, determine what actions were taken to minimize or avoid future denials
  • Scan any correspondence received from insurance companies and review it for any incurred or potential denials. Review the patient account notes to check the action taken and verify an appropriate resolution.
  • Review denial-adjustment code mapping to the general ledger. Verify that denial adjustments map to the appropriate general ledger denial accounts.
  • Compare denial amounts to the reported denials per the general ledger or financial statements.

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