There’s no getting around it: every oncology practice is being underpaid.

Unfortunately, underpayments are commonplace throughout the industry, no matter the size or specialization of a particular practice. The reasons, which we will get into below, are complex and not every contributing factor occurs with the same frequency, but the end result is the same—underpayments happen.

Why does this matter? In one word, revenue. Because of widespread underpayments, oncology practices are leaving large sums of money on the table every single year. This missed income could be used to grow the practice and to increase the quality of care, but instead it sits unrealized.

Of course, revenue cycle managers in oncology practices already know this. Whether a practice is being underpaid isn’t the real question. The real question is where and when the practice is being underpaid.

In a specialty that already faces significant financial pressures, any opportunity to ensure financial stability and practice longevity is a welcome one.

In today’s post, we want to help revenue cycle managers understand the various scenarios that most frequently lead to underpayments. We’ll also show you how to protect your practice in these situations and begin capturing some of this missing revenue.

Top Scenarios Leading to Underpayments

There are quite a few situations that lead to underpayments. While this list is far from exhaustive, these are some of the top culprits.

Charges Underpaid Per Fee Schedule Allowances

Practices work with fee schedules and contractual allowed amounts, which together influence what they can bill for various procedures, medications, and products. However, the payer provided Explanation of Benefits (EOB) often lists a differing amount. This EOB data may be incorrect and understated.

Frequently, payers will inappropriately adjust or write off partial amounts due. Usually this occurs because practice management systems use the EOB as the source of truth when comparing exceptions. Instead, the actual fee schedule is what should be used as the source of truth. In this scenario, the payer incorrectly adjusts the amounts due because of the EOB.

Payers will continue to present inaccurate EOBs that will get lost in the processing shuffle if not contested. It takes time and effort to contest these discrepancies — and it also requires noticing the discrepancies in the first place.

The challenge here is that there’s no effective way to see these discrepancies in the practice management system — even when practices tightly manage their fee schedules.

In one example from the first five months of this year, a community oncology practice would have unknowingly missed out on $1.3M in underpayments.

Carve-Out Codes

When dealing with complex care in oncology, practices often negotiate increased payment for a sub-set of carve-out codes. These codes are often harder to manage and unfortunately payers make mistakes loading and reimbursing carve out codes correctly.

The solution here is to monitor by creating and maintaining an up-to-date fee schedule built around the carve-out codes and other nuances.

In one example of how this played out, a small, 4-provider oncology practice had a $170K impact in less than 5 months!

While carve-out codes are a good thing, they are hard to manage because they are not the payer’s “standard fee schedule” so they are more susceptible to loading and payment issues causing significant underpayments, even if your practice is small. This is why they must be monitored.

Unlisted J Codes

Pharmaceuticals with Unlisted J codes can be a significant cause of underpayments in oncology practices. The topic is a complex one, and we’ve recently published a separate post on the topic. Check out The Necessary Evil: Unlisted J Code Pharmaceuticals for a deeper dive, but for the purposes of today’s post, we’ll keep it simple.

New and unclassified drugs are issued a temporary “Not Otherwise classified” (NOC) J code also called an unlisted J code. Using new and innovative therapies in oncology is commonplace; therefore managing unlisted J codes is critical.

There are many billing hurdles to doing so, though. First, practices are required to bill these J codes at 1 unit, regardless of how much of the drug was used.

Various new drugs are all using the same J code (J3490 or J9999), and practice management systems don’t handle it well. Practices need to use custom codes in the system to differentiate these drugs, but sometimes this crucial step gets missed.

Unless a practice has an automated technology solution, there aren’t great solutions for monitoring these issues, so it’s another area to manually monitor. And unfortunately, even when practices stay on top of this, corrections and proper payments are often slow in coming.

In one example, it took longer than 90 days to be reimbursed for over 30% of claims utilizing newly indicated immunotherapies, and 12% continued to linger in AR over 365 days later. These impacts on timely reimbursements are quite impactful and can add up to significant losses over time.

Nurse Practitioner 15% Reduction Incorrectly Applied

Many payers, including Medicare, reduce reimbursements for care administered solely by an APP (Advanced Practice Provider) by 15% from the full physician rate.

This applies to supervision of procedures where the APP is practicing independently (i.e., chemo administration codes).

This is another area where errors occur frequently. The reduced rate is supposed to be applied only to E&M/office visits, but for one practice, we found it was also being incorrectly applied to drug reimbursement, adding up to $50K in underpayments per APP.

How to Protect Your Practice

As we’ve noted above, there are so many ways that oncology practices encounter underpayment. And the cumulative effect of this missed revenue can be significant, affecting both a practice’s profitability and its ability to provide the highest level of care to all patients.

So how can you protect your practice and reduce underpayment? Fee schedule validation and management is the primary solution.

Many of the scenarios described earlier can be resolved through better management and validation of fee schedules. However, this can be an intensely manual process, which is why so many practices fail to execute effectively. Here’s what you to do to protect your own practice.

Overall Analysis and Regular Auditing: Practices that aren’t doing any regular analysis or auditing of fee schedules are nearly guaranteed to be leaving money on the table. You need to dive into the transaction level data to ensure you catch everything.

Proper System Setup: None of this can be done effectively if your practice management system is a mess. But first, you must have control of your fee schedules to ensure they are mapped in your system correctly.

The Right Resources: Many of these processes are intensely manual, but with the right modern tools (including automation), they don’t have to be.

The Right Capabilities: Ultimately, having the right capabilities—team, skills, and platforms—to capture lost revenue from underpayments takes the burden off the rest of your team and keeps them focused on what really matters – fighting cancer.

Lori Fleischauer
Lori brings over 20 years of healthcare experience to AC3 with her focus on managing costs, increasing revenue and mitigating risk by use of technology.
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Lori Fleischauer
Director, Client Operations