Top Revenue Cycle Scenarios Leading to Underpayments in Oncology Practices

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

Underpayments are commonplace throughout the healthcare industry, no matter the size or specialization of a particular practice. The reasons are complex, and not every contributing factor occurs with the same frequency, but the end result is the same: underpayments.

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.

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

It’s important to understand the various scenarios that most frequently lead to underpayments and  how to protect your practice in these situations and capture missing revenue.

Top Scenarios Leading to Underpayments

Many situations lead to underpayments. While this list is far from exhaustive, these are some of the top culprits.

Charges Underpaid Due to Inaccurate Fee Schedule Allowances

Oncology practices rely heavily on fee schedules and contractual agreements to determine the reimbursement rates for various medical procedures and pharmaceuticals. However, discrepancies often arise between the amounts listed on Explanation of Benefits (EOB) forms and the actual fee schedule allowances. This discrepancy can lead to underpayments if not addressed correctly.

One common issue is when payers provide EOBs indicating reimbursement amounts that differ from the agreed-upon fee schedule. These discrepancies may stem from incorrect or understated data on the EOB, leading to practices receiving less than they are entitled to.

Additionally, payers may inappropriately adjust or write off partial amounts owed to the practice. Unfortunately, many practices rely solely on the information provided in the EOB as the source of truth, rather than cross-referencing with the actual fee schedule. Consequently, incorrect adjustments by payers go unnoticed, resulting in underpaid claims.

To mitigate this risk, practices should diligently maintain and reference their fee schedules to calculate the allowed amounts based on the reimbursement rates outlined in the payer contracts. By adopting this approach, practices can accurately identify discrepancies between the expected reimbursement and the actual payment received.

Furthermore, practices must actively contest inaccurate EOBs and discrepancies in payment to ensure that they receive the full amount owed according to their contracts. This proactive approach requires dedication and vigilance but is crucial in safeguarding against underpayments.

In one notable example, a community oncology practice successfully avoided missing out on $1.3 million in underpayments over the first five months of the year. By meticulously managing their fee schedules and diligently verifying reimbursements against their contracts, they were able to identify and rectify discrepancies, thereby maximizing their revenue potential.

Complex, Complicated Payer Contracts

Modern payer contracts are confusing; with vague terms, ill-defined parameters, and pages of legalese, it’s like they were designed to allow payers to underpay, delay, or avoid payment entirely. With room for various interpretations, payers can manipulate the meaning into reimbursements that benefit them and hurt your practice by lowering the payments you receive.

Reimbursement rate calculations indicated in a payer contract may be so complex that even the payer has a hard time processing claims and following the contract parameters leading to underpayments, which may also be difficult to appeal if a payer’s parameters for automated processing are incorrect as well. Ultimately, practices must have clear contract documentation to cite, and be willing to follow-up and escalate further with payer representatives.

Third Party Administrator Plan Discrepancies

Another revenue cycle scenario that’s notorious for underpayment potential has to do with third party administrator (TPA) plans. These plans typically rely on a network’s rates for reimbursements, but when the network doesn’t update the TPA, payers pay at the old TPA rates while practices are expecting to be paid at current network rates. This results in a payment discrepancy that could be an underpayment.

Denials, Partial Payments, and Denied Billing Units

Practices also must contend with outright denials and partial payments. Payers sometimes deny payment or insist on partial payment, leaving practices short. In this situation, practices are faced with the choice of contesting the decision (a process that can last for months) or accepting the underpayment or nonpayment.

Payers sometimes deny billing units for certain drugs, including high-value drugs common in oncology. They may pay out for a certain number of units but deny additional units. No matter the reason, your practice is left underpaid.

How to Protect Your Practice

There are so many ways that oncology practices encounter underpayment. 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.

Validating that a fee schedule’s allowed amounts are calculated based on the payer contract rates and appropriately updated and maintained is the best way to identify and reduce underpayments and protect your practice.

Many underpayment scenarios can be resolved through better management and validation of fee schedules. This can be an intensely manual process, which is why so many practices fail to execute effectively. Here’s what you can 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  disorganized or populated with incorrect information. You must update and maintain your fee schedules to ensure claim information throughout your system is correct. 

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)  takes the burden off the rest of your team and keeps them focused on what really matters – fighting cancer.