In collections, make a list and check it twice

March 1, 2006

Convincing evidence suggests that, as suspected, managed care companies lack the ability to properly adjudicate claims and pay the contracted amount for services rendered. As a result, every radiology practice must routinely verify managed care payment compliance by tracking and reporting third-party payment practices.

Convincing evidence suggests that, as suspected, managed care companies lack the ability to properly adjudicate claims and pay the contracted amount for services rendered. As a result, every radiology practice must routinely verify managed care payment compliance by tracking and reporting third-party payment practices.

Many major health insurers have settled class action lawsuits brought by physicians alleging improper payment for physician's services. Humana and health plan giant WellPoint recently settled claims brought by physicians amounting to $58 million and $198 million, respectively. WellPoint's payment will settle allegations brought in a class action lawsuit by 18 state medical associations representing 700,000 physicians. The physicians contended they had been cheated by insurance companies that programmed computer systems to systematically underpay physicians for their services. Under the settlement agreement, WellPoint will pay physicians $135 million, pay legal expenses of $58 million, and contribute $5 million to set up a foundation to promote quality healthcare and improve quality healthcare delivery to uninsured patients. Earlier settlements have been made with Aetna, Cigna, Prudential, and HealthNet. These carriers alone represent approximately 56 million subscribers.

Some software modules of the radiology billing system that were once a luxury have become a necessity and well worth the money to purchase or customize. Because radiology billing deals with a large number of relatively small claims, it is crucial to implement automated management tools that easily summarize data concisely, clearly, and in a timely fashion. These requirements are major capital investments for any radiology practice or billing service provider.

Most major billing software vendors either currently have or are developing these reporting modules. If you are in the market for billing software, managed care payment compliance should be at the top of the list of software package requirements. Before you purchase a radiology billing software package, be sure that it has this capability. Visit or contact other users to determine if the reporting will achieve your objectives. Be aware that if the software is in testing or development, a firm could still be years away from selling a working model.

Automated payment verification software capabilities are essential in today's reimbursement environment, according to Wendy Driscoll, practice manager for Radiology Physicians of Springfield in Springfield, OH.

"This type of reporting brought to our attention that one of our largest payers was consistently trimming 2% to 3% off of each claim payment," she said. "Had this gone undetected, it would have cost the group $40,000 annually."

If you have an older version of software, an upgrade may be necessary to take advantage of this reporting. Upgrades should take place as the software vendor improves its base product and offers new functionality. If an upgrade is needed to obtain managed care payment compliance, it will be well worth the time and expense.

If your software company is not agreeable to implementing this functionality, you have several options. You can attend the user group meetings sponsored by the vendor and lobby the vendor to plan this functionality for an upcoming release of the software.

Another alternative is paying your vendor to customize your current software to provide this functionality. This upgrade can be expensive when you consider programming costs and maintenance fees, but with customization you get exactly what you want. Have your software vendor do enough research so that it can give you a dependable quote for time and cost. Many times, customization can be the best option.

The last alternative should be changing billing or software vendors. If your vendor does not understand the importance of this valuable functionality, it may have other developmental issues that also are affecting your radiology practice. If you operate on a proprietary platform, the costs associated with obtaining this functionality are typically worth it.

A well-designed managed care payment compliance module should have the capability to produce informative management reporting. This includes the flexibility to report detailed transactions as well as summary data. Automated reporting should identify the managed care companies and the amount by which specific claims are underpaid. This amount of detail is important if at some time you need proof in arguing your case with the carrier. The software must be able to compare (for every claim) the contracted rate with the actual payment received. The reporting output should become part of your standard monthly reporting. By reviewing this output, you can easily determine which payers are not living up to their contractual obligations.

Next, determine how to address underpayment with the respective carriers. This can be done on a claim-by-claim basis or in bulk. The claim-by-claim method has inherent weaknesses because you are relying on clerical staff at both ends to address a major issue. A better approach is to address the claims in bulk with the payer. With the bulk approach, the reporting is run for a selected period of time, and if a certain payer is identified as a problem, management should meet with the respective carriers to discuss how the underpayment happened. You can ask how and when they intend to process and pay outstanding claims, and how they intend to correct the problem in the future. If the issues persist, there may be grounds to terminate the contract.

For additional tips from Kirk Reinitz, see his practice management column at diagnosticimaging.com.

Mr. Reinitz is president of Comprehensive Medical Practice Management in Powell, OH. He can be reached by e-mail at kirk_reinitz@cmpminc.com.