Underpayment has always been a key issue in the healthcare industry. The healthcare providers have been performing their duties in long work hours under challenging conditions but not getting paid in an adequate manner. This has further been highlighted in recent years, especially during the COVID-19 pandemic. To get a brief on the term, underpayment, it is the practice of paying the healthcare workers and providers an amount that is very less in comparison to the services they provide. 

Underpayment has significantly hit not only healthcare providers but also patients. While the providers get underpaid, the patients also do not get proper care as the providers try to avoid the patients who have a lower-paying insurance plan. A report in the Journal of American Medical Association shows that the high burnout rates are experienced by healthcare workers who feel underpaid for their services.

“Most employees do not give their best, either because they are underpaid, or because to do that would be to be underpaid.”

― Mokokoma Mokhonoana

The severity of the situation can be understood by the fact that there has been a significant rise in “physical flight”, wherein healthcare providers leave their work due to underpayment. This has even led to the early retirement of good resources in the healthcare industry. Further adding to the situation, a recent report based on a survey by the American Nurse Association in the year 2020 shows that almost 62% of the nurses in the states remain underpaid. Association of American Medical Colleges in its analysis of the healthcare industry has concluded that there will be a huge shortage of over 139,000 physicians in the USA by the year 2033. And most of these shortages will be due to underpayments.

Governments have been trying to contribute well to support the healthcare industry through Medicare schemes but this has not worked well till now. In the year 2021, the government of California increased the rates for healthcare providers by 15%. 

In this article, we will explore the problem of underpayment in the healthcare industry and what factors contribute to it. Further, the article will also provide potential solutions to the problems under discussion.

The Main Causes of Underpayment in the Healthcare Industry

Low Reimbursement Rates from Insurance Companies: It is observed that it is common for insurance companies to negotiate rates with healthcare providers for the services they cover under different product packages. In most situations, the prices offered by the insurance providers are way too low for what the healthcare providers deserve, and this leads to underpayment. 

The reason behind the lower rates is mostly the prioritization of profits by the insurance provider over the health of patients and the concerns of healthcare providers.  A survey done in the year 2020 by the Medical Group Management Association found that more than 90% of healthcare provider experience delay and denial of payments by insurance companies.

Inadequate Compensation from Institutions: Many healthcare providers complain of not getting paid well by the hospitals and clinics for whom they work for. The situation is more severe for workers located in remote or underserved areas. Most of the time people join these workers join the healthcare industry to serve society so accept lesser pay but this too leads to underpayments.

Unpaid Services by Patients: At times the patients do not pay the bills for the services provided by the healthcare institutions. The reasons given for this are quite common as financial hardship and issues with the insurance provider. The result of this comes up as Underpayment due to the unpaid bills for the services provided by the healthcare organization.

A healthcare organization must know how much money can it save if you were able to get to know why the claims are unpaid.

Each and every state in the USA has different state fee schedules which are regularly updated by their respective authorities. This provides a chance sometimes to the insurance company to reject a claim citing the state in which the claim is applicable. It is thus important that healthcare organizations keep themselves updated with the new changes in the rules and regulations made by the authorities in the healthcare industry.

Impact of Underpayment on Patients

Limited Access: With healthcare providers getting underpaid, there is a high chance that they will accept fewer patients who have insurance with lower reimbursements. This will limit access to care for many.

Reduced Quality of Care: Underpaid Healthcare providers will surely be less and less may be less motivated to provide high-quality care, leading to reduced quality of care for patients.

More Medical Errors: Burnout and dissatisfaction due to underpayment can lead to a higher rate of medical errors.

At CIVIXDATA, we ensure that our products, services, and support system is continuously updated on the rules and regulations so we can provide our customers with a better classification of underpaid cases.

Our operations have been effective in decreasing underpayments over some time for our healthcare partners. We follow the following steps to ensure a clear classification of the underpaid cases: 

Explanation of payment or EOP as it is known in the health care sector, we ensure that our knowledge base on codes for explanation or rejection of claims is regularly updated so we can provide a better service to our clients. Added to this we also focus on the Initiation of the EOR which is an explanation of the review. By doing this we ensure that claims are cleared off on exactly what is due. This is followed by checking EOB, an explanation of benefits, this is done to get better data on the dates when patients received the service, how much was the cost associated with the same, how many parts of the amount is paid by the insurance and how much remaining amount will be paid by the patient. This ensures that our clients will have fewer underpayments and more revenues with time.

If you are facing the problems of underpayments in your organization, we are here to help. Get a consultation from one of our experts.