Unexplained Payment Variances: To Ignore or Appeal?

Medical claim payment variances come in all sizes and shapes. Some payment variance is justified and can be tracked down to modifiers, scheduled contract adjustments or newly-implemented coding guidance. However, some payment variances are more suspect. Some discounts are related to incorrect modifier application and/or usual, customary and reasonable adjustments should be scrutinized for accuracy.

Further, the upcoming implementation of the ICD-10 code set will likely involve many new payer claim processing edits. ICD-10 payers have been working to reassure many providers that the upcoming ICD-10 implementation should be reimbursement neutral. In fact, neutrality is only one of the key factors being testing by many payers at this time and some managed care negotiators have added neutrality clauses to their contracts.

However, many ICD-10 critics have suggested that the additional coding detail will lead to MS-DRG shifts which will result in payment variance. Further, ICD-10 has codes meant to better reflect chronic care management which may involve newly developed claim payment edits.

The trouble is in knowing what to appeal and what to accept as a correct adjustment. Once a payment variance is identified and the adjustment does not appear to be supported, action should be taken to determine if the payment adjustment is accurate. Here are some steps to consider when assessing payment variances:

1. In-depth Comparative Analysis – Examine your claim history for similar claims and review the billing detail. Once you have located similar claims which appear to have received higher reimbursement, you may want to contact your provider representative to discuss the benefit variance to see if more information can be obtained to justify the variance. You may want to specifically ask for input from the payer regarding how the following processing edits apply to the charges and if written guidance is available to better explain the adjustments:

  • Modifiers
  • Bundling edit changes
  • Fee schedule adjustment – It is important to have access to the latest fee schedule changes. Review the process for loading fee schedules into your practice management system and make sure that your system is using the most up-to-date payment information.

2. In-depth Verification of Benefits of future claims – Payors have a legal obligation to provide benefit disclosure related to upcoming treatment. Therefore, if a specific procedure has been identified as being subject to variable rates of reimbursement, consider seeking verification of benefits prior to treatment.

3. Appeal Single Claims For Disclosure of Payment Terms – When appealing a payment variance, often one is unable to obtain a written explanation regarding the benefit calculation unless an appeal is filed which specifically demands disclosure of the payment terms and any applicable discount. Demanding disclosure during the course of an appeal will require the payer to cite the specific policy/plan language which justifies any discount or reduction in the benefit level. Therefore, be sure to include a well-worded disclosure demand in your appeal letter which makes it clear that you require more information regarding how the benefit calculation has been conducted in accordance with the terms of the policy and will be consistently applied to all similar claims.

4. Seek An Audit of A Collection of Claims with a similar Payment Variance – You may want to approach this issue by seeking an audit related to a certain type of claim. This will allow you to seek review of a number of claims as a group and also allow you to provide payment history for similar claims paid at a different level. Consider using the following wording for Requesting a Payer Claim Processing Audit Related to ICD-10 Payment Variances:

Dear Provider Representative,

We are tracking payment variances which appear to be related to the recent ICD-10 code set implementation. The above listed claims have been identified as having a lower reimbursement rate from previously processed claims submitted with ICD-9 coding. The explanation of benefits for these claims did not give adequate information regarding how the benefits were calculated. Therefore, we request your review of these claims in regards to benefit calculations and reimbursement neutrality and a detailed explanation regarding the discounts applied to the benefits.

State and federal disclosure laws as well as contract terms may be applicable and require the release of detailed information to substantiate an adverse benefit determination. Therefore, please include any claims editing guidance which was used in processing these claims. If you believe this request does not fall under disclosure requirements, please provide a written explanation. Thank you for your assistance in regards to this matter.

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