03 Feb Payment Variance: How to Identify It
Payment variance presents a significant and ongoing financial challenge for your medical business. As a provider, your practice depends on payers to cover the cost of services you render, but the final dollar amount often comes up short of what you anticipated. Stop allowing your rates to vary from the contractual terms you negotiated with payers.
In our last blog, we explained what payment variance is and how it happens. Here, we’ll help you get a sense of how to identify payment variance. And be sure to keep an eye out for our third blog in this series where we’ll offer a solution for payment variance.
Receiving less money than you expected is always obvious, but identifying where and why payment variance occurred is a challenging endeavor to say the least.
Your Team Can Only Handle So Much Multitasking
Your accounts receivable team is perpetually and simultaneously submitting claims, managing payments that come in, and fulfilling many other responsibilities as well. Unless you can sustain an enormous staff, it’s not feasible for your AR department to follow, manage, and compare claims historically against the payments you expected and the payments you actually received.
To Make It Even More Challenging…
This endeavor only becomes more complex and challenging when you remember that your team must keep track of the multiple contracts and fee schedules associated with the multiple payers you work with. Like most providers, you likely take:
And three or four unique commercial payers
Trying to manage all of this data going back and forth, in what’s essentially a manual process within your practice, becomes a herculean task. In order to accomplish such an endeavor, your team would need to process enormous volumes of data. But try as they might, no AR department could ever apply the nuanced knowledge and rationale necessary to sort through all your claims and billing paperwork in a timely manner.
The Workflow Is Anything But Simple
If you’re still not buying how insurmountable your payment variance issues are with the resources and staff you currently have, consider this. In managing each of your practice’s claims, your AR department has to:
Check the contracted rate matches the paid rate
Appeal any denials if possible
Respond to the payer’s questions or requests for additional documentation
Ensure the claim and any appeals submitted fit within the agreed-upon time window
Even if you had the people power to accomplish what needs to be done to prevent payment variance, your medical business, like most providers, probably doesn’t have sophisticated enough protocols set up to know the expected payment amount.
The Right Tools Are Needed To Make The Right Decisions
Because your AR department doesn’t have this knowledge at their fingertips, they can’t make smart decisions about your fee schedule when negotiating with payers and affect dynamic change. As high-deductible health plans come into effect, these issues will only grow. Plus, on top of the financial blow payment variance wreaks, the lack of transparency that results in your relationships with patients can also take a major toll on patient trust.
How To Fix It
In order to start anticipating payment variance, your team would need to do the following for each of your payer relationships:
Take the terms of your fee schedule from your contract
Create a boilerplate spreadsheet of expected payments by code
Factor in details like geographic indicators that may affect expected payments of particular codes
Examine the timeframe for payment (or denial) for each type of code
This work would not be extraordinarily difficult, and your team does have billers and coders capable of accomplishing it, but the scale of doing so for every payer and every code makes the task pretty much impossible without AI and the support of experts.
If your team could take a look at payment variance in this way, they could begin prioritizing which discrepancies they should focus on appealing and correcting. Overtime, they may even be able to:
Identify and/or anticipate denials and adjust them accordingly before (re)submission
Prevent certain types of denials from occurring repeatedly
Follow-up as quickly as possible when a denial occurs instead of allowing claims to time out
Shorten your payment window for claims
Keep an Eye on Payment Variance & Watch Your Practice Grow
If you’ve read this and the first blog in our three-part series, you know what payment variance is and have a general idea of how to identify it. To learn what needs to happen for your medical practice to start addressing this financial hurdle, take a quick look at our blog on solving payment variance.