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Medical billing: another way payors exert their power over hospitals

Health insurance companies are increasingly ‘clawing back’ payments from already struggling hospitals.

Ever wonder how hospitals and doctors’ offices get paid for the services they provide? Many of us know that insurers pay for some of the care patients receive, but how does a visit with your doctor turn into an insurance claim?

Okay, we’ll admit, it’s probably not keeping you up at night, but when it comes to understanding how deeply embedded insurance companies are in the American health system, it’s worth considering.

As it turns out, medical billing is complex. When a provider is seeing you, all the notes and documentation from the visit are translated into billing codes by a special team within the healthcare facility. Those codes represent your ailment, the severity of your illness, who treated you, where they treated you, what the service was, and more.

Then, these codes are sent to insurance companies, who are supposed to reimburse for the coded claims at a previously agreed upon rate.

Hospitals and doctors’ offices take this process very seriously. If items aren’t coded correctly, the claims might enter a review process, or insurers may deny the claim altogether. And of course, this all affects the financial security of the healthcare facility. The reality is that to keep doors open and clinicians employed, hospitals and healthcare facilities need to be paid for the services they provide.

How serious do they take it? There are entire teams of coders expertly trained to accurately translate medical services to billing codes, and even additional teams called ‘clinical documentation integrity’ teams, whose entire job is to make sure the codes are accurate and thorough.

All that isn’t to say that hospitals or doctors never make mistakes. They may code incorrectly, or there might be some uncertainty about the correct code – patients don’t always exactly match a diagnostic checklist! Sometimes, insurers don’t catch an incorrect code until the payment is already made.

Enter the clawback. This is a process where insurers retroactively recoup reimbursements they’ve already made. And according to a recent article in Modern Healthcare, they’re getting increasingly aggressive and even reclassifying a patients’ record to lower-reimbursement services.

In the article, Bart Fiser, vice president of corporate revenue cycle and managed care at Fayetteville, North Carolina-based Cape Fear Valley Health, describes how payors will pull data from sepsis patients and potentially reclassify it as pneumonia or endocarditis, which pull in less reimbursement.

This kind of unwarranted downcoding hurts a hospitals’ ability to sustainably provide the care patients need. And critically, hospitals have little to no recourse.

“Providers say big payers sometimes claw back funds even if a dispute is ongoing, leaving them with no comparable recourse—they can’t take money from payers if they decide underpayment occurred,” reports the article.

There isn’t an insurance claims agent in your hospital room to determine whether you have sepsis or endocarditis – and even if there were, most of us would prefer the doctor to make that call. Further, keep in mind that insurers have the upper hand in reimbursement rates in the first place.

At the end of the day, this is just further evidence of the outsized power insurers hold in the healthcare system compared to hospitals, and how – rather than working with hospitals to find a sustainable and accurate way to provide and pay for services – insurers are quick to pad their bottom line at the expense of providers and patients alike.

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