How I lost $867,000 to insurance errors

Before reading this, please note that this is an extreme case, but it was important enough to bring it to everyone’s light so it can be avoided in your office.

Let’s get started.

Over the past 20 years, I have had the opportunity to work with a strong team of professionals to build a fun and profitable office. Some time ago we joined the PPO world. Our office team entered the fees into our dental software system and away we went, billing insurance companies and collecting payments and making the required PPO adjustments as any contracted dental provider would do.

This past year, my office manager with 40 years of experience retired and a new office manager was hired. After 2 months of receiving claims, our new office manager noticed that the amount we were writing off was inaccurate. At first glance, the amount seemed correct. There in black and white was the billed amount, contracted amount, patient’s portion and write-off portion.

However, after careful review, we learned that the contracted rate with the insurance company was higher than the rate we were billing at (i.e. our UCR). We were effectively leaving reimbursements on the table because we weren’t submitted fees as high as the insurance contracted rate allowed. Since the EOB showed the contracted rate, we would then mistakenly adjust the patient ledger to match the contracted rate, which effectively resulted in one of two results:

1. A reduced in the amount the patient owed, or

2. A credit to the patient’s account which reduced billing for future services or a refund to the patient.

Now I know this would not happen to most, yet this happened to me and could be possibly happening to you. As we audited our accounts, we found that it occurred a standard 6% of the time with one insurance company that was consistently changing the fee and/or code. With close to 50% of our patient database being contracted with this plan and being a large office producing over $1.7 million a year, this equated to approximately $51,000 a year in this insurance adjustment error…or $867,000 over 17 years that my retired office manager oversaw this billing.

Example of an EOB error:

Billed Amount(UCR) – Insurance Contracted Amount – Insurance Paid – Patient Portion – Adjustment

$70.00                                     $107.00                                     $70.00               $0.00                 $37.00

$29.00                                      $54.00                                       $29.00              $0.00                 $25.00

$698.00                                  $1,050.00                                  $349.00             $349.00             $352.00

Total Billed – Total Allowable Amount – Total Ins. Paid – Total Patient Portion – Total Write-0ff

$797.00                  $1,211.00                      $448.00                     $349.00                     $414.00

So rather than applying the insurance payment of $448.00 and verifying patient paid $349.00, they did one step further (which was the error), by writing off $414.00. Why? Because the insurance EOB said so!

Three things I want you to take away from his experience:

1. Be sure to look at your write-offs each month–ask questions.

2. Make sure that your team is updating the contracted insurance fee schedules.

3. Verify that you are billing your UCR fees to the insurance companies to insure you are maximizing insurance payments. Verify that your UCR is at least as high as the contracted rates.

In closing, KNOW YOUR BUSINESS! It could greatly impact your long-term finances.

For questions, please feel free to email Deb Eatros with PracticeCFO: deb.eatros@practicecfo.com.

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