The Top 5 Reasons Your Claims Are Being Underpaid (and How to Fix Them)

You’ve submitted a claim and received a payment, but the amount feels off. You’re not alone. Underpayments are a common and frustrating problem for medical practices, and they’re rarely a coincidence. In fact, many underpayments are due to correctable errors in the billing process—not malicious intent from the payer.

This guide will walk you through the top five reasons your claims are being underpaid and, more importantly, provide concrete solutions and appeal strategies for each. By addressing these issues, your practice can significantly increase its revenue and improve efficiency.

1. Missing or Incorrect Modifiers

The Problem:
Modifiers give payers crucial details about a procedure, such as whether it was bilateral, performed multiple times, or on a specific anatomical site. Without them, payers may default to paying at a lower rate. For instance, missing a bilateral modifier (e.g., modifier 50) may cause the payer to reimburse for only one side of the procedure.

The Solution:

• Institute a thorough claims scrubbing process with billing software that flags missing modifiers.

• Use a manual checklist for complex, high-volume claims.

• Provide regular training to coding and billing staff on modifier rules.

Appeal Strategy:
If underpayment results from a missing modifier, resubmit the corrected claim with the appropriate modifier and include a note explaining the update. Most payers will reprocess without dispute.

2. Payer Fee Schedule Mismatch

The Problem:
You negotiated a contract with the payer, but their system applies an outdated or incorrect fee schedule. That discrepancy leads to reduced reimbursement.

The Solution:

• Perform routine audits of top payers’ payments against your contracted fee schedules.

• Keep digital, searchable copies of all payer contracts for quick reference.

• Identify patterns early before they accumulate into significant revenue loss.

Appeal Strategy:
Submit a factual appeal letter quoting the contracted CPT rate side by side with the payer’s payment. Attach the relevant contract excerpt for proof. Clear, evidence-based appeals are hard to deny.

3. Outdated Patient Insurance Information

The Problem:
If outdated insurance data is used—say the patient changed jobs or their policy expired—the payer will process the claim incorrectly, often at a lower or incorrect rate.

The Solution:

• Make insurance verification mandatory at every visit, not just the first.

• Use real-time electronic eligibility verification tools to confirm coverage, deductibles, and policy dates.

• Empower patients to update their insurance information via portals or during check-in.

Appeal Strategy:
Once the correct information is verified, rebill the claim with updated data. If necessary, appeal to the new payer with a copy of your verification report to demonstrate accuracy.

4. Incorrect Coding or Bundling

The Problem:
Payers may incorrectly apply bundling rules or down-code a claim, reimbursing at a lower CPT level than documented. For example, two distinct services might be inappropriately bundled into one.

The Solution:

• Ensure detailed clinical documentation that fully supports the billed services.

• Stay current on payer-specific bundling policies for your most common procedures.

• Conduct internal audits to identify patterns of incorrect bundling.

Appeal Strategy:
Write an appeal citing your clinical documentation and payer guidelines. Show that the services were distinct and should be reimbursed separately. Documentation is your strongest ally here.

5. Timely Filing Issues

The Problem:
Not technically an underpayment, but missing a filing deadline can mean losing the entire reimbursement. It’s an administrative failure that effectively results in underpayment.

The Solution:

• Implement an alert system that flags claims nearing timely filing limits.

• Prioritize these for submission.

• Review aging reports weekly to ensure no claims go stale.

Appeal Strategy:
If denied for late filing, check clearinghouse reports for submission timestamps. If you can prove it was submitted on time, include that proof in your appeal.

Conclusion: From Reactive to Proactive

Underpayment recovery isn’t about confrontation—it’s about precision and persistence. By tackling these five common issues, you shift from constantly chasing lost revenue to proactively preventing it. Each dollar recovered strengthens your practice’s financial stability and allows you to focus more on patient care.

Call to Action

Don’t let underpayments quietly drain your revenue cycle. At MBW RCM, we specialize in uncovering hidden leaks, fixing systemic billing issues, and maximizing reimbursements for healthcare practices.

Contact MBW RCM today for an expert review of your current billing processes and a tailored strategy to stop underpayments before they start.