Ambulance Underpayment Recovery: The Good, The Bad and The Ugly

For years, ambulance providers have had three responses to underpaid out-of-network insurance claims. All three responses are logical but ineffective.

The first response by EMS agencies is to accept the underpayment as payment in full. The second response is to appeal the underpayment with the insurance company. The third response is to balance bill the patient.

In the first response to the underpaying insurance company, the EMS agency accepts the out-of-network underpayment as payment in full. In so doing, the EMS agency is implicitly agreeing with the payment calculation of the insurance company.

For example, Bob's Ambulance LLC bills XYZ Insurance Corp. $1,000. XYZ Insurance pays Bob's $500, with a $500 disallowance. When Bob's biller posts the underpayment transaction to its billing system, the biller records the $500 payment. Bob's biller also posts a $500 adjustment to bring the claim balance to $0. The adjustment may be labelled "usual and customary," "contractual allowance," or some variation.

Bob is taking one of two positions by accepting the original payment amount. One, Bob does not believe that he is entitled to additional payment above what the XYZ calculated. Two, Bob believes he is shortchanged, but does not believe he has any remedy against XYZ. In either scenario, Bob is taking the "head in the sand" approach.

In the second response to the underpaying insurance company, the EMS agency appeals the underpayment with the insurance company. In that case, the EMS agency is explicitly disputing the underpayment.

The EMS agency may contend, in the insurance appeal, that its usual and customary charges were erroneously discounted. In rare instances, the insurance company will acknowledge the error of its ways with respect to the underpaid claim in question. When it does, the insurance company will pay the difference between usual and customary charge and the original payment. In all likelihood, meanwhile, the insurance company will continue underpaying future claims. The insurance company does not learn from its mistakes.

In most cases, though, the insurance company will deny the appeal. In the denial, the insurance company may assert that they paid the usual and customary fee. Insurance companies may make this assertion on the grounds that they referenced fair health rates in calculating the usual and customary payment amount. Alternatively, some insurance companies may advance that the payment amount is a reflection of the rates that it pays to contracted providers. Either way, the EMS agency is worse off than before it submitted the appeal. Not only is the EMS agency underpaid, but it also wasted time in trying to fight the insurance company.

As an example, the assistant chief of an upstate New York EMS agency reported that it did a demonstration project on appealing insurance underpayments. The biller of said agency took their eye off the ball of their regular billing and collections responsibilities. At the end of the day, the demonstration project was a bust; insurance companies did not pay up.

In the third response to the underpaying insurance company, the EMS agency balance bills the patient. When balance billing the patient, the EMS agency is implicitly acknowledging that the insurance company paid the correct amount. However, there is a leftover balance that the patient is responsible for—the disallowed amount.

A modest percentage of the time, the patient will pay the EMS agency's bill upon receipt. Balance billing did the job.

That said, the EMS agency may have another strategic aim. In pursuing the patient for the disallowed amount, the ambulance provider may hope to compel the insurance company to make an additional payment on the underpaid claim. Patients are seldom pleased to see a "surprise" balance bill for a covered ambulance service. When this strategy works, it’s because the insurance company hopes to keep its client, the ambulance patient, a happy client. Faced with a client (i.e. patient) complaint, the insurance company might just pay up.

Some EMS agencies first submit an insurance appeal on underpaid claims and, when unsuccessful, balance bill the patient. This is the billing equivalent of throwing spaghetti against the wall to see what sticks.

For its part, the balance billing tactic may be coming to an end. States such as New York, Colorado and others largely prohibit balance billing for ground ambulance claims. At the federal level, the Ground Ambulance and Patient Billing (GAPB) Advisory Committee is weighing the issue of balance billing by ground ambulance providers. Balance billing by air ambulance providers has been largely prohibited by the No Surprises Act.

Separately, balance billing puts EMS agencies in the crosshairs of the media. One need only do a Google search of "ambulance balance billing" to corroborate this.

In a nutshell, EMS agencies have limited arrows in their quiver to recover underpaid insurance claims. They can either ignore the issue, appeal with the insurance carrier or balance bill the patient. Each of these strategies have proven to be ineffective, historically. A blunt instrument to start, balance billing is becoming less effective with the widespread passage of "surprise billing" legislation.

It would seem, then, that EMS agencies are at the mercy of the insurance companies.

Source: RVNU EMS