What does the term "underpayment" refer to in revenue cycle management?

The term "underpayment" in revenue cycle management specifically refers to receiving a lower amount than what was expected for services rendered. This situation often arises when insurance reimbursements or payments from patients do not meet the anticipated revenue levels established by the healthcare provider. Underpayment can have significant impacts on the financial health of a healthcare organization, as it means they may not be fully compensated for the costs of care provided, leading to cash flow challenges.

Understanding this concept is crucial for revenue cycle management, as it involves strategies to ensure that claims are properly billed and that reimbursements align with the amounts expected based on contracts and regulations. Addressing underpayment issues may necessitate reviewing payment policies, ensuring accurate coding, and even negotiating with payers for fair compensation.

This definition highlights the financial implications of underpayment and emphasizes the importance of accurate revenue cycle management practices in maintaining the viability of healthcare organizations.