Avoiding Underpayments: How to Audit Your Claims Pricing Effectively
- Micro-Dyn
- Sep 11
- 4 min read
In today’s high-stakes healthcare reimbursement environment, underpayments are a silent threat to financial stability. Whether caused by payer contract misinterpretations, outdated CMS pricer logic, or incorrect grouping and coding, underpayments chip away at revenue without raising obvious red flags.
According to the Healthcare Financial Management Association (HFMA), 3–5% of claims are underpaid—and in large health systems, that can represent millions in annual revenue leakage. For revenue cycle management (RCM) leaders, claims pricing audits are one of the most powerful tools to identify, recover, and prevent underpayments.
This article provides a step-by-step guide for conducting an effective claims pricing audit, leveraging both technology and process to ensure you’re getting every dollar you’re owed.
🔍 Understanding Claims Pricing and the Role of a Claims Pricer
A claims pricer is the system (or algorithm) that determines the payment amount for a healthcare claim, based on factors like:
Payer contract terms
Medicare or Medicaid reimbursement schedules
Procedure codes (CPT/HCPCS) and diagnosis codes (ICD-10)
Site of service and modifier use
Claims grouping logic (e.g., DRGs, APCs)
Underpayments occur when the payer’s pricer logic—either by error, outdated data, or policy misapplication—calculates reimbursement below the contracted or regulatory rate.
⚠️ Common Causes of Underpayments
Contract Misinterpretation Complex payer contracts can include varying reimbursement rates by code, site, or patient population. Without automated contract management, these nuances can be missed.
Incorrect Code Grouping DRG or APC misgrouping can result in a lower-paying category, especially if secondary diagnoses or procedures are omitted.
Outdated Pricer Logic If your internal claims pricing system isn’t updated with the latest CMS or payer fee schedules, discrepancies are inevitable.
Missed Bundled Payments or Add-On Codes Services like implantable devices, prolonged care, or certain imaging studies may be separately payable—but only if billed correctly.
Site-of-Service Errors Medicare’s site-neutral payment policies and payer-specific outpatient rules can cause reimbursement differences if the site code is wrong.
📝 Step-by-Step Guide to Conducting a Claims Pricing Audit
Step 1: Define the Scope of the Audit
Decide whether to focus on:
A specific payer contract
A high-volume service line (e.g., orthopedics, cardiology)
A high-dollar subset of claims
Claims with high denial or adjustment rates
Tip: Start with high-impact areas first—services that are both frequent and high value.
Step 2: Gather Your Data
Pull the following data elements for the selected claims:
Claim header and line-item detail
CPT/HCPCS, ICD-10, and modifier codes
Payer allowed amount vs. paid amount
Expected reimbursement (based on contract)
POS (Place of Service) codes
Pricer or payment adjustment codes
Ensure you have at least six months of data to identify patterns.
Step 3: Compare Paid vs. Expected
Use contract management software or a claims audit tool to recalculate what should have been paid, based on the original claim data. Compare to actual payment amounts.
Key Metric: Underpayment variance = (Expected – Paid) ÷ Expected x 100%
Step 4: Validate Claims Grouping
Check whether the claim was grouped correctly under DRG, APC, or other relevant payment classification systems.
Were all diagnosis and procedure codes submitted?
Were severity levels captured correctly?
Did the pricer recognize all qualifying comorbidities?
Step 5: Investigate Underpayment Causes
Classify underpayments into categories:
Payer Error – Incorrect application of rates or logic
Provider Error – Coding or documentation omission
System Error – Outdated pricing table or contract load
Step 6: Initiate Recovery Efforts
For payer-related discrepancies:
Submit corrected claims or appeals with contract references
Provide supporting documentation for procedure complexity or add-on codes
For provider-related errors:
Correct internal coding or documentation workflows to prevent recurrence
Step 7: Update Internal Claims Pricer Logic Your internal claims pricer should mirror payer logic as closely as possible:
Load updated CMS and payer fee schedules at least quarterly
Validate grouping logic after every CMS update (e.g., DRG, APC, RBRVS changes)
Include payer-specific bundling and unbundling rules
Step 8: Monitor and Repeat A single audit is not enough. Create a quarterly claims pricing audit schedule to continuously identify and address underpayments.
🤖 Technology’s Role in Underpayment Detection
Claims Pricing Automation Modern RCM platforms can automatically compare expected vs. actual payments in real time.
AI-Powered Audit Tools Machine learning models can flag patterns of underpayment—down to the CPT code or payer region—faster than manual review.
Contract Management Systems These store payer agreements digitally, enabling automated compliance checks during claim adjudication.
📊 Real-World Impact: A Case Study
A regional health system implemented quarterly claims pricing audits focused on its top 20 highest-revenue CPT codes. Within six months, it:
Identified $2.4 million in underpayments across two commercial payers
Recovered 82% of flagged amounts through appeals
Reduced future underpayments by 40% by updating internal pricer logic
✅ Best Practices for Claims Pricing Audits
Start Small, Scale Up – Focus on high-value codes first, then expand to all claims.
Document Everything – Keep detailed notes on discrepancies and resolutions for compliance.
Engage Cross-Functional Teams – Involve coding, billing, compliance, and IT.
Train Your Staff – Educate RCM teams on common underpayment scenarios and contract specifics.
Leverage External Expertise – Consider third-party audit firms for complex payer contracts or large-scale audits.
📉 The Bottom Line
In 2025, avoiding underpayments is about precision—both in claims submission and in auditing payment results. By combining technology-driven claims pricer automation with disciplined reimbursement reviews, providers can protect millions in potential lost revenue.
A structured claims pricing audit isn’t just a financial safeguard—it’s a competitive advantage in a reimbursement environment where every dollar counts.