Why Would a Paid Claim Still Be Losing You Money?

Because payment and correct payment aren't the same, and nothing in a standard billing workflow automatically distinguishes between them. An underpayment happens when a payer processes and pays a claim below the contracted or expected rate, a gap that doesn't trigger a denial, generate a rejection, or create a worklist item for anyone to investigate. SPRY's billing platform auto-matches remittances to claims and flags mismatches instantly, routing underpayments for follow-up rather than letting them post as if the claim closed correctly.

What Is an Underpayment, and How Is It Different From a Denial or a Write-Off?

These three outcomes look similar on a billing report but mean very different things for a practice's revenue.

Source: Combine Health, "Healthcare Underpayments Guide," see references

An underpayment isn't a type of denial. A denial means a claim wasn't paid at all. An underpayment means it was processed and paid, just for less than the contract specifies, which is exactly what makes it so easy to miss.

Why Underpayments Are Genuinely Harder to Catch Than Denials

A denial creates a worklist item almost automatically, a rejection status, a reason code, something for a biller to act on. An underpayment does none of this. The remittance posts, the balance appears to be zero or matches what was expected at a glance, and the claim looks closed. As one industry source put it plainly: when a claim is reduced rather than denied, it doesn't create a worklist item, it shows up as nothing at all.

That invisibility is precisely why underpayments accumulate for so long before anyone notices. Nobody is actively hiding the gap, but nothing in a standard workflow surfaces it either, unless the specific line-item payment is actively compared against the actual contracted rate for that code and payer.

How Common Are Underpayments, Really?

More common than most billing teams assume. Industry data shows large health systems see roughly 2% to 3% of claims underpaid due to payer edits or technical variances, while small-to-midsize physician groups, the category most outpatient PT practices fall into, often see that figure rise to 5% to 7%, depending on payer mix and how much automation is already in place.

Separately, when practices actively pursue recovery, the results recovered typically range from 2% to 6% of total paid claims, a meaningful figure once applied to a full year of billing volume. The gap between how often underpayments happen and how often they're actually caught and appealed is the real problem: fewer than 1% of denied or underpaid claims are ever appealed, according to a KFF analysis of CMS data, meaning the vast majority of this specific category of lost revenue is never recovered, not because it isn't recoverable, but because nothing prompted anyone to look.

What Causes Underpayments in the First Place?

Underpayments generally trace back to one of four causes, according to industry analysis: the provider billing incorrectly or without documentation that fully supports the service, the payer pricing the claim using incorrect contract terms, the payer miscalculating the allowed amount and the provider not catching it, or the payer and provider interpreting the same contract language differently. Only the first of these is actually the practice's own error; the other three originate on the payer's side and are only recoverable if someone on the practice's side is actively checking.

What a Real Underpayment Looks Like

A contract specifies $58 for a unit of CPT 97110 with a given payer. The remittance comes back paying $46 for that same unit, an $12 gap that doesn't trigger a denial and posts as a normal payment. Multiplied across 40 visits a month where that same code and payer combination recurs, that's $480 a month, or roughly $5,760 a year, in silently underpaid revenue from a single code-payer pairing that nobody flagged, because nothing about the payment looked wrong without actively checking it against the contract.

What to Look for in Software That Catches This

Does it compare every payment against the actual contracted rate, not just confirm a payment was received? ‍

Software that only confirms "paid" versus "not paid" will never catch an underpayment, since a partial payment still registers as paid.

Does it flag mismatches automatically at the point of posting, not during a periodic audit?

‍Underpayments accumulate silently between audits. Catching them at posting, rather than during an occasional review, prevents months of unflagged variance from building up.

Does it route flagged underpayments to a specific follow-up workflow, not just a report?

‍A report someone has to remember to check produces the same abandonment problem underpayments already suffer from. A flag that generates an actionable follow-up item is what actually gets pursued.

Does it work across every payer, not just a subset?

‍Underpayment patterns vary by payer, and a tool that only checks a portion of a practice's payer mix leaves the rest of the exposure uncovered.

How SPRY Catches Underpayments Automatically

This connects directly into SPRY's broader denial management and claim scrubbing workflows, since underpayments, denials, and rejections are three separate categories of lost revenue that all benefit from being tracked in the same connected system rather than three disconnected review processes.

Underpayment Recovery Checklist

• Confirm current, accurate contracted rate tables exist for every active payer
• Compare a sample of recent remittances against those contracted rates directly, not just against the billed amount
• Check whether payment variance clusters around a specific code, modifier, or payer
• Confirm someone owns following up on flagged underpayments, not just identifying them
• Review the appeal window for each payer, since underpayment appeals are often time-limited
• Track recovered versus abandoned underpayments over time, not just the initial variance found
• Reassess contracted rate tables periodically, since payer fee schedules change

Frequently Asked Questions

What's the difference between an underpayment and a denial?

A denial means a payer refused to pay a claim at all, generating a visible rejection. An underpayment means the payer processed and paid the claim, but below the contracted rate, which generates no visible signal since the claim appears to close normally.

How common are underpayments in outpatient practices?

Industry data suggests small-to-midsize physician groups see roughly 5% to 7% of claims underpaid, higher than the 2% to 3% typically seen in large health systems, largely depending on payer mix and how much reconciliation automation is in place.

Why don't more practices catch and appeal underpayments?

Because nothing in a standard billing workflow flags them automatically. According to a KFF analysis of CMS data, fewer than 1% of denied or underpaid claims are ever appealed, largely because underpayments don't generate the kind of worklist item a denial does.

Can claim scrubbing software also catch underpayments?

Claim scrubbing addresses issues before submission. Catching underpayments requires a separate check after payment is received, comparing the actual remittance against the contracted rate, which is a distinct capability from pre-submission scrubbing.

How much revenue can a practice typically recover by actively pursuing underpayments?

When actively pursued, recoveries commonly range from 2% to 6% of total paid claims, though the exact figure depends heavily on payer mix and contract complexity.

Ready to Stop Losing Revenue That Was Already Paid, Just Not Correctly?

If your team has never specifically checked remittances against contracted rates, SPRY's team can walk through what automated underpayment flagging would catch for your specific payer mix.

Book a Demo →