Denials get attention because they’re visible — a claim comes back rejected and someone has to act on it. Underpayments are the opposite: the claim shows as “paid,” so it quietly disappears from most teams’ radar even when the payer paid less than the contracted rate. Industry studies estimate 5% to 10% of paid claims have payment discrepancies, and Medicare and Medicaid underpayments alone reached $130 billion in 2022. HFMA benchmarks put hospital underpayments at 2% to 5% of net patient revenue — money that was earned but never fully collected.
What Is Payment Reconciliation?
Payment reconciliation is the process of matching every remittance (ERA/EOB) against your actual contracted fee schedule, line by line, to confirm you were paid what you’re owed for each CPT code and payer combination. When the paid amount doesn’t match the contracted rate, that gap is a recoverable underpayment.
Why Underpayments Go Unnoticed
- No denial code triggers a review — an underpayment often shows up as a “paid” claim with no flag telling anyone to check the amount.
- Manual review doesn’t scale — checking hundreds of remits against a fee schedule by hand isn’t realistic for most billing teams.
- Payer contracts are genuinely complex — tiered rates, bundled services, and annual fee schedule updates make it easy to apply the wrong rate.
- Staff turnover erases institutional knowledge — when the person who negotiated the contract leaves, so does the knowledge of what “correct payment” looks like.
The Reconciliation Process, Step by Step
- Load fee schedules — every contracted rate, by CPT code and payer, is loaded into a reference system.
- Match remits against expected reimbursement — each ERA (835) is automatically compared against the expected reimbursement.
- Flag variances — discrepancies beyond a set threshold are flagged for review.
- Root-cause each variance — categorized by wrong fee schedule, missed contract update, or bundling error.
- Appeal or dispute — underpayments are disputed directly with the payer, with documentation.
- Track resolution to close — every disputed underpayment is tracked until resolved.
What This Looks Like in Practice
One documented case involved a provider discovering a systemic 1.2% underpayment pattern across more than 200,000 claims from a single payer — an issue that would have gone entirely unnoticed under manual review, since no individual claim looked unusual on its own. Identifying the pattern enabled a bulk appeal that recovered funds the organization didn’t know it was owed.
How TBC Solutions Handles Reconciliation
We load and maintain your payer fee schedules, automatically compare every remit against the contracted rate, and flag variances for our team to review and dispute — so recovering underpayments doesn’t depend on someone manually noticing a discrepancy in a spreadsheet.
Frequently Asked Questions
How common are underpayments really?
Industry studies put the rate at 5% to 10% of paid claims, with HFMA estimating hospitals are underpaid 2% to 5% of net patient revenue overall.
How is an underpayment different from a denial?
A denial is a claim the payer refused to pay and is visible immediately. An underpayment is a claim the payer paid, but for less than the contracted rate.
Can underpayments still be recovered after the claim is closed?
Often yes, within the payer’s appeal or dispute window, which is why ongoing reconciliation matters.
Is reconciliation only worthwhile for large practices?
No — even small, consistent underpayment patterns add up meaningfully over a year, and smaller practices often have less bandwidth to catch them manually.
Stop Leaving Underpayments on the Table
Find out how much your practice may be under-collecting — schedule a free consultation with TBC Solutions.