Your Insurer Paid the Claim — But Did They Pay You Enough?

The claim didn't get denied. Money showed up in your account. So why does something feel off?

Denials announce themselves. You get a notice, you know to act. Underpayments are different. The insurer pays, the claim closes, and the practice moves on — without anyone checking whether that payment matched your contracted rate. Industry data puts underpayments at 3 to 5% of all claims on average.¹ For a practice billing $1M annually, that's $30,000 to $50,000 quietly disappearing every year.

This post covers what underpayments are, how to tell if your practice has a problem, and what a practical recovery process looks like.

What's the Difference Between an Underpayment and a Denial?

A denial means the insurer reviewed the claim and refuses to pay on it for the listed reason. No payment, clear notice, obvious next step.

An underpayment means the insurer paid something, just less than your contracted rate. No rejection notice. No flag. Just a number that's quietly lower than it should be.

Most practices track denials carefully. Almost no one systematically tracks underpayments — which is exactly why payers get away with them.

A few common causes show up repeatedly in behavioral health billing:

• Telehealth place-of-service errors: A claim billed with POS 10 (patient's home) gets processed at the office rate instead
• Modifier issues: A telehealth modifier like -95 or -GT appears on your claim but gets ignored in adjudication
• Wrong fee schedule applied: Payer uses an outdated rate, especially common after annual contract updates
• Bundled codes: CPT codes paid as a single unit when your contract specifies separate reimbursement

Here's a real-world example. A Minnesota outpatient therapy practice billed telehealth visits with POS 10. Their contracted rate: $150. Actual payments: $132. No denial notice, no flag — just a consistent $18 shortfall per session that went unnoticed for months.

How to Tell If Your Practice Has an Underpayment Problem

The step most guides skip: before you can recover anything, you have to know there's a problem.

Start with a 90-day spot audit. Pick three payers, pull 20 claims each, and line up three numbers: what you billed, what your contract says you're owed, and what actually got paid. If those last two numbers don't match, you've found something.

A few warning signs worth watching for:

• A specific CPT code consistently pays 10 to 15% below your contracted rate
• The same payer, same code, payment variance every month
• Modifiers showing up on your submitted claim but not reflected in the payment

The key benchmark: if any payer is consistently paying below 90% of your contracted rate, that's a systemic underpayment — not just a bad month.

This is where a regular A/R aging report becomes more than a cash flow tool. When you're reviewing A/R data and you notice a payer's allowed amounts running consistently low, that's a signal worth investigating.

There's a behavioral health-specific wrinkle here, too. Waiver-based programs like ARMHS and CTSS have state-set rates that update periodically. When the state updates those rates and a payer's system doesn't follow, an entire program's claims can be underpaid at scale — and it won't look like a denial. It'll just look like revenue.

The Underpayment Recovery Process, Step by Step

Once you've identified a discrepancy, here's how to work through it.

Step 1: Document the gap. Pull the original claim, the EOB or ERA, and the fee schedule section of your payer contract for that specific CPT code. You need all three in front of you.

Step 2: Determine who made the error. If the modifier was wrong on your end or the code was outdated, correct the claim and resubmit. If the payer applied the wrong fee schedule or ignored your modifier, that's a formal underpayment appeal, not a corrected claim. The distinction matters.

Step 3: File the appeal with evidence. Reference the contracted rate explicitly. Attach the relevant fee schedule page. Show the line-item discrepancy. A vague "we think we were underpaid" appeal won't get far — a specific, contract-backed appeal will.

Step 4: Know your window. Most payers allow 90 to 180 days from the date of service or EOB to appeal. Minnesota has prompt payment laws that apply to commercial payers, which can work in your favor.² Don't assume the window is closed before checking.

Step 5: Follow up at 30 days. Submit and silence doesn't mean resolution. Track every open appeal and escalate if it goes unanswered.

One more thing worth addressing: a lot of practices avoid pushing back because they don't want to damage their relationship with a payer they depend on. It's a reasonable concern and an understandable hesitation. But payers expect appeals. A professional, contract-based appeal isn't a confrontation — it's a routine part of the billing process. Practices that never appeal simply leave money behind.

For context on what's at stake: one billing coordinator found that BCBS had been applying an outdated fee schedule to CTSS claims. After filing a formal appeal with the original contract page attached, they recovered $4,200 across 18 months of affected claims.

Knowing how to read your denial tracking data can also surface underpayment patterns — claims that were "paid" but flagged as partially adjusted are worth a second look.

From One-Time Audit to Ongoing System

A single audit is a start. But underpayment recovery pays the most when it's built into your regular workflow.

At minimum, run a quarterly comparison of expected versus actual payments by payer and CPT code. A simple log works: payer, CPT code, contracted rate, actual rate, date, claim number. When the same payer-code combination shows a variance more than once, you've identified a pattern worth escalating formally — not just correcting one claim at a time.

At five or more providers, manual tracking becomes impractical. The math makes the case on its own: 3% underpayment on $2M in annual billing is $60,000 per year.¹ Over three years, that's $180,000 in revenue the practice earned but didn't collect — if nobody was looking for it.

That's also where your net collection rate tells the story. If your net collection rate is running below 95%, underpayments are often part of the explanation.

That's what a standing audit system catches. Not a crisis — just a quiet, correctable gap.

Final Thoughts

Underpayments don't look like a crisis. That's what makes them dangerous: a slow, quiet erosion of revenue your practice earned and contracted for.

The shift is simple, but it matters. The question isn't whether the claim got paid. It's whether it got paid correctly.

At BreezyBilling, our monthly A/R audits are designed to catch exactly this — comparing actual payments against expected rates, flagging variances, and pursuing the difference before it compounds. Each client has a dedicated account coordinator who knows your payer mix, your program types, and what your reimbursements should look like. That standing familiarity is what makes patterns visible before they become losses.

If you're not sure whether your practice has an underpayment problem, we're happy to take a look. Reach out to the BreezyBilling team to learn how our auditing process works.

Footnotes

1. Underpayments: How to Spot Them and Recover Revenue Without Adding Headcount — Billing Dynamix, 2024

2. Minnesota Statutes, Section 62Q.75 — Prompt Payment of Claims, Minnesota Department of Commerce