Choosing an Underpayment Recovery Partner: 10 Questions to Ask About Fees, Proof and Contract Terms
A recovery partner's contract should show what the practice pays, how each recovered amount is proved, and who bears the costs and responsibilities. Ask for those terms in writing before work begins. Underpayments can leave revenue uncollected and keep accounts receivable open longer. The CMS fiscal year 2025 improper payments fact sheet estimated that 6.55% of Medicare Fee-for-Service payments were improper, representing $28.83 billion out of $439.88 billion in expenditures. Vendor due diligence, including the checks outlined in the Procright guide to vendor due diligence, helps practices assess a recovery partner before signing.
Happy Billing is a Texas-headquartered medical billing company that runs end-to-end billing and recovers underpaid out-of-network claims. It works with practices in New York and New Jersey. A free 30-minute call is available to discuss a practice's needs.
US practices only.
1. How Are Underpayment Recovery Fees Calculated
The fee percentage is only half the calculation. Ask for the exact dollar base in writing: billed charges, allowed amounts, identified variance, or cash deposited. The CMS Physician Fee Schedule is Medicare's primary payment method for professional services, so billed charges alone do not establish an underpayment.
Consider a Manhattan physical therapy claim for CPT 97140 x2 and 97110 x2, billed at $540. After Data iSight repricing, Cigna paid $60, compared with $300 to $400 for a visit before repricing. The contract's fee formula determines how much of any recovery the practice keeps.
Run the formula against actual remittances, then compare the net dollars the practice would retain. Check how the agreement treats prior payments and claims already in progress. Happy Billing offers a free 30-minute discovery call.
- Test three claims: Apply the proposed formula to your remittances.
- Calculate net to practice: Compare dollars retained, not just fee percentages.
- Define prior payments: State how the contract treats money received before engagement.
2. Is the Fee Charged on the Full Award or Only on Incremental Recovery
This is the most expensive definition in the contract. A full-award fee applies to the entire payment after reopening, including money the payer already paid. An incremental-recovery fee applies only to new dollars above the original payment.
Work it in dollars. A claim paid at $100 and recovered to $150 creates $50 of incremental recovery. One model fees the $50. The other fees the full $150. Across hundreds of repriced claims, that gap decides whether the program improves cash flow or just moves it.
Practical rule: If a firm won't model your net on one $300 claim paid at $100, it hasn't answered the fee question.
A multi-location New Jersey sports medicine practice saw Cigna and Horizon reprice roughly $300 claims to roughly $100. Its net outcome depended on this definition. Review the pattern in our guide to signs your out-of-network claims are being systematically underpaid, then require the fee base on every invoice. Ask whether claims already in your biller's queue are treated differently.
3. Who Pays IDR Initiation Fees and Administrative Fees
Federal Independent Dispute Resolution under the No Surprises Act has its own costs, separate from any contingency fee. Your contract should state who pays initiation fees, administrative fees, and arbitrator fees, which costs are returned if you prevail, and which are lost if you don't.
For an owner, this is straightforward cash risk. A lost dispute can add cost to a claim that was already underpaid, so don't approve a filing without a written cost estimate first. Our step-by-step guide to the federal IDR process covers the sequence and timing.
What a Good Answer Includes
- Pass through at cost: No markup on IDR fees, stated in writing.
- Eligibility check first: The partner confirms the claim qualifies before filing.
- Value test: It tells you when a payer dispute is cheaper than IDR.
Fees are contingency-only, depend on claim age and volume, and we give a clear number after a free 30-minute call with a billing specialist. In how we approach it, we assess whether IDR is cost justified before anything is filed.
4. What Are the Contract Length and Exit Terms
Payment accuracy isn't a one-time cleanup. The CMS improper payment rates and additional data page reports Medicare Fee-for-Service rates of 7.38% in FY 2023, 7.66% in FY 2024, and 6.55% in FY 2025. Rules and claim populations keep changing, so term, renewal, and exit rights matter from day one.
Pin down notice period, auto-renewal, tail fees, and assignment of benefits revocation. If 40 claims are mid-negotiation when you terminate, who owns them, do fees apply to later recoveries, and when do your files come back?
We've seen practices learn about a tail clause only after giving notice. Require a written list of open claims at termination, a fee cutoff date, and return of remittances, correspondence, and dispute records within a set number of days. Confirm patient-facing activity stops at exit and the AOB can be revoked on a defined timeline. No patient contact is needed when an AOB is on file during active work.
5. How Do They Verify That a Recovery Actually Happened
A payer's statement that a claim was reprocessed does not prove the practice received payment. Require a claim-level record that connects the 837 claim and 835 remittance to the appeal, determination, deposit, and any fee. The CMS FY 2025 Medicare Part C error rate findings report underpayments at 0.57% of Part C expenditures, underscoring why the payment benchmark and supporting records matter.
Before signing, request a sample evidence package your own reviewer can use to reconstruct the expected amount, applicable rate on the date of service, filing deadline, submission proof, and cash receipt. The records should be understandable without access to the vendor's dashboard.
- Count cash only after deposit: A negotiated amount is not a recovery until payment arrives.
- Record the benchmark: Document which FAIR Health percentile supported the requested amount.
- Keep dated records: Retain fee schedules, policies, ERAs, and call logs with their dates.
Reconcile each recovery to the ERA and deposit before counting it as cash.
6. What Are the Data Security Terms and BAA Requirements
Any firm touching claims with protected health information must sign a HIPAA business associate agreement before access. Treat the BAA as the floor. Then ask about encryption, role-based access, least-privilege permissions, audit logging, breach notification deadlines, subcontractors, offshore access, and data return at exit.
Authorization-heavy work raises the stakes. The AMA prior authorization survey release reported physicians complete an average of 43 prior authorizations per week, and 94% said authorization delays necessary care. More touches mean more PHI moving between systems, so access controls need to be specific, not promised.
Request a current security attestation such as SOC 2 Type II or HITRUST, ask about reportable breaches, and put the breach notification timeline in the contract. When you weigh the economics, it helps to calculate ROI on outsourced receivables alongside risk. For the broader build versus outsource decision, see our comparison of in-house vs outsourced out-of-network underpayment recovery.
7. Do They Replace Your Current Biller or Work Alongside Them
A recovery partner should have a defined lane, not duplicate your biller's work. Ask whether the partner replaces your biller, works alongside them, or takes only closed claims. Put the division in writing by claim type.
Overlap can weaken a claim. If two firms contact the payer about the same underpayment, the practice risks conflicting negotiations and a muddled remittance trail. Specify who owns payer contact, how claim status is shared, whether the partner works in your existing EHR, and whether claim transfers require written approval.
Happy Billing's out-of-network recovery can be scoped to work alongside a practice's current biller, which can continue handling clean claim submission. For a clearer handoff, see this guide to batching underpaid out-of-network claims for payer negotiation.
8. How Do They Batch Claims and Handle Timely Filing Windows
A claim's value depends on more than its underpayment. Batching can make related claims easier to review together, while each claim still needs its own timely filing and appeal deadlines tracked.
Ask how the partner selects claims for a batch, what happens when a claim is too old or misses a deadline, and which steps require your approval. The recovery path may include payer negotiation, resubmission for a new explanation of benefits when allowed, a formal payer dispute, or IDR for eligible claims. Benchmark data can inform a negotiation, but confirm what evidence supports the proposed amount.
For Medicare Part B, the CMS Medicare appeals process overview says a redetermination request generally must be filed within 120 days of receiving the remittance advice. Put responsibility for deadline tracking and escalation in the contract, and keep a claim-level record of dates, submissions, responses, and next steps.
9. Which Payers and Repricers Do They Cover and in Which States
Coverage is a revenue mapping question. If your underpayments concentrate with one payer the firm handles poorly, the fee won't save the program. Ask about Cigna, Aetna, UnitedHealthcare, Horizon, and Blue Cross plans, plus repricers MultiPlan, Zelis, and Data iSight/Claritev. Our comparison of Aetna vs Cigna vs United Healthcare repricing explains why each needs a different approach.
Send your payer mix by volume and dollars before the first call and make the firm respond payer by payer. Confirm state experience, including New Jersey and New York dispute rules, and specialty experience. Our specialty billing pages show how physical therapy, chiropractic, sports medicine, and behavioral health claims differ.
Say one payer reprices your highest-volume procedure combination every month. That isn't a generic recovery problem. It's a payer-specific pattern, and the partner should name its dispute path for that payer before you sign.
10. What Reporting Cadence and Transparency Should You Expect
Require claim-level reporting at a defined cadence, weekly or biweekly during active negotiation and monthly for reconciliation. Each report should separate identified variance, submitted appeals, adjudicated recoveries, and net cash received, with aging and fees by claim.
Manual status chasing is expensive. The CAQH Index Report 2024 estimates automating medical claim-status inquiries could save the industry $2.4 billion annually. Ask whether status monitoring is integrated through an API, clearinghouse, or EHR instead of manual portal checks, and stratify results by payer, CPT/HCPCS, modifier, place of service, and reason code.
- Request a sample report: Check it reconciles to deposits and your ledger.
- Define recovered: Count it only after cash clears.
- Name an owner: One person answers questions on each report.
We've seen monthly reconciliation turn recovery data into a payer contracting input, which is where the lasting value sits.
What each question should pin down in the contract
Use the table to turn each answer into a term the practice can enforce. The three dollar-level tests are straightforward: calculate the fee on one underpaid claim, assign every IDR cost, and specify the claim-level evidence required before a fee is due.
| Item | Fee Base to Confirm | Proof Standard | Exit Terms to Negotiate | Reporting Cadence |
|---|---|---|---|---|
| 1. How are underpayment recovery fees calculated? | State the fee percentage and apply it only to dollars actually recovered under the agreed claim scope. | Require a worked example showing the original payment, expected payment, additional cash received, and fee. | Set the fee cutoff date and require a written list of open claims, with the fee treatment for later recoveries. | Weekly or biweekly during active work; monthly reconciliation of fees and collected amounts. |
| 2. Is the fee charged on the full award or only on incremental recovery? | Define whether the fee applies to the full award or only the increase over the original payment; state any hybrid rules. | Require each statement to identify the claim, award, original payment, incremental recovery, and fee base. | Specify which open claims remain fee-eligible after termination and cap the tail period in the contract. | Weekly or biweekly during active work; monthly reconciliation by claim category and fee base. |
| 3. Who pays IDR initiation fees and administrative fees? | Name who pays each initiation and administrative cost, when reimbursement is due, and whether any markup is permitted. | Require a pre-filing cost estimate and copies of dispute documentation and fee receipts. | Assign responsibility for costs on pending IDR cases and document any reimbursement due at termination. | Weekly or biweekly during active disputes; monthly summary of costs, outcomes, and pending cases. |
| 4. What are the contract length and exit terms? | State whether fees apply to post-termination recoveries and identify the claims covered. | Require a dated inventory of open claims and delivery of the related files at exit. | Specify term, renewal, notice, termination rights, AOB revocation, and a defined tail limit. | Provide an exit-status report and file handoff on the termination date; continue monthly updates on any agreed tail claims. |
| 5. How do they verify that a recovery actually happened? | Make a fee due only on verified recovery collected by the practice. | Match each claim to its ERA/EOB, deposit record, and supporting dispute documents. | Preserve access to evidence and state who may work open claims after termination. | Deliver verification evidence with each recovery report and reconcile monthly. |
| 6. What are the data security terms and BAA requirements? | List any security-related charges separately from recovery fees. | Require a signed BAA and review the vendor's security attestations and controls. | Specify data return or deletion, access cutoff, and breach obligations at termination. | Set breach-notification deadlines and a schedule for security updates in the contract. |
| 7. Do they replace your current biller or work alongside them? | Define the claim scope and fee responsibility for each party's work. | Document claim ownership, payer-contact responsibility, and handoffs. | Require transfer or return of claims and access at termination. | Set a weekly coordination update during active work and monthly review of claim ownership and status. |
| 8. How do they batch claims and handle timely filing windows? | State whether batching or escalation changes the fee and identify any added charges. | Document batching criteria, filing deadlines, and escalation steps. | Assign responsibility for open batches and deadline-sensitive claims at termination. | Review deadline-sensitive claims weekly and provide a batch-status update at each review. |
| 9. Which payers and repricers do they cover, and in which states? | List covered payer, repricer, state, and claim types, then define the fee for each covered category. | Request documented experience relevant to the practice's payers, states, and specialty. | Identify uncovered claims and require their transfer or return at termination. | Review coverage and results monthly, including claims outside the contracted scope. |
| 10. What reporting cadence and transparency should you expect? | Show recovered dollars and fees at claim level, with the fee base stated for each claim. | Require supporting documents and reconciliation to deposits and the general ledger. | Preserve access to reports and claim records for open claims after termination. | Weekly or biweekly during active negotiations; monthly reconciliation. |
Turn Ten Answers Into a Contract You Can Defend
A defensible contract ties each fee to a documented claim-level result. Get written terms for the fee base, whether fees apply to the full award or only incremental recovery, who pays IDR costs, exit and tail provisions, proof of recovery, security, biller responsibilities, batching, payer and state coverage, and reporting. Then compare the same three underpaid claims across proposals: what the practice keeps, what costs it pays, and how each recovery is documented.
The CMS Medicare Parts A and B appeals booklet instructs appellants to submit relevant supporting documentation with the first appeal request. A partner should be able to connect the claim, remittance, rate basis, recovery calculation, and resulting payment. Have counsel or a tool such as LegesGPT's AI contract review check that the written terms match the answers you received.
What Should I Pay an Underpayment Recovery Partner
Compare fees using the same claims and the same calculation. The contract should define the fee base, how it treats full awards versus incremental recovery, and whether IDR initiation or administrative costs are charged to the practice. Ask for the expected net amount after fees and costs, rather than comparing headline rates alone.
Happy Billing offers a free 30-minute discovery call with a billing specialist to discuss your claims.
Will a Recovery Partner Disrupt My Current Biller
A practice can keep its current biller for the work it wants to retain. Credentialing is separate from billing, and the contract should define the recovery partner's claim scope, payer-contact responsibilities, handoffs, and ownership of open claims. Clear boundaries reduce duplicate work and make it easier to reconcile fees.
How Long Does Recovery Usually Take
Timing depends on the claim, payer review, and the applicable dispute process. Set expectations in writing for status updates, deadline tracking, and responsibility for claims that remain open at termination. Avoid relying on a single promised turnaround for every batch.
What Proof Should I Demand Before Paying a Fee
Require a claim-level record linking the original claim and remittance to the expected amount, appeal or dispute documents, payer determination, payment, and fee calculation. The contract should also state how the practice can reconcile that record to its deposits and what documentation remains available after termination.
If underpaid out-of-network claims are affecting revenue, Happy Billing can review claims, batch them for negotiation, and work alongside your current biller. Book a free 30-minute call to discuss your claims and next steps.
US practices only.