What a Nonpayment Integrity SME Needs to Know About Payment Integrity

Tom Martin, M.A., MBA

Amid growing federal scrutiny of healthcare fraud, it’s critical to distinguish intentional fraud from unintentional payment errors. In FY2024, CMS reported over $86 billion in improper payments, primarily due to overpayments. This underscores the importance of payment integrity (PI) which helps detect and prevent waste — not fraud — by ensuring claims are paid accurately. To drive better outcomes, it's essential to distinguish between fraud, waste and abuse (FWA) and understand where PI fits in.

Defining FWA — and where PI lives

• Fraud is intentional deception for financial gain, typically investigated by Special Investigation Units (SIUs); you may also hear "program integrity" associated with fraud.
• Abuse involves questionable billing practices that may not be fraudulent but could be excessive or improper.
• Waste, where PI operates, results from unintentional errors in billing, configuration, or claim processing.

Overpayments — the focus of PI — largely stem from waste, not fraud. While fraud is criminal and abuse is often subjective, waste is preventable. This distinction is crucial: Payment integrity isn’t about policing bad actors — it’s about systemic accuracy and financial stewardship.

What PI does — and doesn’t do

PI ensures claims are paid accurately and involves detecting, preventing, and recovering overpayments, defined as instances where a health plan pays more than contractually or clinically justified. Underpayments, where providers are shortchanged, are usually handled by claims operations or revenue reconciliation teams.

Traditionally reactive, PI is increasingly proactive, using data analytics and audit trends to address root causes, prevent errors, and improve operational workflows. Importantly, PI isn't just about recovery—it’s about data-driven insights.

Why PI matters beyond the PI team

Non-PI leaders — especially those in claims, configuration, utilization management (UM), and provider network — play a critical role in transforming overpayment findings into long-term solutions. When PI insights are embedded into daily operations, health plans see reduced rework, stronger provider relationships, and greater member satisfaction.

Here’s how different teams can use PI —and why it benefits them:

1. Claims Directors
   1. Use PI trends to adjust adjudication logic, update training, and implement system flags for high-risk claims.
   2. Why it matters: Improves first-pass payment accuracy and reduces downstream corrections.
2. Configuration Teams
   1. Address recurring system edit failures and reverse-engineer error patterns.
   2. Why it matters: Builds system resilience and minimizes preventable overpayments.
3. Utilization Management & Policy Teams
   1. Refine medical necessity criteria and authorization rules using PI findings.
   2. What it matters: Prevents unnecessary care and tightens alignment with clinical policy.
4. Provider Network Teams
   1. Identify outlier providers and use audit data to guide education or contract refinement.
   2. Why it matters: Strengthens provider trust, reduces abrasion, and supports cleaner claims.
      

The case for transparency

Payment accuracy can’t improve in a vacuum. Providers often express frustration with opaque audit results or unclear expectations. That’s why data transparency, sharing audit findings and trends, and a clearly defined role for provider service representatives (PSRs) become essential.

PSRs, equipped with PI data, serve as vital messengers. They help providers understand why a claim was flagged, how to avoid repeat errors, and how to align with payer expectations. This reduces friction and turns audits into education, not punishment.

Measuring progress: Recovery rates

A helpful way to benchmark PI maturity is through overpayment recovery rates:

1. ≥3%: Foundational PI efforts are in place.
2. ≥5%: A sustainable program with active audits and data mining.
3. ≥8%: A mature, layered strategy with pre- and post-payment controls.
4. ≥10%: Industry-leading, with integrated analytics and feedback loops.

These metrics are contextual—business line, claim volume, and provider mix all matter—but they help track progress toward a more efficient, collaborative model.

The bottom line

PI is no longer a back-office function but a strategic enabler. For non-PI leaders, understanding and using PI findings can lead to fewer errors, better provider engagement, and stronger financial performance. The goal isn’t just to recover money; rather, it’s to fix what’s broken before it breaks again.

Tom Martin, M.A., MBA, is vice president, client relations, DRG Claims Management.